Pick the right time frame and just about any investor can look like a genius. Getting a portfolio to outperform long enough to fuel anyone's retirement dreams, though, is an entirely different matter.
Warren Buffett took control of Berkshire Hathaway (BRK.A -0.38%) (BRK.B -0.54%) in 1965. Since then, A-class shares of the holding company have increased at a 20% compound annual growth rate.
Buffett's 57-year run at Berkshire Hathaway is the stuff of legends, but the stocks in the holding company's equity portfolio don't always move upward in a straight line. These three holdings lost between 29% and 56% of their value in 2022.
After these stocks fell hard 2022, everyday investors could get a better price for them than Buffett was willing to pay. Here's why they look like smart options right now.
Paramount Global
Shares of Paramount Global (PARA -4.53%) dropped around 56% in 2022 but that hasn't stopped Buffett from buying the stock hand over fist. Berkshire added more than 12 million shares of the entertainment stock to its equity portfolio in the third quarter.
Everyday investors who want to start a position in Paramount Global could probably get a better price than Buffett paid. The stock is down around 18% since the end of September.
In December, Paramount Global's stock price took a hit because management warned that fourth-quarter results could be affected by a pullback in ad spending. The important thing to remember is that declining demand from advertisers is an issue for Paramount's competitors too.
The company's subscription-based service, Paramount+, grew third-quarter revenue by 98% year over year. But this isn't the whole business. Paramount Pictures achieved its sixth No. 1 box office hit of the year with Smile, and Top Gun Maverick was the top-selling digital title in the first week of its release. The company also owns Pluto, the leading ad-supported television streamer.
A tough time for the entertainment industry has pushed shares of Paramount Global down to the ultra-low valuation of just 0.37 times trailing sales. Compare this to Netflix, which currently trades at 4.2 times sales, and it's clear that the pessimism surrounding this stock has gone too far.
At recent prices, Paramount Global offers a nice 5.7% dividend yield. Demand from advertisers might return to previous levels in 2023 or it could stay depressed. Either way, that distribution is yours to keep.
Apple
Apple's (AAPL 0.10%) stock price has tumbled around 29% from its peak at the beginning of 2022. Shares of the device maker take up more than two-fifths of Berkshire's equity portfolio, making it the largest bet of Buffett's career.
It didn't happen overnight, but Apple became the world's largest company by market cap thanks to a walled garden of products and services that are incredibly sticky. In other words, folks who use an iPhone are highly likely to choose Apple again when they get a new laptop.
Earlier this year, the iPhone overtook Alphabet's Android to become the most popular type of smartphone with a 50% share of the mature U.S. market. Outside of the U.S., though, there's still plenty of room for growth in this highly competitive space. Apple's share of the global smartphone market is only around 17%, according to International Data Corporation.
Having devices used by a majority of Americans is an extremely lucrative position to be in. That's because Apple can get away with charging a whopping 30% on nearly all transactions made from iPhone applications. Services revenue soared 14% year over year in Apple's fiscal 2022 and I believe this operating segment will be a top contributor to the company's bottom line for many years to come.
Despite a highly defensible position that could lead to years of steady profit growth, you can buy shares of Apple for just 20.9 times trailing earnings. That's significantly less than the average stock in the Nasdaq-100 index, which currently trades at 23.8 times trailing earnings. A nice price now and a bright future ahead make this a top stock to buy in 2023 and hold for the long run.
