It's no secret why everyday and professional investors pay close attention to Berkshire Hathaway (BRK.A 0.60%)(BRK.B 0.60%) CEO Warren Buffett: his track record. Although no investor is infallible, the Oracle of Omaha has led his company's Class A shares (BRK.A) to an aggregate return that's 153 times greater than the widely followed S&P 500, including dividends, since he took over.
As of March 29, there were more than four dozen securities (stocks and exchange-traded funds) in Berkshire Hathaway's $335 billion investment portfolio. While many of these stocks and ETFs are well-positioned to increase in value over long periods, some stand out as better values right now than others.
What follows are three Warren Buffett stocks that are no-brainers buys in April.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Johnson & Johnson
The first Buffett stock that stands out as a no-brainer buy right now is healthcare conglomerate Johnson & Johnson (JNJ 1.49%). Although the company's talcum powder lawsuits are a temporary overhang, they won't have any impact on J&J's well-defined competitive advantages.
Before diving into company specifics, it's important to note just how defensive the healthcare sector is. We don't have the luxury of deciding when we become ill, which means demand for prescription drugs, medical devices, and healthcare services remains consistent in any economic environment. Even if, for example, a recession materializes in the U.S., companies like Johnson & Johnson shouldn't see sales slow.
What ultimately makes Johnson & Johnson tick is its revenue mix. For more than a decade, the percentage of net sales J&J derives from pharmaceuticals has been climbing. Given that brand-name drugs offer strong pricing power and high margins, it's no secret why the company has focused its efforts on expanding its pharmaceutical portfolio.
NYSE: JNJ
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The downside to brand-name therapeutics is they have a finite period of sales exclusivity. But this isn't a concern for Johnson & Johnson. It's generating more than enough operating cash flow to reinvest in internal research, forge collaborative partnerships, and make acquisitions. Additionally, it has a world-leading medical-device segment that can benefit over the long run as the global population ages and access to preventative medical care improves. Patent cliffs simply aren't the worry for J&J that they might be for other drugmakers.
Another reason to trust in Johnson & Johnson is the continuity you get in leadership positions. Since its founding 137 years ago, J&J has had only eight CEOs. Having long-tenured leaders ensures that visions are being realized from start to finish.
Johnson & Johnson is also, arguably, the safest publicly traded stock in the United States. It's one of only two publicly traded companies to have a AAA credit rating from Standard & Poor's, a division of S&P Global. This is one notch higher than the credit rating for the U.S. government (AA), and it implies the utmost faith that J&J can service and eventually repay its outstanding debts.
Best of all, Johnson & Johnson is cheaper now, on the basis of forward-year earnings, than it's been over the past decade. With a 60-year streak of increasing its annual dividend and a forward price-to-earnings ratio of 14, there may not be a better Warren Buffett stock to buy right now for conservative investors.
NYSE: USB
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U.S. Bancorp
The second Warren Buffett stock that's a no-brainer buy in April is a company the Oracle of Omaha seems intent on jettisoning from Berkshire Hathaway's portfolio. I'm talking about regional bank U.S. Bancorp (USB +0.12%), which is the parent of U.S. Bank.
U.S. Bancorp has been clobbered over the past three weeks by fear and uncertainty tied to what happened with SVB Financial (SIVB.Q +0.00%) and Signature Bank (SBNY.L +0.00%). SVB and Signature both purchased longer-maturing U.S. Treasury bonds, which lost considerable value as the Federal Reserve raised interest rates. The hole created from these mark-to-market losses was simply too big to overcome, which ultimately led to SVB and Signature being seized by regulators. U.S. Bancorp has been dragged down by this regional bank tumult.
However, U.S. Bancorp isn't SVB Financial or Signature Bank. While it's possible tighter lending markets or a U.S. recession could temporarily weigh on the cyclical banking industry, what ailed SVB and Signature isn't anywhere as big of a worry for U.S. Bancorp. The latter has more than enough tangible common equity to cover any mark-to-market losses from held-to-maturity bonds.
Beyond not having the proverbial landmines on its books that have sunk other regional banks, U.S. Bancorp has done a pretty good job of avoiding the riskier derivative investments that hurt money-center banks during the financial crisis in the late 2000's. By focusing on loan and deposit growth, it's been able to deliver a return on assets that regularly tops its peers.
Yet another differentiating factor for U.S. Bancorp is its ability to encourage users to bank online or via mobile app. Though management didn't update the company's digital trends at the end of its fiscal year, a whopping 62% of total sales, and 82% of active customers, were digital users as of the end of August. Digital users are considerably less-costly to banks than in-person and phone-based interactions with tellers. Investing in various automation and digitization initiatives is paying off handsomely for U.S. Bancorp.
Despite near-term uncertainty for the bank industry, U.S. Bancorp is bargain-basement-priced at less than 7 times forward-year earnings.
Image source: Getty Images.
Paramount Global
The third Warren Buffett stock that's a no-brainer buy in April is media giant Paramount Global (PARA +0.00%).
With few exceptions, media stocks have been taken to the woodshed since the beginning of 2022 over fears that a recession would take shape. It's quite normal for advertisers to pare back their spending when the U.S. or global economy signals even the slightest bit of slowing -- and the U.S. economy produced back-to-back quarters of declining gross domestic product in the first-half of 2022.
But advertising is a two-way street that undeniably favors the patient. While ad spending over the next couple of quarters could be unpredictable, the U.S. economy spends a considerably longer amount of time expanding than contracting. Buying stakes in ad-driven businesses during bear markets and economic downturns tends to be a smart strategy for long-term investors.
NASDAQ: PARA
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Aside from an inevitable rebound in ad spending, Paramount Global has done a remarkably good job of growing its streaming subscriber base. The company closed out 2022 with more than 77 million direct-to-consumer (DTC) subscribers, which is up 30 million in just 15 months. Planned prices hikes on its DTC subscribers should help reduce losses from this segment.
Additionally, streaming service Pluto TV has emerged as a hidden gem. Pluto TV is the nation's top free streaming service that's supported by ads. The 6.5 million new monthly active users added during the fourth quarter increased its total user count to 79 million. If the U.S. economy were to struggle, a free streaming service like Pluto TV would be a prime beneficiary.
Even Paramount Global's film entertainment division is firing on all cylinders. While it'd be foolish to expect Paramount to deliver a blockbuster the likes of Top Gun: Maverick every year, six of its 2022 movie releases opened their first week at No. 1 in the U.S. box office.
Priced at just 12 times Wall Street's forward-year consensus earnings, Paramount Global has all the makings of a steal.
