One of the most successful investors of all time, Warren Buffett, has built his fortune and reputation by following three simple rules when it comes to picking stocks for his holding company, Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%):
- He looks for companies that have a strong brand name, a solid financial position, and a durable competitive advantage over their rivals. These companies can withstand market fluctuations and management mistakes better than others.
- He invests for the long term, not the short term. He does not chase trends or fads, but focuses on the intrinsic value and growth potential of the businesses he owns.
- He takes advantage of market panics and crashes to buy more shares of his favorite companies at bargain prices. He believes that "The best chance to deploy capital is when things are going down."
Which Warren Buffett stock stands out as a top buy in July? Read on to find out.
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Berkshire: Superb financials, a wide moat, and gold-star management
If you're looking for a Warren Buffett stock to buy hand over fist in July, you might want to consider Berkshire Hathaway. Buffett's holding company sports a diversified portfolio of businesses and investments that offer both growth and value. Here are three reasons Berkshire Hathaway is a great buy in July and beyond.
First, Berkshire Hathaway has an exceptionally strong balance sheet and a top-shelf business model. As of March 31, the holding company had $130.6 billion in cash and short-term investments. This large cash position provides the company with ample liquidity to pursue value-creating opportunities for shareholders. Moreover, Berkshire Hathaway has a proven history of generating steady free cash flows, which indicates a strong and healthy business.
Second, Berkshire Hathaway has a wide moat that protects its competitive advantage and profitability. The company owns and operates some of the most dominant and durable businesses in the world, such as GEICO, BNSF Railway, Dairy Queen, and See's Candies. These businesses have loyal customers, strong brands, economies of scale, and high barriers to entry.
Berkshire Hathaway also has a sizable stake in some of the most profitable and innovative companies in the world, such as Apple, Amazon, Coca-Cola, and Bank of America. These large-cap companies have strong growth prospects, resilient earnings, and competitive moats of their own.
Third, Berkshire Hathaway has visionary leadership. Buffett, along with his top investment managers Ted Weschler and Todd Combs, have demonstrated an uncanny ability to consistently unearth high-quality businesses with depressed valuations and formidable economic moats.
Speaking to this point, Berkshire Hathaway's value-oriented approach to stock investing has yielded market-crushing returns for shareholders over the past several decades. Beating the market consistently over such a long period doesn't happen by accident. Buffett and his team are undoubtedly some of the best business pickers of all time.
Time to buy?
All told, Berkshire stands out as a top Buffett stock to buy this month. The diversified holding company has a rock-solid balance sheet, a wide moat, and a gold-star management team. These qualities should translate into solid returns for shareholders in the long run, making it an attractive choice for growth and value investors alike.
