Warren Buffett is anything but a speculative short-term trader. In fact, he seems to prefer slow and steady movers, looking to cash in on a company's consistent resiliency rather than a lucky windfall.
Nevertheless, Warren Buffett's Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%) portfolio currently holds a handful of stocks that, thanks to a unique set of circumstances, just might dish out big gains in a short amount of time. Here's a deeper dive into three of these springloaded stocks that could uncoil in a hurry.
1. Coca-Cola
Berkshire Hathaway isn't a key stakeholder in Coca-Cola (KO) by coincidence. Buffett is also a big fan of the company's products. He reportedly drinks five cans of one of the company's namesake colas every single day, adhering to his own advice "invest in what you know."
But Coca-Cola is a great Buffett-approved pick even if he weren't a regular customer of the company's beverages. Not only has the beverage giant paid a quarterly dividend like clockwork for decades now, but has raised its annual payout for 61 consecutive years. There's no end to the streak in sight, either, given the company's commanding hold of the beverage market.
This continued dividend growth, along with its underlying profit growth, hasn't meant much to the market of late. Shares are priced right around where they were as of early 2022 -- an unusually prolonged lack of forward progress for this particular ticker.
That sideways movement, though, is the chief reason shares could go parabolic sooner than later. As investors start to figure out that Coca-Cola will be able to push through the recent wave of inflation, they'll start stepping back into the stock more consistently.
2. Paramount Global
Paramount Global (PARA -2.22%) shares could catapult higher for a slightly different reason. The stock's been tumbling since making an unusually pointed peak back in early 2021. If it reverses course, this overdone selling could unwind in a hurry.
The worry driving this stock sell-off makes enough superficial sense. Paramount is a major television and film production house. In addition to Paramount Studios and the CBS network, the company also owns Nickelodeon, TVLand, Comedy Central, MTV, and other cable channels. It's also parent to streaming service Paramount+ as well as free-to-watch, ad-supported platform Pluto TV. But given the ongoing slow demise of cable television and the hypercompetitive streaming arena, none of these businesses seems particularly healthy.
The fact is, however, Paramount is moving to exactly where it needs to be.
Cable providers are feeling the bulk of the headwinds as consumer choices change. Consumers still want entertainment content; they just increasingly want it less from a cable company and more from a streaming app. That's where Paramount+ fits into the changing picture more than most people realize. A great deal of Nickelodeon, MTV, Paramount's Showtime, and even some original and new CBS content is now included in Paramount+.
Connect the dots, and you'll see that the company is managing the industrywide shift from cable to streaming, boasting 60 million paying subscribers as of the end of the first quarter.
Perhaps Paramount's most underestimated weapon, though, is Pluto TV. While the FAST (free ad-supported television) business is relatively young, this free-to-watch business model is the future. Streaming television market research outfit Hub Entertainment Research reports that over the course of the past couple of years, the number of U.S. consumers watching ad-supported television has grown at the same time ad-free viewing has.
Image source: Hub Entertainment Research's July 2023 report "TV Advertising: Fact vs. Fiction."
In this same vein, Digital TV Research predicts that the global FAST market will triple in size between 2022 and 2028, growing from $6 billion to $18 billion per year by the end of this six-year stretch.
Again, Paramount is where it needs to be even if most investors can't see it yet.
3. Capital One Financial
Last but certainly not least, add Capital One Financial (COF 0.16%) to your list of Warren Buffett stocks that could take off in a big way soon.
It's one of the newest of Berkshire's positions. In fact, all 9.9 million shares of the credit card company Berkshire owns were purchased during Q1, making it the biggest buy of the quarter. It wouldn't be surprising to see the position expanded in the near future, as Buffett often accumulates shares slowly rather than buying a big stake in a company in one fell swoop.
As for what he sees in Capital One -- and the reason you should consider owning it as well -- it's arguably the company's impressive and persistent track record of value creation.
While economic turbulence that prompts loan delinquencies and defaults is a worry right now, Gabelli Global Financial Services Fund manager Ian Lapey notes that if the environment turns truly problematic, "Capital One would probably tighten its underwriting standards as it did in the early stages of the COVID-19 pandemic and during other recessions." Lapey adds of Capital One: "This is a very strong bank with terrific management led by co-founder Richard Fairbank. The company has never lost money since going public in 1994, and TBV [total book value] has compounded at about 14% a year."
Buffett and his acolytes at Berkshire seem to see the same strong leadership and are using the stock's recent weakness as a chance to scoop up undervalued shares in anticipation of bullishness ahead. You may want to consider doing the same.
