Warren Buffett's Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%) manages a large portfolio of stock investments. Many ordinary investors, like you and me, monitor this list for ideas about what to buy next. Any stock that passes Buffett's genius-level analysis must be something special, after all.
That's a good starting point, but you shouldn't simply copy Berkshire's stock holdings without further analysis. Some stocks in its portfolio have been there for decades, and holding on to a firmly established long-haul winner is not the same thing as starting a fresh position at current prices. And Buffett's deep-pocketed strategy targets very different goals than my retirement savings account.
Furthermore, many of Buffett's investments are built on a deep mastery of industries I can't claim to understand. For me, buying bank stocks is like my dog chasing cars -- even if I catch a good one, I wouldn't know what to do with it. Buffett would know when to sell, leaving me flat-footed with a poorer long-term outcome.
So I'm not terribly interested in most of the 54 stocks and two exchange-traded funds on Buffett's list of current holdings. However, I see two great buys in Berkshire's portfolio right now, and one riskier idea that might be worth a speculative little swing. All three stocks are priced well below $300 per share. In fact, you could pick up one share of each for a grand total of about $290.
Great buy 1: Amazon ($135 per share)
E-commerce giant Amazon (AMZN 3.43%) is one of those top-quality stocks that you can buy at almost any price. And right now, Amazon's stock also looks incredibly cheap, trading at 2.7 times sales. Sure, that's higher than the multiyear low sales ratio it recorded around New Year's, but the stock still looks dramatically undervalued.
Amazon shares are cheap due to a temporary slowdown in e-commerce sales. The company's soft top-line growth has overlapped exactly with the global inflation crisis. Budgeting belts tightened and Amazon's revenue growth decelerated. When the global economy gets back on its feet, I expect Amazon's results to pick up speed again.
On top of that potential rebound, Amazon is in prime position to benefit from the artificial intelligence (AI) boom. Amazon's cloud computing platform is a leading provider of data-crunching horsepower, and the company is building generative AI features into its popular Alexa smart-home tools.
One of Buffett's money managers opened a modest Amazon position for Berkshire Hathaway in 2019, and its stake in the company is worth $1.45 billion today. That's a rather small investment by Berkshire's standards, accounting for just 0.2% of the value of the stock portfolio, but Buffett is in it for the long haul. So am I, and I'm sorely tempted to grab more Amazon stock before the share price takes off again. And thanks to last year's 20-for-1 stock split, the stock is easily affordable, even if you only have $300 to invest.
Great buy 2: T-Mobile ($142 per share)
Buffett's investment in T-Mobile US (TMUS -0.06%) is even smaller, worth $759 million nowadays. But the former underdog in the high-stakes wireless telecom market has evolved into a top dog. And thanks to its torrential cash flows, T-Mobile is even adopting a shareholder-friendly dividend policy before the end of the year.
In other words, T-Mobile's cash profits are so rich that the company can't spend them all on growth-promoting projects. Distributing dividends directly to shareholders is seen as a good use of spare cash. It's a nice problem to have, and the dividend plan speaks volumes about T-Mobile's network quality. If the company weren't already a leading provider of high-quality 5G network connections, it would make more sense for management to boost the network construction budget instead.
T-Mobile's free cash flow landed at $2.9 billion in the recently reported second quarter. That was a 64% year-over-year jump. Its 5G network covers 98% of American customers. And the upcoming dividend payouts of $750 million per quarter beginning in Q4 are on top of a vibrant stock buyback program, which had a $3.5 billion budget in the second quarter.
Yet T-Mobile stock remains affordable, trading at 2.1 times sales and 14 times forward earnings projections. The stock chart has been flattish all year long, and the current share price would have looked familiar to a time traveler from May 2021. That's another no-brainer buy in my book.
Speculative gamble: Paramount ($13 per share)
Finally, I'm tickled pink by Berkshire Hathaway's $1.3 billion investment in movie studio and media company Paramount Global (PARA -2.22%). This stock is so far removed from classic Buffett strategies that I have to wonder if the Oracle of Omaha knows something we don't.
The company is unprofitable and its top-line growth has not been impressive in recent years. A staggering 14% of Paramount's stock is on loan to short-selling bears. And the stock is priced for absolute disaster -- shares are changing hands at 0.3 times sales and 11 times forward earnings projections. Its price-to-book ratio of 0.4 indicates that the average Paramount investor believes the business operations are worth less than simply selling every asset and returning that cash to shareholders. It's not a pretty picture.
Yet, Berkshire Hathaway holds a significant stake in this struggling company, with 15% of Paramount's stock in its pocket. And the road ahead might not be full of quicksand and pitfalls after all. The Paramount+ video-streaming service now boasts 61 million paid subscribers and the segment's revenue rose 47% year over year in the second quarter.
I don't see Buffett as an expert in media-streaming operations, but he knows plenty about what makes a turnaround story. Paramount might be undervalued if its streaming future is brighter than its long-suffering TV and movie businesses.
To sum it up, I wouldn't put all my eggs in the Paramount basket, but a modest speculative play? At these prices, it's akin to purchasing a lottery ticket. Go in prepared for a total loss -- any profits would be a delightful windfall.
