Berkshire’s incredible success is due in part to Warren Buffett’s ability to identify undervalued stocks. Berkshire’s chairman and CEO is arguably the best investor of all time, and he’s helped the company he built amass a publicly traded stock portfolio that’s currently valued at more than $200 billion.
Two of Buffett’s investments are particularly attractive today. Read on to learn more about them.
The tech giant
Buffett’s largest position may also be the most intriguing opportunity at current prices. Berkshire Hathaway owns more than 250 million shares of Apple (NASDAQ:AAPL), currently valued at approximately $45 billion. And Buffett has said he’d like to buy even more.
Buffett may get his chance. Apple’s shares have pulled back in recent weeks along with the overall market. Fears surrounding trade wars, the impact of potential tariffs, and peaking iPhone sales have all weighed on the stock.
Yet I’d argue that many of these fears are already priced into Apple’s shares. With its price now down more than 20% from its highs, Apple’s stock is trading at less than 12 times forward earnings estimates, compared with nearly 17 for the S&P 500. That’s quite a bargain for an elite business that’s projected to grow its EPS by 13% annually over the next half-decade. In fact, I wouldn’t be surprised if Buffett is increasing Berkshire’s stake in Apple during this latest sell-off.
Buying a great business at a bargain price is a great way to build wealth in the stock market. And should Wall Street’s fears prove unfounded, investors who buy today could enjoy even larger gains. President Trump recently announced a 90-day delay in retaliatory tariffs while the U.S and China work toward a new trade deal. And while iPhone unit sales may be slowing, higher average selling prices helped drive a 29% surge in iPhone revenue in the fourth quarter. As such, the bears are probably overestimating the long-term impact of these issues — and it’s creating an opportunity for investors to buy shares in Apple at a terrific price today.
The banking leader
Investors may also want to take a look at one of Buffett’s newest positions. In a recently released financial filing, Berkshire Hathaway disclosed that it purchased more than 35 million shares of JPMorgan Chase (NYSE:JPM), currently valued at nearly $4 billion.
Like Apple, JPMorgan Chase is a titan in its industry. In fact, it’s the largest bank in the U.S., with $2.6 trillion in assets.
JPMorgan Chase is a broadly diversified financial institution, with operations that span across retail and commercial banking, credit card services, investment banking, and asset management, among others. This diversification lessens its risk profile for investors, as strength in one area of its business can offset weakness in another.
JPMorgan Chase also has a respected management team, led by CEO Jamie Dimon. Buffett is a big fan of Dimon, so much so that he also owns JPMorgan Chase stock in his personal portfolio.
Moreover, like Apple, JPMorgan Chase’s shares have pulled back in recent weeks. Investors appear to be concerned that rising interest rates could slow economic growth. But banks tend to make more money in rising rate environments as they see an expansion in their net interest margins — essentially, the spread between what a bank earns on its loans and what it pays out to depositors. So even if the economy slows somewhat, higher interest rates could make JPMorgan Chase’s banking operations more profitable in the years ahead.
Better still, with its price now down about 10% from its highs, JPMorgan Chase’s stock currently trades for less than 11 times forward earnings estimates. That’s an attractive price for a best-in-class global financial institution that’s projected to grow its profits by nearly 10% annually over the next five years. Thus, long-term investors may want to consider buying this banking titan’s stock today.
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and Berkshire Hathaway (B shares). The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.