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Invest Like Warren Buffett With These 3 Stocks

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Warren Buffett, often referred to as the Oracle of Omaha, is an American businessman, investor, and philanthropist. He is the CEO of Berkshire Hathaway, a diversified holding company whose subsidiaries engage in insurance, freight rail transportation, energy generation and distribution, manufacturing, and many others.

He’s one of the most successful investors globally, with a net worth of over $113 billion. He has had stellar returns in the market, making it easy to understand why investors are always looking to see his next move.

It’s always a good sign to see that Buffett has recently started a position in any stock you own. When you see him increase size in a position, that’s an even more incredible feeling.  

Buffett has been on a shopping spree throughout 2022, becoming more aggressive on the buy-side than we have seen in recent years.

He’s increased his position in both Apple (AAPL - Free Report) and General Motors (GM - Free Report) and has even started a new position within HP (HPQ - Free Report) . Let’s analyze all three companies a little deeper to understand why he’s made these moves. The chart below illustrates the year-to-date performance of all three companies while blending in the S&P 500 as a benchmark.

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Apple

Apple (AAPL - Free Report) has completely shifted the mobile phone landscape over the last decade, and it’s been one of the best places for investors to park their cash. In the previous five years, shares have increased by a stellar 320% and have easily outpaced the S&P 500.

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Warren Buffett has stated numerous times he’s attracted to Apple shares because of the company’s brand loyalty. Essentially, this means that AAPL customers are likely to remain with the company throughout the years, consistently upgrading from old iPhone models to new ones. Furthermore, he believes that Apple’s services and products are very beneficial to society.

Apple has posted strong quarterly results repeatedly, exceeding EPS estimates in 19 out of its last 20 quarterly reports. Over the previous four quarters, the company has acquired an average EPS surprise in the double-digits of 12%.

In its latest quarter, in the face of adverse business conditions, Apple still managed to exceed bottom line estimates by a notable 6.3%. Earnings are expected to grow 9% year-over-year in FY22, and in FY23, the bottom line is forecasted to expand an additional 8.7%.

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Looking at valuation, Apple currently sports a 24.3X forward earnings multiple, well below 2020 highs of 41.5X and modestly above its five-year median of 19.9X. Furthermore, the value represents a 35% premium relative to the S&P 500’s forward P/E ratio of 18.1X.

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Image Source: Zacks Investment Research

HP

HP (HPQ - Free Report) is a leading global provider of personal computing, imaging, and printing products. Over the last five years, shares have increased 158% in value, easily outpacing the S&P 500.

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Image Source: Zacks Investment Research

HPQ has consistently reported strong quarterly results, chaining together 13 consecutive EPS beats dating back to 2019. Over its last four quarters, HPQ has acquired an average EPS surprise of 8.4%, and in its latest quarter, the company marginally beat bottom line estimates by 2%.

The current FY22 EPS estimate of $4.31 reflects a sizable 14% growth in earnings year-over-year from 2021. Additionally, earnings are forecasted to grow an additional 2.5% in FY23.

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Pivoting to valuation metrics, HPQ sports an attractively low 9.1X forward earnings multiple, well below 2017 highs of 13.4X and just a tick below the median of 9.3X over the last five years. Additionally, the value represents a steep 49% discount relative to the S&P 500’s value. In my opinion, this is one of the big reasons why Buffett invested in the company - it looks like a classic Buffett value play.

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General Motors

General Motors (GM - Free Report) is an American multinational automotive manufacturing corporation headquartered in the motor city of Detroit, Michigan. Over the last five years, share performance has been a bit disheartening, increasing approximately 25% in value and underperforming the general market by a wide margin.

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Image Source: Zacks Investment Research

GM has had robust earnings results, exceeding bottom line estimates in 15 consecutive quarters dating back to 2018. Over its last four quarterly reports, the company sports an average EPS surprise in the double-digits of 25%, and in its latest quarter, GM beat earnings estimates handily by 34%.

For the current fiscal year, earnings are expected to decline a marginal 2.5%, and in FY23, earnings are forecasted to decrease an additional 1%.

Zacks Investment Research
Image Source: Zacks Investment Research

General Motors sports a beautifully low 5.6X forward P/E ratio, an absolute fraction of 2020 highs of 22.9X, and nicely below the five-year median of 6.6X. Additionally, the value represents an enormous 69% discount relative to the S&P 500’s value.

Zacks Investment Research
Image Source: Zacks Investment Research

Bottom Line

For market participants looking to invest like the Oracle of Omaha, all three companies above provide precisely that. Buffett has amassed a fortune within the market, and it’s pretty easy to see why investors like to mimic his holdings.


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Apple Inc. (AAPL) - free report >>

HP Inc. (HPQ) - free report >>

General Motors Company (GM) - free report >>

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