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4 Warren Buffett Stocks to Buy in Q2 Earnings

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It is not for no reason that Warren Edward Buffett is an investment guru. Suffice it to say that his company, Berkshire Hathaway Inc. BRK.B, has yielded a staggering return of more than 700% since inception.

Buffett’s investing mantra is quite simple. He believes in purchasing shares of great companies and holding them for a considerable period of time. These companies have reliable business models that have stood the test of time. They also generate plenty of cash and provide dividends, which are indicators of a strong and sustainable business.

Such companies tend to belong to sectors such as technology, industrials, healthcare and communication services, to name a few. Solid economic growth and the Trump administration’s initiative to cut tax rates are providing the much-needed windfall to such sectors.

Tech stocks, in particular, are hitting record highs as investors regained their appetite for risk. And why not? U.S. and Chinese officials resumed talks over trade issues, which helped soothe nerves. Threats of a trade war were looming large after President Trump recently prepared another gargantuan round of tariffs on Chinese imports.

Let us, thus, focus on the Oracle of Omaha’s favored companies that are likely to make the most of the second-quarter earnings season. Such companies are positioned to report upbeat earnings results, which could eventually lead to an uptick in share price.

What Will Drive Earnings?

Earnings are likely to rise mostly on strong economic data. The United States has been able to create 213,000 jobs in June; a sign that corporates are finding ways to fill positions despite the lack of skilled workers. Such upbeat hiring figures breezed past analysts’ estimates of 200,000 job additions.

Job gains were pretty broad-based, with white-collar jobs leading the way with 50,000 additions. From manufacturers, health-care providers to construction companies, all hired workers, a clear sign of a burgeoning economy.

The unemployment rate rose to 4% last month, but for good reason. The jobless rate went up mostly because of around 600,000 people entering the labor force. This showed that more Americans are searching for jobs as they are easier to find.

The U.S. economy, in the meanwhile, is projected to expand in the second quarter at an annual pace of nearly 4% after a 2.2% gain in the first three months of this year, economists say. This would put the economy in a solid position this year to meet or even beat 3% growth in gross domestic product, one of the primary aims of the government (read more: US GDP to Hit Elusive 3% Annual Growth in 13 Years: 5 Picks).

At the same time, the tax overhaul policy will provide the much-needed wherewithal to corporates. After all, the tax laws gave companies massive relief as they will now be paying between 8% and 15.5% instead of the earlier 35% for bringing back money held overseas.

4 Warren Buffett Stocks for Q2 Earnings

As mentioned above, Buffett’s preferred sectors are poised to gain in the near term. Banking on such positives, it will be prudent to invest in four of his favorite stocks from the aforementioned sectors that are expected to report a significant uptick in second-quarter earnings.

Lest we forget, U.S. companies are expected to see one of the strongest second-quarter earnings season in almost a decade. Total earnings for the S&P 500 companies in the second quarter are estimated to improve 19.1% from the same period last year on 8.2% higher revenues (read more: Start of Q2 Earnings Season).

These stocks flaunt a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Apple Inc. AAPL designs, manufactures, and markets mobile communication and media devices, and personal computers to consumers, and small and mid-sized businesses; and education, enterprise, and government customers. The Zacks Consensus Estimate for its current-year earnings increased 0.4% over the last 90 days. The stock has an average four-quarter positive earnings surprise of 5.10%. Companies with positive earnings surprise are more likely to come up with positive results in the near term.

General Motors Company (GM - Free Report) designs, builds, and sells cars, trucks, crossovers, and automobile parts. The Zacks Consensus Estimate for its current-year earnings advanced 2.9% over the last 90 days. The stock has an average four-quarter positive earnings surprise of 18.40%.

Teva Pharmaceutical Industries TEVA manufactures and market generic pharmaceuticals. The Zacks Consensus Estimate for its current-year earnings improved 2.7% over the last 90 days. The stock has an average four-quarter positive earnings surprise of 10.05%.

Sirius XM Holdings Inc. SIRI provides satellite radio services in the United States. The Zacks Consensus Estimate for its current-year earnings rose 4.2% over the last 90 days. The stock has an average four-quarter positive earnings surprise of 17.50%.

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