If any investor has stood the test of time, it is Warren Buffett, and with good reason. For years, the “Oracle of Omaha” has had a rock-star-like presence in the investing world His annual Berkshire Hathaway shareholders meeting draws literally thousands of loyal fans who are investors. Known for his long buy and hold strategies, and his massive portfolio of public and private holdings, he remains one of the preeminent investors in the world.
The April consumer price index came at 8.3% on an annual basis, and many investors have become worried. As well they should be with inflation still at 40-year highs. Mortgage rates are the highest since 2009, which at 5.27% for a 30-year fixed is still historically low, but that rate was 2.95% just last fall. Gasoline prices are at all-time highs, and food prices at the grocery store have jumped.
Worried investors should shift away from high-beta stocks and go into conservative, dividend-paying companies to ride out what may be the worst year in the stock market since 2008 and 2009. We screened Warren Buffett’s Berkshire Hathaway portfolio looking for quality defensive names that make sense now and found seven top stocks that are all rated Buy by major Wall Street firms.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Bank of America
Bank of America Corp. (NYSE: BAC) is the second-largest holding at Berkshire Hathaway. The company is a ubiquitous presence in the United States, providing various banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, corporations and governments in the United States and internationally. It operates 5,100 banking centers, 16,300 ATMs, call centers and online and mobile banking platforms.
Bank of America has expanded into several new U.S. markets, with scale across the country positioning it ideally to benefit from accelerating loan growth over the next two years. Moreover, unlike smaller peers, scale allows the bank to increase investment substantially over the next few years without notably jeopardizing returns, driving further market share gains.
Banks, almost regardless of size, are a solid idea as the potential for higher net interest income (NII) on portfolio loans to homeowners, farmers and small business owners. NII is one of the strongest tailwinds provided to financial firms in a rising-rate environment, as they can achieve better returns on their cash balances while achieving higher rates of returns from customers who come in for loans. Bank of America posted very solid first-quarter results.
Bank of America stock investors receive a 2.35% dividend. The Goldman Sachs target price of $51 is higher than the $49.16 consensus target and Wednesday’s closing print of $35.57.
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