If any investor has stood the test of time, it is Warren Buffett. For years, the “Oracle of Omaha” has had a rock-star-like presence in the investing world. His annual Berkshire Hathaway shareholders meeting draws 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 entire world.
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Even though the Federal Reserve has been raising interest rates at a breakneck pace this year, yields for the 10-year note and the benchmark 30-year bond are back to levels seen in early September, with only the short end of the Treasury curve above the 4% level. While attractive for senior citizens who need very safe bonds with no risk of principal loss, this is a poor idea for those who have a longer investing time horizon.
We decided to screen the Berkshire Hathaway portfolio looking for the highest-yielding stock holdings and found seven top stocks that not only make sense for growth and income investors but also look like good ideas for 2023, when we may see a new bull market by the summer.
Trading this market has become difficult. With algorithm program trading often skewing performance, the Buffett way may be the best way to go now. All seven of these high-yielding winners are Buy rated across Wall Street. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Ally Financial
The bank with no buildings is poised to have a very solid fourth quarter and 2023. Ally Financial Inc. (NYSE: ALLY) is a digital financial services company that provides various digital financial products and services to consumer, commercial and corporate customers primarily in the United States and Canada.
Its Automotive Finance Operations segment offers automotive financing services, including providing retail installment sales contracts, loans and operating leases, term loans to dealers, financing dealer floor plans and other lines of credit to dealers, warehouse lines to automotive retailers and fleet financing. It also provides financing services to companies and municipalities for the purchase or lease of vehicles and vehicle-remarketing services.
The Insurance Operations segment offers consumer finance protection and insurance products through the automotive dealer channel and commercial insurance products directly to dealers. This segment provides vehicle service and maintenance contracts and guaranteed asset protection products, and it underwrites commercial insurance coverages, which primarily insure dealers’ vehicle inventory.
The Mortgage Finance Operations segment manages consumer mortgage loan portfolio that includes bulk purchases of jumbo and low-to-moderate income mortgage loans originated by third parties, as well as direct-to-consumer mortgage offerings.
The Corporate Finance Operations segment provides senior secured leveraged cash flow and asset-based loans to middle market companies, leveraged loans and commercial real estate products to serve companies in the health care industry. The company also offers commercial banking products and services. In addition, it provides securities brokerage and investment advisory services. The company was formerly known as GMAC and changed its name in May 2010.
Investors receive a 4.80% dividend. Citigroup has a $34 target price on Ally Financial stock. The consensus target is $32.51, and the stock closed on Thursday at $24.83.
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Chevron
This integrated giant is a safer way for investors looking to get positioned in the energy sector and shares have backed up nicely. Chevron Corporation (NYSE: CVX), through its subsidiaries, engages in integrated energy and chemicals operations worldwide. The company operates in two segments, upstream and downstream.
The upstream segment is involved in the exploration, development, production, and transportation of crude oil and natural gas; processing, liquefaction, transportation, and regasification associated with liquefied natural gas; transportation of crude oil through pipelines; and transportation, storage, and marketing of natural gas, as well as operates a gas-to-liquids plant.
The downstream segment engages in refining crude oil into petroleum products; marketing crude oil, refined products, and lubricants; manufacturing and marketing of renewable fuels; transporting crude oil and refined products by pipeline, marine vessel, motor equipment, and rail car; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives. It is also involved in the cash management and debt financing activities; insurance operations; real estate activities; and technology businesses.
The company posted strong third-quarter results and remains one of the best ways to play energy safely.
Chevron stock comes with a 3.30% dividend. The Raymond James target price of $215 is well above the $193.63 consensus target and Thursday’s close at $173.54.
Citigroup
This top bank stock has bounced nicely off the lows, and Warren Buffett bought a massive $2.5 billion worth of shares back in the summer. Citigroup Inc. (NYSE: C) is a leading global diversified financial service company that provides consumers, corporations, governments a broad range of financial products and services.
Citigroup offers services such as consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management. It operates and does business in more than 160 countries and jurisdictions in North America, Latin America, Asia and elsewhere.
Trading at a still cheap 7.0 times estimated 2022 earnings, this stock looks very reasonable in what remains a volatile stock market and in a sector that has dramatically lagged.
Shareholders receive a 4.54% dividend. The $79 Oppenheimer price target is a Wall Street high. The consensus target for Citigroup stock is $57.15, and shares closed on Thursday at $44.69.
Johnson & Johnson
With a diverse product base and a very popular and solid brand, this is among the most conservative big pharmaceutical plays. Johnson & Johnson (NYSE: JNJ) researches, develops, manufactures and sells various products in the health care field worldwide.
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Its Consumer Health segment offers baby care products under the Johnson’s and Aveeno Baby brands; oral care products under the Listerine brand; skin health/beauty products under the Aveeno, Clean & Clear, Neutrogena and OGX brands; acetaminophen products under the Tylenol brand; cold, flu and allergy products under the Sudafed brand; allergy products under the Benadryl and Zyrtec brands; ibuprofen products under the Motrin IB brand; smoking cessation products under the Nicorette brand; and acid reflux products under the Pepcid brand.
This segment also provides women’s health products, such as sanitary pads and tampons under the Stayfree, Carefree, and o.b. brands; wound care products comprising adhesive bandages under the Band-Aid brand; and first aid products under the Neosporin brand.
The Pharmaceutical segment offers products in various therapeutic areas, including immunology, infectious diseases, neuroscience, oncology, pulmonary hypertension and cardiovascular and metabolic diseases.
Its Medical Devices segment provides electrophysiology products to treat cardiovascular diseases; neurovascular care products to treat hemorrhagic and ischemic stroke; orthopedics products in support of hips, knees, trauma, spine, sports and other; advanced and general surgery solutions that focus on breast aesthetics and ear, nose and throat procedures; and disposable contact lenses and ophthalmic products related to cataract and laser refractive surgery under the Acuvue brand.
Shareholders receive a 2.55% yield. Johnson & Johnson stock has a $198 price target at Citigroup. The consensus target is $184.40. On Thursday, the closing share price was $177.20.
Kraft Heinz
Even in bad times, everybody has to eat, and this company always stands to benefit. Kraft Heinz Co. (NASDAQ: KHC) was formed via the merger of H.J. Heinz and Kraft Foods. The company is a leading global food company, with $29 billion in annual revenues generated by such well-known brands as Kraft, Heinz, Oscar Meyer and Maxwell House. Legendary investor Warren Buffett holds a big position in the stock at Berkshire Hathaway.
It is the third-largest food and beverage manufacturer in North America, deriving 76% of revenues from that market and 24% internationally. Additional brands include Oscar Meyer, Maxwell House, Capri Sun, Classico, Jell-O, Kool-Aid, Lunchables, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon, Quero, Weight Watchers Smart Ones and Velveeta.
The dividend yield here is 4.06%. The BofA Securities US 1 top pick has a $48 price target, while the consensus target is $42.10. Kraft Heinz stock closed at $44.69 on Thursday.
Kroger
This grocery chain giant is always a solid idea when the going gets rough as people tend to eat out less. Kroger Co. (NYSE: KR) operates as a retailer in the United States. It operates combination food and drug stores, multi-department stores, marketplace stores and price impact warehouses.
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Its food and drug stores offer natural food and organic sections, pharmacies, general merchandise, pet centers, fresh seafood and organic produce. Its multi-department stores provide apparel, home fashion and furnishings, outdoor living, electronics, automotive products and toys.
The company’s marketplace stores offer full-service grocery, pharmacy, health and beauty care, and perishable goods, as well as general merchandise, including apparel, home goods, and toys. The price impact warehouse stores provide grocery and health and beauty care items, as well as meat, dairy, baked goods and fresh produce items.
Kroger also manufactures and processes food products for sale in its supermarkets and online, and it sells fuel through 1,613 fuel centers. As of January 29, 2022, the company operated 2,726 supermarkets under various banner names in 35 states and the District of Columbia.
Kroger stock investors receive a 2.24% dividend. The BofA Securities target price of $75 is well above the $53.95 consensus target and Thursday’s close at $47.46.
Procter & Gamble
The company offers a very solid dividend as well as a host of recognizable products. Procter & Gamble Co. (NYSE: PG) is one of the world’s largest consumer products companies and one of the oldest in the Fortune 500. Its many brands include Pampers, Tide, Bounty, Charmin, Gillette, Oral B, Crest, Olay, Pantene, Head & Shoulders, Ariel, Gain, Always, Tampax, Downy and Dawn.
The company sells its products through mass merchandisers, e-commerce, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, baby stores, specialty beauty stores, high-frequency stores and pharmacies. The company has been very innovative in its product development process and uses that to help ensure future growth and cash flow. This should provide investors with years of steady growth and dividends.
Investors receive a 2.45% dividend. Raymond James has set its price objective at $165, and the consensus target is $148.60. Procter & Gamble stock ended Thursday trading at $151.32.
Seven top Warren Buffett holdings for investors looking for yield and a modicum of growth that while not invincible, will surely hold up better the rest of 2022 and into next year than technology and some other more volatile sectors.
The stock market has some big downside potential from where we are now, and playing it safe just makes sense until the Federal Reserve is done raising interest rates, which may not be until the first quarter of 2023.
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