7 Stocks to Buy in a Dip Like Warren Buffett
These stocks fit Buffett's playbook.
Warren Buffett, CEO of Berkshire Hathaway (ticker: BRK.A, BRK.B), has been one of the most consistent and successful investors on Wall Street for decades. Buffett's value-oriented, long-term approach has persevered through countless media panics, economic recessions and bear markets. Buffett once famously said investors should be "fearful when others are greedy and greedy when others are fearful." There's plenty of fear in the market right now, but investors won't know what, if anything, Buffett has been buying until 13F filings are released in May. However, here are seven stocks to buy that fit the Buffett playbook, according to Morningstar.
Intel Corp. (INTC)
Intel has exactly the type of durable competitive advantage that Buffett loves. The company has huge scale advantages and dominant market shares in the PC and server microprocessor markets. Analyst Abhinav Davuluri says the recent market sell-off created a buying opportunity in certain semiconductor stocks, including Intel. Intel is Davuluri's top semiconductor stock pick, and he says the technology company should be able to navigate the difficult near-term environment while also investing in innovative process and designs, including 7-nanometer chips, artificial intelligence and next-generation automotive processors. Morningstar has a "buy" rating and $70 fair value estimate for INTC stock.
Coca-Cola Co. (KO)
Warren Buffett first invested in Coca-Cola back in 1989. Buffett has added to his investment from time to time throughout the years, but he has never sold a single share. Coca-Cola is currently Berkshire's third-largest public stock holding. Analyst Nicholas Johnson says the coronavirus sell-off has made Coca-Cola stock "a steal" at current levels for investors willing to ride out the near-term market volatility. Johnson says Coca-Cola is the gold standard in a massive global beverage market and is a high-quality defensive play during times of uncertainty. Morningstar has a "buy" rating and $57 fair value estimate for KO stock.
Pfizer (PFE)
Pfizer is one of the largest pharmaceutical companies in the world. Analyst Damien Conover says the health care sector has historically been a defensive safe haven for investors during periods of market weakness and could provide protection from the coronavirus volatility. Conover says Pfizer's diverse portfolio of current drugs, its massive operational scale and its cash flow give it competitive advantages in developing and marketing its pipeline. The recent launch of cardiovascular drug Vyndaqel has been particularly impressive. Pfizer also pays a 4.7% dividend. Morningstar has a "buy" rating and $46 fair value estimate for PFE stock.
Exxon Mobil Corp. (XOM)
An oil pricing war between Saudi Arabia and Russia came at the worst possible time for oil stocks given the quarantines, travel restrictions and general economic shutdowns stemming from the COVID-19 outbreak. However, analyst Allen Good says Exxon is moving full steam ahead on its own investment plans as part of its target to double earnings and cash flow from 2017 levels by 2025. Good says Exxon is the highest-quality integrated oil major. Exxon also pays a 10.6% dividend yield at current prices. Morningstar has a "buy" rating and $76 fair value estimate for XOM stock.
China Mobile (CHL)
China Mobile is the world's largest mobile operator with nearly 1 billion subscribers. Analyst Dan Baker says China Mobile has the strongest balance sheet among all telecom companies and one of the strongest balance sheets in the entire market. The company generates significant free cash flow, which has it well-positioned for the coming 5G upgrade cycle. China Mobile has $58 billion in cash to defend its business from competitors. In addition, China Mobile pays a 5.7% dividend and trades at just nine times forward earnings. Morningstar has a "buy" rating and $52 fair value estimate for CHL stock.
Salesforce.com (CRM)
Salesforce.com is a global leader in on-demand, cloud-based customer relationship management software. Analyst Dan Romanoff says software investors looking to buy the coronavirus dip should focus on the type of high-quality companies with wide competitive moats that Buffett is known to fancy. Romanoff says Salesforce should maintain earnings per share growth of more than 20% in the long term, and the company has margin expansion opportunities. He says Salesforce should grow operating margins by 1% annually for at least 10 years. Morningstar has a "buy" rating and $202 fair value estimate for CRM stock.
Wells Fargo & Co. (WFC)
Wells Fargo is one of four bank stocks that are among Berkshire's nine largest stock holdings. Wells Fargo shares are down 50% year-to-date after the Federal Reserve issued two emergency interest rate cuts that dropped rates essentially to 0%. Analyst Eric Compton says the rate cuts will certainly have a negative impact on bank earnings in the near term, but he says a few quarters of bad earnings have minimal impact on the intrinsic value of a company like Wells Fargo. Morningstar has a "buy" rating and $55 fair value estimate for WFC stock.
Stocks to buy in a dip like Warren Buffett:
-- Intel Corp. (INTC)
-- Coca-Cola Co. (KO)
-- Pfizer (PFE)
-- Exxon Mobil Corp. (XOM)
-- China Mobile (CHL)
-- Salesforce.com (CRM)
-- Wells Fargo & Co. (WFC)
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