With the Federal Reserve recently announcing that it will likely be on the path to sliding to higher interest rates than originally thought, the stock market has resumed its downward trajectory that it has been on for most of 2022. As painful as this drop was for current shareholders for people with cash For business, low stock prices are often opportunities to buy great companies at a discount.
For decades, Warren Buffett has built an incredible reputation for doing just that – from sweeping up to buying either stock or entire powerful companies at discount prices. For small investors, this opens up a somewhat closer “if you can’t beat them, join them” opportunity. With that in mind, three Motley Fool shareholders have dug into the companies in Buffett’s portfolio to see if the recent market carnage yielded any deals that might be worth buying today.
they came with Activision Blizzard (ATVI 0.08%)And the Amazon (AMZN 1.88%)and Buffett Berkshire Hathaway (BRK.A 0.75%) (BRK.B 1.27%). Read on to find out why and decide for yourself if any or all of them are just deals that deserve a place in your portfolio in addition to Buffett.
Real profits from virtual worlds
Eric Folkman (Activity Blizzard): Here’s a curious photo: Warren Buffett sitting on his couch, staring intently at a big screen TV while working on a remote control in his hand. On screen, his avatar embodies the villains while the legendary financier plays a first-person shooter video game.
One has to imagine such a painting, because perhaps the famous Luddite Buffett does not spend his spare time blasting away from virtual enemies.
This does not prevent him from investing deeply in video game The industry, however, is where Berkshire Hathaway amassed a large stake in Activision Blizzard. Berkshire is now a major player in the company’s shareholder list, holding about 9% of the stock valued at more than $5 billion.
This investment represents something of a bet. in january, Microsoft Offered to acquire Activision in an all-cash deal worth approximately $70 billion. That comes out to $95 a share, and thanks to the drop in the target company’s share price, it’s about 30% potential upside.
Many investors who are not Buffett are skeptical about completing the deal. This, combined with a general lack of enthusiasm for the technology and its adjacent stock, has prevented Activision from getting close to Microsoft’s bid price.
But it appears that regulatory decisions will be issued soon in many jurisdictions. Yes, there are concerns about many issues – how will Microsoft / Activision support the cornerstone or not Call of duty on the titles SonyThe PlayStation console, to name a few, and the cloud hanging over Activision after the recent high-profile sexual harassment case.
But the stakes are high here, and the rich Microsoft has a lot of experience negotiating and compromise with regulators. I think Buffett and Berkshire’s bet on the ongoing deal is well thought out and is likely to result in windfall gains.
Even if it doesn’t, Activision has nowhere to go but to improve the company’s culture. Aside from that its fundamentals are solid, the most recent Call of duty The title sets new sales records for the company. Investors should definitely consider following Buffett’s lead in this stock.
This e-commerce giant has fallen dramatically from its height
Parkiv Tatefusyan (Amazon): Unfortunately for Amazon shareholders, the stock is down 45% in 2022. On the bright side, this is an opportunity for long-term investors to buy Buffett stock at a discount. Amazon has struggled amid the economic reopening, as consumers shift their spending toward experiences outside the home such as restaurants, travel and theme parks.
However, Amazon has grown its revenue at a compound annual rate of 25.6% over the past decade as it has attracted millions of new customers. During that time, operating profit margin expanded from 1.1% to 5.3%. Admittedly, the company will continue to face headwinds in the near term as consumers unleash pent-up demand for the kind of things they missed when they were locked in the house. This is bad news for Amazon.
However, in the long run, it is likely that a greater percentage of total sales will be transferred online. Supporting this trend is the added convenience of e-commerce that brick-and-mortar stores can’t match. As the largest online retailer in sales, Amazon is poised to capitalize on this growth. Meanwhile, a massive sell-off in 2022 gives investors a chance to buy Amazon shares at a price-to-earnings ratio of 84.66, well below the average valuation in the past five years.
Not even Buffett himself could completely avoid the market’s wrath
Chuck Salita (Berkshire Hathaway): When the market behaves poorly, investors often turn their stock purchases into strong, stable businesses in order to try to avoid the worst of problems. Buffett’s Berkshire Hathaway is often considered one of those stocks. This is because it has a good balance sheet with a pool of cash, a diversified portfolio of companies across insurance and many other sectors, and a solid reputation as a money generating powerhouse.
However, despite this incredibly strong and well-deserved reputation, not even Berkshire Hathaway was able to avoid completely swamping the market in 2022. Although it held up better than the market as a whole, Berkshire Hathaway’s shares tumbled little so far. general. This gives you the opportunity to buy shares of one of the most powerful companies in the market for less than you could have had when this mess started.
From a value investor’s perspective, Berkshire Hathaway shares can be purchased at about 1.4 times their book value. This is not all so much before the level where Buffett himself was willing to buy back shares of Berkshire Hathaway.
If Berkshire Hathaway’s stock drops significantly from here, absent the end of the economy catastrophe, it could turn a reasonable discount today into tomorrow’s incredible bargain. That reality makes now a great time to consider dipping your toes into the one stock that makes up the absolute bulk of Buffett’s net worth.
Bargains don’t last forever
Given that the Fed is expected to keep raising rates until inflation is tightly controlled, the market may remain very nervous for at least a little longer. still as October march pointsWhen stocks get cheap enough, investors will pounce on buying. This makes today a great time to at least look at companies like Activision Blizzard, Amazon and Berkshire Hathaway and consider whether their decline so far in 2022 makes them worth buying today.