Warren Buffett’s Berkshire Hathaway couldn’t escape the stock market’s wrath in 2022. Of the 50 stocks Buffett owns, only 10 stocks gained in value last year. In the third quarter alone, Berkshire Hathaway lost $10.1 billion on its investments in equities.
Yet gains or losses on investments in any given quarter are meaningless, as Buffett’s track record as a stock picker in the long term is hard to rival. That explains why investors often look at the legendary-investor’s portfolio for stock ideas. Right now, among the several stocks Berkshire Hathaway holds, here are the three best, no-brainer Buffett stocks to buy for 2023.
One oil stock Buffett absolutely loves
The first Buffett stock to buy for 2023 is also one the Oracle of Omaha bought hand over fist in 2022: Occidental Petroleum (NYSE: OXY).
Although Buffett already owned preferred stocks and warrants in Occidental, he disclosed a position in its common stock for the first time in March 2022. There’s been no stopping Buffett since then.
Occidental stock is now among Berkshire’s 10 largest holdings, and Buffett has even obtained regulatory approval to buy up to a 50% stake in the oil and gas producer. That means he could continue to buy shares in Occidental in 2023, and that could be one of the biggest catalysts for the oil stock’s price this year.
As an upstream oil company, Occidental is also perfectly poised to rally if crude oil prices rise this year. On the flip side, even if oil prices fall, Occidental should still deliver value to shareholders, as it also runs midstream and chemicals businesses, is flush with cash, and has a much stronger balance sheet now after repaying debt worth a whopping $9.6 billion in 2022 through Nov. 7.
A solid cash-flow profile also means Occidental should increase its dividend per share yet again in 2023. In fact, the company says it should be able to increase dividends even if West Texas Intermediate (WTI) crude oil plunges to $40 per barrel. Although Occidental may not increase its annual dividend payout as much as it did in 2022 — 1,200%, at that — it’s a company that’s committed to paying you more. That’s a very Buffett thing to own right now.
The steadfast stock Buffett can’t let go of
The second Buffett stock you may want to buy right now is Mastercard (NYSE: MA). The payment processor has performed exceptionally well over the years and looks poised to stick with the trend.
Mastercard is currently on solid footing. During the nine months that ended Sept. 30, 2022, the company grew its net revenue by 20% and net income by 17% year over year. Mastercard generated a solid operating margin of 55% during the period, and that’s pretty consistent with what the company has generated for years.
Payment processing is an asset-light, high-margin business with no credit risk since companies don’t lend but earn a fee on every transaction processed on their network, and that’s visible in Mastercard’s numbers. The company had 3 billion Mastercard and Maestro-branded cards issued globally, as of Sept. 30.
One thing that could hugely work in the company’s favor this year and beyond is its international exposure, which is larger than that of its arch-rival Visa. With a majority of global transactions still cash-driven, there’s a massive market outside the U.S. for Mastercard to capture.
Also, in the context of where things stand now, greater international exposure could help drive growth for Mastercard, even if the U.S. economy slows down. Management’s views on this are something investors may want to watch out for when the company holds its quarterly earnings conference call on Jan. 26.
In any case, Mastercard has navigated all kinds of business cycles over the decades, so investors shouldn’t have to worry about how the company will fare if there’s a recession. Right now, it’s on track to report solid numbers for 2022 and grow steadily in 2023, making it a no-brainer Buffett stock to buy.
This Buffett stock is about to make a huge move
If you believe a recession is upon us, Johnson & Johnson (NYSE: JNJ) is one steadfast Buffett stock you’ll want to consider buying for 2023, especially with its upcoming spin-off.
Johnson & Johnson will spin off its consumer health products division into a new company called Kenvue this year as it wants to focus more on healthcare — specifically, pharmaceuticals and medical devices. Although its consumer business owns some of the best-known brands including Neutrogena, Band-Aid, and Tylenol, it has also been a slow-growth business. Johnson & Johnson believes separating the two businesses will allow it to focus and invest in higher-growth areas, and therefore unlock greater value for shareholders.
There’s merit to this argument. In the first nine months of 2022, for example, its consumer health division — which made up roughly 16% of Johnson & Johnson’s overall sales — reported operational growth (excluding the impact of foreign-currency fluctuations) of only 2.6% year over year. Pharmaceutical and MedTech (formerly known as medical devices) segments, meanwhile, reported a respective 10% and 6.6% operational growth in sales.
The company has big plans. It’s targeting higher-than-average growth for its pharmaceutical business and expects to generate $60 billion in revenue by 2025. This comes despite the loss of sales from Stelara, its blockbuster drug with a main patent expiring in 2023 in the U.S. and 2024 in the European Union. In MedTech, Johnson & Johnson just acquired Abiomed to expand cardiovascular offerings.
Johnson & Johnson also has a solid balance sheet and is a Dividend King, with an unbeatable 60-year track record of consecutive annual dividend increases. While the company will provide its outlook and growth plans for 2023 on Jan. 24 when it releases its fourth-quarter numbers, you shouldn’t have to wait to buy this 2.6%-yielding Buffett stock.
10 stocks we like better than Occidental Petroleum
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Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Mastercard, and Visa. The Motley Fool recommends Johnson & Johnson and recommends the following options: long January 2023 $200 calls on Berkshire Hathaway, short January 2023 $200 puts on Berkshire Hathaway, and short January 2023 $265 calls on Berkshire Hathaway. The Motley Fool has a disclosure policy.