Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) really scaled back its stock buying in the fourth quarter of 2022. According to the company’s recent 13F filing with the Securities and Exchange Commission (SEC), Berkshire limited its position additions to just four stocks, Apple, Louisiana-Pacific, Occidental Petroleum, and Paramount Global (NASDAQ: PARA).
These transactions occurred sometime between Oct. 1 and Dec. 31 of 2022. So they don’t really reflect the stocks that Buffett and Berkshire are making purchases in this month. Investors won’t know until May what Berkshire is buying right now. But if I could offer suggestions, the following three stocks would be Buffett stocks that should become larger holdings in the company’s portfolio by the time of the company’s next 13F filing.
1. Paramount Global
Paramount Global is a conglomerate that owns a TV network, numerous cable channels, a major movie studio, a streaming service, and several other entertainment-related properties. Admittedly, streaming services from Netflix and Walt Disney overshadow Paramount+ when it comes to subscriber totals. And its ownership of CBS places it in the center of the transition from traditional television to streaming and has potential effects on overall growth. The TV media segment, which made up 72% of the company’s revenue in 2022, declined by 4% year over year.
However, its film studio had a great year with the success of Top Gun: Maverick, and it’s still a player in the content space with successes like the various Yellowstone-related shows and the numerous Star Trek movies and series. These franchises likely were the reason Paramount+ was the fastest-growing of the major streaming services. It now boasts 56 million subscribers, up from 33 million one year ago.
Paramount’s overall revenue rose to $30 billion in 2022. That’s up 5% despite the performance of the TV media segment. The rapid increases in operating expenses, however, led to a massive drop in net income, with earnings falling 76% to $1.1 billion in 2022.
The media stock‘s $0.96-per-share annual dividend yields 4%, which may have made it easier for Buffett and other investors to forgive the recent performance. And as Paramount transitions into more of a streaming company, it should profit Berkshire and its other investors.
2. Bank of America
At first glance, Bank of America (NYSE: BAC) might seem counterintuitive as a stock buy right now. Berkshire already holds more than 1 billion shares of the company, its largest holding besides Apple. However, like the addition to Apple in Q4, buying shares of Bank of America right now would be a wise move for Buffett and his team. The banking, investment, and asset management giant has positioned itself to benefit as interest rates rise. The higher rates especially help BofA through adjustable-rate loans, which will bring in increased revenue.
Indeed, growth has helped its largest segment, consumer banking, which grew to a record 35.9 million consumer checking accounts and logged its 16th consecutive quarter of expansion. Consumer investment accounts also experienced record client flows of $28 billion in 2022.
Overall, the company earned $95 billion in revenue, 7% more than in 2021. Still, higher income taxes and much higher provisions for credit losses led to a 14% drop in net income, as BofA reported $27.5 billion in net income.
Still, those increases in expenses are likely temporary. Also, even though the bear market in 2022 weighed on the stock, its 11 P/E ratio is low by historical standards, a factor that likely helps make it one of the company’s favorite bank stocks.
StoneCo (NASDAQ: STNE) is less known to U.S. investors. Many analysts compare the Brazilian fintech to Block‘s Square ecosystem, as it provides fintech and enterprise software services to retail-focused businesses in Brazil. The stock flew high when it first launched its initial public offering (IPO) in 2018, partially due to its pre-IPO backing from Berkshire.
However, factors such as inflation, COVID-19, Brazilian election turmoil, and a requirement for increased loan reserves hammered StoneCo stock. Consequently, it has fallen by over 90% over the last two years.
Conditions may have improved more recently as the company has now adjusted to the new reserve requirements and the country moves on from COVID-19 and its recent election.
Even with the turmoil, revenue of 6.9 billion reais ($1.3 billion) in the first nine months of 2022 grew by 133% compared with the same period in 2021 (as it emerged from the pandemic). Also, it lost 527 million reais ($102 million) in the first three quarters of 2022, which included a profit of 247 million reais ($48 million) in Q3.
And with stock declines leveling off over the last year, its 41 P/E ratio, which fell from a high exceeding 160 two years ago, could make it increasingly appealing to Berkshire and other investors.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Will Healy has positions in Berkshire Hathaway and Block. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Block, Netflix, StoneCo, and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney, long March 2023 $120 calls on Apple, short January 2024 $155 calls on Walt Disney, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.