Warren Buffett, CEO of Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), is renowned for his investment prowess. Under his leadership since the mid-1960s, the company’s Class A shares have achieved an astounding nearly 5,000,000% return, vastly outpacing the S&P 500’s approximately 35,000% total return, including dividends. This impressive performance makes Buffett a highly emulated investor on Wall Street.
Based on Berkshire Hathaway’s latest Form 13F filing with the Securities and Exchange Commission and insights from Buffett’s recent annual shareholder meeting, the company manages a $375 billion portfolio comprising 44 stocks and two exchange-traded funds. However, not all these stocks are equally attractive. Here are three Warren Buffett stocks that are particularly promising buys for June and beyond.
Mastercard
The first standout Warren Buffett stock for long-term investors is payment-processing giant Mastercard (NYSE: MA).
Mastercard faces a significant challenge: its cyclical nature. Financial stocks like Mastercard fluctuate with the health of the U.S. and global economy. If indicators point to a recession, consumer and enterprise spending typically decline. However, economic cycles are not linear. Most U.S. recessions since World War II were resolved in under a year, while periods of growth usually last several years. During these growth periods, Mastercard tends to benefit from extended expansions.
Unlike some of its peers that offer loans, Mastercard has avoided lending, thereby insulating itself from credit delinquencies and loan losses during economic downturns. This focus on payment facilitation has kept its profit margin above 40%.
Mastercard has a long-term opportunity to expand its payment infrastructure in underbanked emerging markets. In the first quarter, currency-neutral cross-border volume surged 18%, highlighting the potential in regions like Africa, the Middle East, and Southeast Asia, where credit card usage and digital payments are still developing.
Although Mastercard’s forward price-to-earnings (P/E) ratio of 27 might seem high, Wall Street analysts expect the company to grow its earnings by nearly 20% annually over the next five years. Additionally, this forward P/E ratio represents a 20% discount to its average forward-earnings multiple over the past five years.
Sirius XM Holdings
Another compelling Warren Buffett stock for June is satellite-radio operator Sirius XM Holdings (NASDAQ: SIRI).
Sirius XM is also cyclical, facing challenges from reduced advertiser spending and fewer new vehicle purchases during economic uncertainty. The company’s subscriber count can decline when U.S. economic growth slows, as seen in the modest decrease during the first quarter.
Despite this, Sirius XM has significant competitive advantages. It is the only licensed satellite-radio operator, allowing it to increase subscription prices above inflation without losing many subscribers.
Additionally, Sirius XM generates most of its revenue from subscriptions (78%), making it less reliant on volatile advertising revenue.
Sirius XM’s costs for equipment and transmission are relatively stable, allowing the company to add millions of users without significantly increasing expenses. After a recent downturn, Sirius XM stock is nearing a 4% dividend yield and is valued at its lowest forward P/E ratio (below 9) since going public.
Chevron
The third Buffett stock to consider in June is energy giant Chevron (NYSE: CVX).
Like Mastercard and Sirius XM, Chevron’s performance is tied to the U.S. and global economy. Economic slowdowns reduce demand for energy commodities like oil and natural gas. However, Chevron typically benefits from prolonged economic expansions.
During the COVID-19 pandemic, global energy companies, including Chevron, had to cut capital spending. Although spending levels have returned to normal, global crude oil supply remains constrained, boosting oil prices.
Chevron is acquiring Hess in a $53 billion all-share deal, adding 465,000 net acres of oil-rich land in the Bakken Shale, expanding its Gulf of Mexico presence, and increasing production in Guyana. If crude oil prices remain high, Chevron’s drilling segment will thrive.
Chevron’s integrated operations, including pipelines, chemical plants, and refineries, provide a hedge against declining crude oil prices. The company also has a robust capital-return program, with a $75 billion share repurchase authorization and 37 consecutive years of dividend increases. Chevron’s current yield is over 4%.
Chevron’s valuation is attractive, with a forward P/E of around 11, which is 22% below its five-year average forward-earnings multiple.
In summary, Mastercard, Sirius XM Holdings, and Chevron are three Warren Buffett stocks that offer compelling investment opportunities for June and beyond.
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