Insights

2 Buffett Stocks to Buy More of in August

Since Warren Buffett acquired Berkshire Hathaway and became its CEO in 1965, the company’s stock price has risen more than 2,326,000%. It’s little wonder the famous investor is sometimes affectionately referred to as the Oracle of Omaha.

Through the years, Buffett and the Berkshire team have done a remarkable job of identifying worthwhile investment opportunities and beating the market in good times and bad. Because of that track record, the company’s holdings tend to attract a lot of attention, and some investors have scored big wins by taking inspiration from the Oracle of Omaha. Within that mold, here’s why you should consider buying these two discounted stocks in August. 

Image source: The Motley Fool.

1. Snowflake

Snowflake‘s (NYSE: SNOW) data-warehousing platform offers clients the ability to combine and analyze information from otherwise protected cloud-infrastructure providers. These days, most large businesses and institutions rely on a combination of applications hosted by competing services from Amazon, Microsoft, and Alphabet, and the cloud infrastructure leaders prevent data from being natively shareable across their ecosystems. Snowflake’s technology makes it possible to combine, store, and analyze data from apps and services hosted by different infrastructure providers, and rapid client additions reflect strong demand for these capabilities. 

Snowflake ended last quarter with 6,322 total customers, up roughly 40% from a year ago and 6% sequentially, and the data specialist is also benefiting as clients increase their use of its services. Product revenue grew 84% year over year to reach $394.4 million last quarter, and the company posted a gross profit margin of 72%.

SNOW PS Ratio (Forward) data by YCharts

With the data-services specialist still valued at roughly 22.5 times this year’s expected sales, it remains one of the most growth-dependent stocks owned by Buffett’s company, and it wouldn’t be shocking to see shares continue to struggle if volatility continues to roil the market at large. On the other hand, Snowflake’s long-term growth outlook remains very promising, and investors who take a buy-and-hold approach could notch stellar returns from the stock at current pricing levels.  

2. Activision Blizzard

In January, Microsoft announced that it would be acquiring Activision Blizzard (NASDAQ: ATVI) for $68.7 billion. Lucky for Buffett and Berkshire, the investment conglomerate had actually initiated a position in the video game publisher’s stock shortly before the deal was announced. Interestingly, Berkshire has continued to buy Activision stock after the deal was announced.

With shares currently priced at roughly $79.50, Activision Blizzard stock offers 19.5% upside compared to the $95 per share price that Microsoft is on track to buy the company at. Investors apparently see significant risk that the acquisition will be blocked by regulators. 

Microsoft has been making moves to bolster its games-as-a-service initiative, essentially aiming to do for video games what Netflix did for video and television subscription services. The Game Pass subscription service has been a big boon to Microsoft’s Xbox console ecosystem and helped it better compete with Sony and its PlayStation family of consoles. However, Xbox has trailed behind PlayStation when it comes to console market share for almost a decade, and Microsoft’s comments suggest it doesn’t intend to pursue a solely platform-exclusive approach with content acquired from Activision Blizzard.

The video game industry will still be highly competitive even if the acquisition goes through, and Microsoft also faces plenty of competition from other big tech companies. With the proposed buyout expected to close before the second half of 2023, the Berkshire team clearly sees Activision Blizzard stock presenting a relatively low-risk way to bank an attractive return in short order. In today’s tough market where solid gains can be hard to find, it’s an intriguing thesis — and one that has a good chance of paying off. 

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Noonan has positions in Activision Blizzard. The Motley Fool has positions in and recommends Activision Blizzard, Alphabet (A shares), Alphabet (C shares), Amazon, Berkshire Hathaway (B shares), Microsoft, Netflix, and Snowflake Inc. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

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