The tale of legendary investor Warren Buffett needs no introduction. Starting with just a small sum, the ‘Oracle of Omaha’ has amassed a fortune of over $100bn in his eight decades of stock market investing.

During his time as Berkshire Hathaway CEO, he’s generated an average annual return of around 20% for shareholders, double that of the S&P 500.

With his conglomerate experiencing this success, I think it’s time I tried to steal some of Buffett’s wisdom in an attempt to replicate it for my own portfolio.

With that, here are two Berkshire holdings I’d buy today if I had the cash.

Apple

First up is Apple (NASDAQ:AAPL). The business has become one of the best-known brands on the planet.

So it’s no surprise that Buffett labels it as one of his best investments, being the backbone of Berkshire’s equity portfolio.

Key to Buffett’s investing strategy is to buy companies you know and understand. And this certainly resonates with Apple.

With over one billion people using its products, it’s easy to see the value of the business.

While far from monumental in size, Apple stock also provides investors with a dividend yield of around 0.5%. For Buffett and his 915m shares, this equated to a payout of nearly $900m last year!

On top of this, the firm has put greater emphasis on creating more value for shareholders. As flagged in its latest results, Q3 saw it return over $24bn to investors.

I also like the moves the business is taking away from its core products. Q3 saw its Services sector report record revenue, including over 1bn paid subscriptions. Earlier this year, Apple also announced the launch of its VR headset, priced at $3,499.

The largest threat to Apple is clearly inflation. As well as rising costs, racing inflation could deter consumers from splashing out on its products and services.

Yet with its market grip and renowned brand recognition, I think Apple is a smart long-term play.

Bank of America

The second stock is Bank of America (NYSE:BAC). There’s been quite a bit of uncertainty across the financial sector this year. And events such as the collapse of Silicon Valley Bank have spooked investors.

However, like Buffett, I buy for the long haul, so I see a host of opportunities within the sector right now, including Bank of America.

The stock takes up slightly less room in Berkshire’s portfolio, but there are still ample reasons to like it. Firstly, it looks cheap. As I write, it trades on a price-to-earnings ratio of below 9. Secondly, it has a dividend yield of over 3%.

On top of this, the bank also posted a strong set of Q2 results, including a 19% jump in net income and a 21% rise in its earnings per share.

Further, it’s benefited from rising interest rates, with net interest income rising 14%.

Given the current economic environment, Bank of America remains constantly under pressure. This has been seen recently as customers demand higher saving rates, in turn potentially impacting the firm’s net interest margin. The lingering threat of recession is also bad news for the bank.

However, with a low valuation and appealing yield, I deem the stock a long-term winner.

The post Warren Buffett owns these 2 stocks. I’d buy them today appeared first on The Twelfth Magpie.

More reading

• 7 easy Warren Buffett tips to retire richer
• Here’s how saving £3 a day could lead to an £11,925 yearly passive income

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Charlie Keough has positions in Apple. The Motley Fool UK has recommended Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Across his years of investing, the legendary Warren Buffett has built a fortune comfortably over $100bn.

During his tenure as CEO of Berkshire Hathaway, Buffett has more than pleased shareholders with an impressive average annual return of around 20%. That’s double the return of the S&P 500.

As an investor, I have nowhere near the experience Buffett has amassed over the years. Therefore, looking to the Oracle of Omaha for some inspiration seems like a smart idea. As I continue to build out my portfolio, here are the Buffett methods I’m using to be successful.

Invest in what you know

My favourite method used by the legendary investor is to invest in companies you know and understand. This means owning businesses where you can easily appreciate their core features.

A simple way of doing this is by understanding how a company makes money and what influences its industry. By doing so, you eliminate uncertainties and avoid the risk of running into complex issues that impact the company’s performance.

Buy for the long run

Another method I’d adopt is investing for the long term. Buffett himself once said: “if you don’t feel comfortable owning a stock for 10 years, you shouldn’t own it for 10 minutes”.

The stock market is inevitably volatile. And this has been clear to investors in the last few years with the pandemic and its knock-on effects. However, these short-term peaks and troughs are nullified with a long-term approach.

Buffett has stakes in a host of companies that he’s held for years, such as Coca-Cola. By replicating this approach, I’d aim to build wealth in the long run.

Be greedy

Finally, Buffett has talked about being greedy when opportunities in the stock market arise.

This was most certainly the case in the global financial crash of 2008 when he snapped up a variety of stocks for a cut-down price. And with the declines we’ve seen across global markets in the past few years, this message resonates once again.

With many stocks taking a hit in recent times, this presents an opportunity for me to add high-value companies to my portfolio for cheap.

What should I buy?

So, with the above in mind, what stocks should I be adding to my portfolio?

Well, while I don’t have any spare cash right now, if I did, I’d look to companies like Apple (NASDAQ: AAPL).

The value of the business is easy to understand, with over one billion people using Apple products.

Looking at the long-term returns of the stock, it’s also clear to see the attraction of Apple. While past performance is no indication of future returns, the last five years have seen it rise an impressive 273%.

The tech company is Berkshire Hathaway’s largest holding, making up nearly 50% of its portfolio. And at the firm’s recent annual shareholders meeting, Buffett labelled Apple as the best business he owns. 

As Buffett said: “someone is sitting in the shade today because someone planted a tree a long time ago”. I’d hope that if I bought Apple today, I’d hold it for years to come and generate some healthy returns.

The post I’d use these Warren Buffett methods to build wealth! appeared first on The Twelfth Magpie.

More reading

• 7 easy Warren Buffett tips to retire richer
• Here’s how saving £3 a day could lead to an £11,925 yearly passive income

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

In his many years of investing, Warren Buffett has amassed a net worth comfortably into the billions.

During his time as CEO of Berkshire Hathaway, the Oracle of Omaha has produced mouth-watering returns – double that of the S&P 500.

Along the way, Buffett has dropped nuggets of advice that I believe all investors should seriously consider when stock picking. Here are three pieces I’d use for my portfolio.

Buy the business

A lot of people judge their decisions based on the share price of a company. However, Buffett has stated in the past that it’s more important to focus on the strength of the business itself.

What this means is that he doesn’t necessarily buy stocks solely because they have a low valuation, for example. Instead, he looks more widely at whether he deems a stock attractive due to its core business features.

If this is the case, Buffett can then assess whether the share price offers value. This again doesn’t mean it’s just ‘cheap’ – but that he sees potential for growth.

Long-term outlook

As well as this, he also buys stocks for the long run. As he once said: “if you don’t feel comfortable owning a stock for 10 years, you shouldn’t own it for 10 minutes.”

Investments will undoubtedly go through volatile periods. But with a long-term perspective, these short-term headwinds are almost irrelevant.

Be greedy

Finally, Buffett has also talked of the ability to “be greedy when others are fearful” as a powerful tool to maximise returns.

The declines we’ve seen in global markets this year are obviously an issue. However, with Buffett’s advice, these declines also become an opportunity.

With many attractive businesses taking hits, now could be the perfect time for me to pile in.

These in action

With these in mind, it makes sense why Apple (NASDAQ: AAPL) is Berkshire’s top holding. The majority of people could tell you the value of Apple’s products and services, showing the strength of the business. And with the stock down 4% in 2022, this may be an opportunity to grab some shares.

On top of this, while past performance is no indication of future returns, the last five years have seen Apple stock rising 343%. For its long-term investors, these are some hefty returns.

Buffett deems Apple as one of his ‘four giants’. And in the second quarter, Berkshire topped up its holdings with an additional 4 billion shares.

The tech giant also posted some strong results in its latest update to shareholders, where net sales jumped 2% compared to H1 2021.

Within the results, CEO Tim Cook talked of Apple’s ability to “enrich the lives” of customers.

The business may see a slowdown in demand in the upcoming months as the cost of living continues to rise. Higher costs for materials and supply chain issues may also prove headwinds for the firm.

However, like Buffett, I deem Apple a strong addition to my portfolio. Its core business features are more than attractive. And if it carries on with its impressive growth, I think I could see some healthy long-term returns.

The post I’d follow this Warren Buffett advice when buying stocks appeared first on The Twelfth Magpie.

More reading

• 7 easy Warren Buffett tips to retire richer
• Here’s how saving £3 a day could lead to an £11,925 yearly passive income

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

After he has amassed a net worth well into the billions, looking to top investor Warren Buffett for investment inspiration doesn’t seem like too bad an idea.

Since the Oracle of Omaha became the CEO of Berkshire Hathaway, he’s managed to generate average annual returns of 20% – twice that of the S&P 500. Pretty impressive.

Apple (NASDAQ: AAPL) makes up nearly half of Berkshire’s stock portfolio, showing Buffett is clearly bullish on the stock, as he deems it one of his ‘four giants’. Here’s why I agree.

Understandable investment

What I most like about Apple is that the value of the company is easy to grasp. As Buffett said, “the important thing is to know what you know and what you don’t know”. In essence, investments should be understandable. Billions of people use Apple products worldwide, so it’s clear to see the use that the company has.

This is shown through the firm’s better-than-expected latest results, where despite the cost-of-living crisis, net sales rose nearly 2% year over year. This included a 3% jump in iPhone sales, while Apple’s services division also saw a rise.

Speaking on its performance, CEO Tim Cook highlighted how it showed “Apple’s constant efforts to innovate, to advance new possibilities, and to enrich the lives of our customers”.

Despite this positive outlook, Cook did also mention the impact of inflation. And this could be a threat to the business in the near term. With it being felt through wages and component costs, this could drag the Apple share price down.

However, with iPhone 13 sales remaining strong despite the near release of a new model, I think this highlights the company’s resilience.

Buyback scheme

Apple has also been boosted in recent times by its share buyback scheme. The aim of this is to return value to shareholders.

Strategies like this have helped towards a meteoric 320% rise in its share price over the last five years, as last year alone the business spent $85bn on buying back shares.

This trend continued in its latest quarter as Apple returned over $28bn to shareholders.

Apple concerns

Despite this, I do have a few concerns surrounding Apple.

With a price-to-earnings ratio of 27, the stock doesn’t seem cheap. Granted, it’s been higher in the past. But with it significantly above the ‘value’ benchmark of 10, this is a worry.

With inflation also set to rise further, Apple’s resilience may break should we see consumers tighten their belts. It has plans to release the iPhone 14 later this year. But with the cost-of-living crisis looking like it’s set to worsen, the business may see a fall in demand for products.

However, there’s talk of Apple freezing the price of the iPhone 14, which goes against the usual trend of incremental price increases for new models. Given the times, this makes sense. And hopefully, this will help offset a slow in demand.

Why I’d buy

So, despite my concerns, I’d still buy Apple shares. Its results show that its capable of navigating tough periods. And with its buyback scheme, along with being an understandable investment, I think it’s a strong addition to my portfolio.

The post Warren Buffett loves this stock and so do I! appeared first on The Twelfth Magpie.

More reading

• 7 easy Warren Buffett tips to retire richer
• Here’s how saving £3 a day could lead to an £11,925 yearly passive income

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Warren Buffett is renowned for his quotes. Over his long and successful investment journey, Buffett has always liked to buy quality stocks for a cheap price. For example, amid the devastating financial crash back in 2008, he famously quoted in a letter to Berkshire Hathaway shareholders how “whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down”.

With 2022 having seen big falls in the stock market so far (for example, the US S&P 500 is down 22% year-to-date), here’s why I’d follow Warren Buffett and buy Apple (NASDAQ: AAPL) stock today. It’s by no means a cheap stock, but it is marked down at the moment.

Apple share price history

Long-term investors in Apple have seen strong results over time. Following the firm’s rise, the last five years have seen its share price rocket by 275%. In fact, Apple has risen over 1,300% in the last decade. However, the stock has failed to repeat this form in 2022. It’s down 26% year-to-date. Despite a 7% rally in March, the share price has struggled to take off this year.

Apple shares make up nearly half of Berkshire’s stock portfolio. And amid its fall, Buffett has rushed to purchase more shares in the tech giant. At the end of March 2022, Berkshire had nearly $160bn worth of Apple shares.

Apple opportunities

With this fall, I think, just like Buffett, that Apple could be a strong addition to my portfolio. One reason for this is the firm’s buyback scheme. Led by CEO Tim Cook, in recent times the business’s performance has been boosted by the programme. Companies buy back their own stock for a variety of reasons, with one being to increase value for shareholders. Last year alone, Apple spent over $85bn on buying back shares.

Also, the current Apple share price can be seen to provide value from some viewpoints. Buffett has previously said that “the important thing is to know what you know and what you don’t know.” Essentially, what he means by this is that investments should be understandable. And with over a billion people using Apple devices across the world (myself included), it’s clear to see the useful services that Apple provides and to understand why it’s popular.

Apple risks

With this said, there are a few concerns I have with this stock.

Firstly, it’s currently trading on a price-to-earnings ratio of around 22. While it has been higher in times gone by, this is still not cheap.

Apple may also suffer from the cost-of-living crisis. With everyday life becoming more expensive, the business may see a slow in demand as consumers shy away from purchasing new expensive goods. This would no doubt impact the share price.

Why I’d buy

Despite this, I still deem Apple a buy. Although it could see a drop-off in demand, I think it holds such a strong position in the market this is unlikely. And along with the firm’s buyback scheme, I think the company is in a strong position to bounce back. Just like Buffett, I would buy Apple shares today for the long term.

The post Why I’d follow Warren Buffett and buy this stock today! appeared first on The Twelfth Magpie.

More reading

• 7 easy Warren Buffett tips to retire richer
• Here’s how saving £3 a day could lead to an £11,925 yearly passive income

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Investing in the stock market right now takes guts. Awful events in Ukraine combined with a huge rise in the cost of living have sent share prices on a downward trajectory for much of 2022.

That’s why I think it pays to tap into the mentality of those who have seen it all before and still managed to thrive. The first person that springs to mind? 91-year-old Warren Buffett.

Why Warren Buffett?

In case you don’t know, the ‘Sage of Omaha’ is one of the wealthiest individuals on the planet. Importantly for private investors like me, his billionaire status has been built on adopting a strategy that anyone can understand.

Put simply, Buffett buys stock in great companies. According to him, these tend to be businesses that resemble castles that are able to fend off invaders (competition) on a consistent basis, thanks to possessing enviable ‘moats’. The latter might include highly-valuable brands or cost advantages or just being a big fish in a small pond.

But there’s another aspect to Buffett’s strategy, namely how he behaves when the chips are down. The master investor regards inevitable market wobbles as opportunities to buy great stocks that are temporarily on sale. It’s a mentality I’ve tried to adopt over the years and particularly in 2022. I’ll never be as wealthy as Buffett, of course! 

So how might I use this approach now with, say, £20,000 — the maximum amount of cash I’m able to deposit in a Stocks and Shares ISA this year — at my disposal?

5 stocks I’d buy today

From the FTSE 100, I reckon Diageo and Unilever are solid choices. Both boast bursting portfolios of ‘sticky’ brands that consumers will willingly pay for. Their ability to pass price increases on should go some way to helping them navigate through these inflationary times. Supermarket giant Tesco also grabs my interest, thanks to its commanding market share.

From the FTSE 250, Games Workshop seems to tick a lot of ‘Buffett boxes’. The Warhammer brand is incredibly popular around the world, making this very financially disciplined company a leader in a (very) niche market. Out of interest, the shares are down nearly 30% in 2022, as I type. That strikes me as an opportunity to “be greedy when others are fearful“, to quote Buffett. 

iPhone maker Apple is the final pick. Since I’m already locked into its ecosystem through owning a number of its devices, I’m highly likely to stick with the tech titan when the time comes to replace them. I sincerely doubt I’m alone. This brings to light another ‘moat’ quality, namely the hassle involved in switching. It should come as no surprise that Buffett owns a huge slice of Apple already. 

Buyer beware

Naturally, adopting the approach of a highly successful investor like Buffett doesn’t guarantee anything. As we’ve seen, the share prices of even the best stocks can still tumble in the face of unexpected global events.

This is why it’s essential to spread my cash around companies in different sectors. Although a big fan of running a concentrated portfolio, you’d never catch Buffett investing in just one small part of the market. This ensures he never needs to sell in a panic — something that Fools like me should also avoid like the plague.  

The post 5 stocks I’d buy before the ISA deadline using the wisdom of Warren Buffett appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple, Diageo, Games Workshop, Tesco, and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Warren Buffett is a legendary investor with countless aphorisms to his name. My favourite is: “Time is the friend of the wonderful company, the enemy of the mediocre.” In that spirit, let’s explore Warren Buffett’s portfolio and see if his top two stock holdings are good long-term buys for me.  

Apple 

According to Berkshire Hathaway‘s (NYSE: BRK-A) SEC filing, Warren Buffett’s largest holding is Apple (NASDAQ: AAPL). Via Berkshire, Buffett owns 5.55% of the US tech giant’s total shares — a whopping 43% of his equity portfolio. Buffett began building a stake in Apple in 2016 and in his annual letter to Berkshire shareholders he praised CEO Tim Cook for Apple’s share repurchase strategy. 

One factor behind Buffett’s bullishness is the iPhone maker’s competitive advantage. Apple’s ecosystem is created by establishing market standards, encouraging developers to build apps tailored specifically to Apple smartphones. This produces a virtuous cycle, making Apple products indispensable. 

Nonetheless, Apple supplier Foxconn recently suspended its Shenzhen production due to a Covid-19 outbreak in the region. The Apple share price is still high for me, despite being down almost 14% on a three-month basis. Currently, I’m reluctant to deploy a significant amount of my cash reserves buying Apple in one go.

Indeed, Warren Buffett bought his position at an average cost of a quarter of today’s price. I will be buying steadily over the coming months to capitalise on any further dips in Apple’s share price. 

Bank of America 

At over 13% of Berkshire’s holdings, Bank of America (NYSE: BAC) is the second-largest constituent of Warren Buffett’s portfolio. The stock’s P/E ratio of 11.63 fits with Buffett’s value investing philosophy. Shareholders also benefit from a handy dividend yield of over 2%.

The Federal Reserve is tipped to hike interest rates in 2022. Bank of America should benefit from these macroeconomic conditions. Moreover, with a total net income of $32m for 2021, the bank is well placed to build on strong fundamentals this financial year. 

The stock currently sits almost 20% below its 52-week high in mid-February. Furthermore, the US economy is flashing recession warning signs. Bank of America shares could face further pain, given the bank services around 67 million consumer and small business clients stateside.

Despite these risks, I see Bank of America’s current share price as an attractive entry point to add this Warren Buffett stock to my portfolio. 

Another way to invest like Warren Buffett 

Perhaps the easiest way to mirror Warren Buffett’s investments is buying Berkshire Hathaway shares. The company’s compounded annual gain of 3,641,613% dwarfs the 30,209% gain for the S&P 500 from 1964 to 2021. For me, Berkshire stock carries some of the diversification benefits of an index fund while providing an opportunity to beat the market. 

Investors may worry about Buffett’s age at 91 while Vice-Chairman, Charlie Munger, is 97. Berkshire Hathaway’s share price performance without the duo at the helm is untested. This doesn’t dissuade me from owning the stock, however. I see the potential for future leadership to emulate Buffett’s investing approach beyond his lifetime. 

Berkshire currently has over $145bn in cash on its balance sheet and insurance is a large part of its business. A useful reminder for me that, with share valuations riding high, cash is king for scooping up bargains in the event of a stock market crash. 

The post 2 stocks make up over 50% of Warren Buffett’s portfolio. Should I buy them? appeared first on The Twelfth Magpie.

More reading

• 7 easy Warren Buffett tips to retire richer
• Here’s how saving £3 a day could lead to an £11,925 yearly passive income

Charlie Carman owns shares in Berkshire Hathaway. Bank of America is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool UK has recommended Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

So, clearly, these results left Meta investors feeling gloomy, but I think this dip in share price could be an opportunity for me to add the stock to my portfolio. Let’s take a look at why.

Meta concerns

While I see value in the current Meta share price, I do have some concerns. One of these is the potential decline in popularity that Facebook, a site owned by Meta, may be experiencing. The latest results showed a drop-off in daily active users, the first time in the firm’s history. And this is more than likely a result of the rise of competitor sites such as TikTok. This may be a reason for Meta’s weak forecast for future growth.

Also, and as mentioned by my fellow Fool Edward Sheldon, another issue for the company is the recent changes to Apple’s privacy policy. Impacting Meta’s ability to offer targeted advertising, it is believed this will cost the firm around $10bn in advertising revenue. This will clearly be a problem for it going forward.

Why I’m buying

With that said, I retain a bullish outlook. After the recent fall in the Meta share price, the firm’s price-to-earnings (P/E) ratio is now around 16. By comparison, Apple has a P/E of 28, while Alphabet’s is 24. For a big tech stock that’s a low valuation, and a tempting factor for me when considering whether to buy the shares.

Further, while Facebook saw a decrease in the number of its daily active users, across its entire ‘Family of Apps’ (also including Instagram, and WhatsApp) Meta actually saw a small increase, meaning Facebook’s decline could be offset across the business.

I also like the fact the firm is investing in the metaverse. This is an area I have a bullish outlook on. While its expansion into this area has been costly, Bloomberg predicts this space could be worth $800bn in 2024. Granted, it will face competition from game systems and virtual worlds such as Roblox and Decentraland, but I think the firm’s early investment in the space could pay dividends.

So, while the latest earnings report may not have met expectations, I see a solid opportunity in this share price fall. Overall user numbers remain healthy and I like the — albeit costly — moves the firm is making to plan for the future. Should Meta be able to capitalise effectively on the metaverse, I think we will see this play out positively in times ahead. At the current share price, I would look to add it to my portfolio.

The post The Meta share price is down over 30% in a month! Should I buy? appeared first on The Twelfth Magpie.

More reading

• Are Meta shares at the start of a comeback?

Charlie Keough has no position in any of the shares mentioned. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool UK has recommended Alphabet (A shares) and Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Peloton (NASDAQ: PTON) stock soared in trading yesterday as rumours circulated that sportswear giant Nike and online retail juggernaut Amazon were considering bidding for the battered fitness firm. Does it make sense for a Foolish UK investor like me to climb on board for the ride?

Reasons to buy

Despite having been a Peloton sceptic for a long time, I don’t think this company is without merit. 

Its flagship bikes are undeniably beautiful bits of kit. Like any other premium brand, I can still see some people wanting one for the image it projects. That’s regardless of how often they actually intend to use it. And a few businesses may consider that to be worth (quite a bit) more than the $10bn valuation it now trades for. 

There’s also little doubt in my mind that the industry is only likely to go from strength to strength in the years ahead. The evolution of smart health-related tech shows no signs of slowing. The influence of social media will surely play a role in pushing more people to improve their fitness too. 

The idea of a heavyweight like Amazon or Nike acquiring the company could also attract other potential suitors to the fray. Apple‘s name was bandied about when Peloton stock first began its awful slide. Having seen it now tumble 80% in one year (even after yesterday’s 21% rise), the Cupertino-based business could now throw its cap into the ring.  

Reasons to steer clear

But let’s come back down to earth for a second. 

One of my biggest gripes with Peloton as an investment is that, aside from aesthetics, I’m not seeing much to separate it from the competition. There’s no ‘moat’ here, to coin a term from Warren Buffett. The fact that Peloton has now cut the price of its equipment on multiple occasions only serves to confirm this.

It’s also a sign that the trend for more people exercising at home may be coming to an end at the same time as the pandemic. Gyms bring an element of socialisation to fitness that staring into a screen can’t. That will be the case no matter how interactive Peloton tries to make its classes.

On top of this, Peloton has already faced a lot of negative publicity as a listed company. These have ranged from the highly serious (product recalls following injuries to pets and children) to the frankly ludicrous (TV shows featuring characters having heart attacks while using its machines). That’s hardly what I like to see as a prospective investor.

So, will I buy Peloton stock today? 

It will be fascinating to see how all this plays out. Amazon clearly has sufficient clout to revitalise the company whereas Nike has arguably better knowledge of the industry. 

Then again, yesterday’s initial excitement could easily dissipate just as soon as it arrived. After all, there’s no guarantee of a bid from either business materialising. In such a scenario, I’d be left holding stock in a company with dwindling revenue and a challenging outlook. That smacks of gambling to me. And that’s not the Foolish way.

I won’t be buying Peloton stock. Instead, I’m inclined to keep my powder dry for other opportunities.

If I were to buy a sold-off share, it would probably be this one. 

The post Peloton stock just surged! Time for me to buy? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon, Apple, Nike, and Peloton Interactive. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Last week, I drew on the wisdom of one of the world’s greatest investors — Warren Buffett — as a way of coping with January’s stock market tumble. Today, I’m returning to the ‘Sage of Omaha’ for guidance on how I can cope with inflation. It turns out that Buffett’s method is actually pretty simple.

How Warren Buffett beats inflation

Buffett recommends buying stock in companies that are capable of passing on price increases to the consumer. But why?

Well, as he said: “If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business“.

This power is often the result of having a strong brand. But it can also relate to the amount a company is able to spend on developing new products.

Having a strong control on distribution, or huge marketing clout, also helps. Many companies have some or all of these attributes. Collectively, they make up what the master investor labels as a ‘moat’ to fend off rivals. 

The fact that Buffett was able to grow wealth during the 1970s (when inflation exploded in the US) is evidence that this method can work wonders. So which stocks might be worth me buying today?

Stocks to buy now

In the US, I’d say tech giant Apple is a good buy now. Regardless of how similar it is to the previous model in terms of capability, and even though some cash-strapped consumers may well decide to swap brands, we know many people will pay top-dollar to have the newest iPhone.

Even those who only replace their phone (or tablet, headphones or smartwatch) every few years they find it hard to leave the Apple ecosystem due to the hassle involved.

It’s this friction that is so incredibly valuable. It should come as no surprise that Buffett is heavily invested in the business.

When it comes to the UK, I remain convinced that FTSE 100 stock Unilever is a great pick. I know for a fact I’d be willing to pay a few pennies more for my Marmite fix. That’s the case even if it meant making sacrifices elsewhere.

Sure, things have been a little unsettling for holders of late. Its bid for GlaxoSmithKline‘s consumer healthcare business failed. Star fund manager Terry Smith’s suggestion that the firm is too focused on its sustainability credentials can’t have helped sentiment either.

However, the share price is now below where it stood when the UK first went into lockdown in 2020. Considering the blue-chip’s bursting portfolio of brands, that looks like an opportunity to me.

It may take time for Unilever’s inflation-busting attributes to shine through. However, there’s a 3.9% dividend yield to make up for it.

Safety in numbers

Of course, buying stock in a company with pricing power doesn’t guarantee anything. The share prices of both Apple and Unilever can easily slide along with those of inferior companies when the markets panic.

However, I’d certainly sleep more soundly knowing that the businesses I part-own have shown an ability to take the sting out of inflation in the past.

Spreading my money around a number of these should give me the best chance of coming through this purse-tightening period relatively unscathed.

The post Here’s how Warren Buffett beats inflation (and how I can too) appeared first on The Twelfth Magpie.

More reading

• 3,566 shares in this FTSE 100 stalwart earns a £1,443 second income
• 2 FTSE shares for beginners starting an ISA
• 7 easy Warren Buffett tips to retire richer
• Here’s how saving £3 a day could lead to an £11,925 yearly passive income
• Is this former stock market hero now the ultimate FTSE 100 buy and hold?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple, GlaxoSmithKline, and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.