Warren Buffett learned a lot from his mentor, Benjamin Graham. One of the most important of those lessons was Graham’s insistence that “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.” The idea is that share prices over the short term reflect investors’ fickle view, but share prices over the long term reflect the quality of the underlying businesses.
Because Buffett knows that Graham was right, he doesn’t worry when stocks in Berkshire Hathaway‘s (BRK.A 0.40%) (BRK.B 0.28%) portfolio fall. Instead, he often even sees these declines as great buying opportunities.
Quite a few stocks that Berkshire owns have dropped significantly. Here are three Buffett stocks down 15% to 36% to buy right now.
Shares of Mastercard (MA 1.66%) have fallen around 15% below the all-time high set earlier this year. Most of this decline came in June, with rising interest rates and inflation worrying investors that Mastercard’s business could be negatively affected by a potential recession.
Buffett trimmed Berkshire’s stake in Mastercard somewhat in the fourth quarter of 2021. However, the conglomerate still owns nearly 4 million shares of the payment-processing company.
Wall Street remains bullish about Mastercard. 34 of the 39 analysts surveyed by Refinitiv rate the stock as a buy or strong buy. The average analysts’ 12-month price target for the stock reflects an upside potential of nearly 26%.
Of course, Buffett doesn’t pay attention to what analysts say. He’s more interested in how Mastercard’s business is likely to perform over the next five or more years. That long-term performance should remain strong as people increasingly move away from using cash.
Apple (AAPL 1.51%) stock has declined close to 18% this year. The same fears affecting Mastercard have weighed on the giant tech stock. Apple also continues to deal with supply chain issues that could reduce its third-quarter sales by as much as $8 billion.
But Buffett’s high estimation of Apple hasn’t changed one bit. Apple remains, by far, the biggest position in Berkshire’s portfolio. Berkshire bought around $600 million worth of Apple shares in the first quarter of 2022. Buffett stated in an interview with CNBC that he stopped buying only because Apple’s share price rebounded.
Analysts are nearly as optimistic about Apple as they are about Mastercard. All but six of the 38 analysts surveyed by Refinitiv think the stock is a buy or strong buy. None of the analysts recommend selling Apple. The average 12-month price target is 23% higher than Apple’s current share price.
Wall Street’s and Buffett’s sunny views about Apple are based on the company’s underlying business strength. Apple should continue to enjoy solid sales growth thanks to the ecosystem built around the iPhone. The company could also deliver even stronger growth later this decade as augmented reality gains momentum.
Amazon.com (AMZN 1.51%) has taken the worst drubbing of these three Buffett stocks. Shares of the e-commerce and cloud leader are down 36% below the peak set in the fourth quarter of 2021. The primary culprit behind Amazon’s slide is slowing sales growth.
Berkshire first initiated a position in Amazon in 2019. Buffett didn’t personally make the decision to buy the stock. However, he’s been a big fan of Amazon for quite a while, even publicly acknowledging that he was an “idiot” for not buying the stock in the past.
As you might expect, Wall Street remains firmly in the Amazon camp. 43 of the 47 analysts covering the stock who were surveyed by Refinitiv think Amazon is either a buy or a strong buy. Their average 12-month price target is a whopping 47% higher than Amazon’s current share price.
Amazon is coming off its biggest Prime Day ever. The company’s Amazon Web Services cloud unit continues to generate strong growth. Amazon also has tremendous opportunities in healthcare and providing cashier-less checkout technology to brick-and-mortar retailers. Like Mastercard and Apple, this Buffett stock should have a lot of room to run.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Amazon, Apple, Berkshire Hathaway (B shares), and Mastercard. The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway (B shares), and Mastercard. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.