Warren Buffett is back to his winning ways. His beloved Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) lagged well behind the S&P 500 in 2020. However, it’s a much better story so far this year with Berkshire’s shares up more than 20% — well ahead of any of the major market indexes.
It wouldn’t be a bad move at all for investors to scoop up shares of Berkshire. However, I think some of Berkshire’s holdings that underperformed in the first half of this year are poised to deliver stronger gains. Here are three Buffett stocks to buy in July.
Buffett appeared to be a big fan of big pharma in 2020, buying shares of several large drugmakers. AbbVie (NYSE:ABBV) ranked as one of his top buys. Berkshire has trimmed its position in AbbVie somewhat but still owns nearly 22.9 million shares.
My view is that AbbVie is Buffett’s best dividend stock by far. It offers a dividend yield of over 4.5%. The company has increased its dividend for 49 consecutive years, a feat that puts it in the upper echelon of dividend stocks.
Sure, AbbVie will lose U.S. exclusivity for blockbuster drug Humira in 2023. However, the company has several other growth drivers that it thinks will fuel robust overall revenue growth through the rest of this decade after a temporary pause when Humira’s sales begin to decline.
The stock should have at least one potential catalyst on the way in the near future. AbbVie hopes to win European approval for Rinvoq in treating atopic dermatitis in Q3 after receiving a positive recommendation from the Committee for Medicinal Products for Human Use.
You could argue that Amazon.com (NASDAQ:AMZN) really isn’t a Buffett stock. One of the legendary investor’s lieutenants actually picked the stock for Berkshire’s portfolio in 2019. However, Buffett has been a longtime fan of Amazon’s business and its founder, Jeff Bezos.
In some respects, Amazon seems like an ideal Buffett stock. The internet giant has a strong moat — something that the Oracle of Omaha has always prized. It also generates a high return on equity, another big plus in Buffett’s eyes.
Both of these are good reasons to consider buying Amazon stock. I’d put the company’s growth prospects even higher on the list, though.
You might not think Amazon would have a lot of growth opportunities in e-commerce considering how dominant it already is. But online sales made up only 13.4% of total retail sales in the U.S. during the first quarter of 2021.
Amazon has even better avenues for growth with its AWS cloud unit and its forays into other markets. I especially look for the company to gain traction in the healthcare sector with its pharmacy and telehealth businesses.
Last, but not least, on the “A-list” of Buffett stocks to buy in July (each stock begins with the letter “A”) is Apple (NASDAQ:AAPL). Actually, Apple should have arguably been first on the list. It’s Berkshire’s single biggest equity holding. Buffett has even referred to Apple as “probably the best business I know in the world.”
I wouldn’t argue with Buffett on that point. Apple recently reclaimed its throne as the world’s most valuable brand (knocking Amazon out of the top spot). The company’s customers remain intensely loyal.
Apple continues to provide good reasons for consumers to stay in its ecosystem. Sales of its 5G-enabled iPhones are soaring. This momentum fuels higher sales for many of the company’s other products and services, including AirPods and apps on the App Store.
The future for Apple also looks bright. The company reportedly has a foldable iPhone on the way. It’s positioned for success in augmented reality (AR). I expect that Apple will further cement its place as Buffett’s favorite — and make him and other investors a lot more money.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.