Recently, I wrote an article in which I suggested that while Warren Buffett is a great investor, we shouldn’t simply buy a stock because he is buying it or because he holds it. Like any investor he makes mistakes, and I pointed out three of his holdings that I don’t think investors should buy now.
However, the fact remains that Buffett has picked several excellent stocks, and there are some that I think investors should consider buying. While it is always prudent to wait for a pullback, especially in a market that is at or near all time highs, I think the following three Buffett holdings offer good long-term value right now.
1. Wells Fargo (NYSE:WFC)
I’m not that fond of bank stocks, generally, as these companies often have a lot of leverage and deal in esoteric financial derivatives that lead me to the conclusion that I shouldn’t waste my time trying to understand it. Wells Fargo, on the other hand, is an exception, and I think that it can be purchased at the current valuation. Wells Fargo, like any large financial institution, has a lot of leverage — and it also deals in esoteric financial derivatives, but it does this to a lesser extent then, for instance, Goldman Sachs (NYSE:GS). Wells Fargo is more of an old fashioned bank that borrows money at one price, lends it out at a higher price, and pockets the difference.
With all of the problems that financials have had this year from Dodd-Frank related regulatory constrains to costly litigation, Wells Fargo has been unscathed, and the stock’s performance reflects this. Shares are up over 14 percent for the year versus just a 4 percent gain for the SPDR Financial ETF (XLF) and negative performances out of several of the large financials. Meanwhile, the shares trade at a modest 13 times earnings, and the company is growing. So while it makes sense to wait for a pullback — the stock closed on Friday at just pennies from its all time high — Wells Fargo is a stock worth buying on weakness and holding.