There are 52 stocks in Berkshire Hathaway's (NYSE: BRK.A)(NYSE: BRK.B) closely followed stock portfolio, and most of them are rock-solid businesses. And during the recent stock market downturn, most have fallen significantly from their highs.
But three in particular that I'm not worried about from a long-term perspective -- and would be comfortable buying right now -- are Bank of America (NYSE: BAC), STORE Capital (NYSE: STOR), and Amazon (NASDAQ: AMZN). In fact, I own all three in my personal portfolio and have added shares of all three in 2022.
A rock-solid bank at a discount
Bank of America is down by more than 35% from its 52-week high, and to be fair, there are some legitimate reasons. Consumer confidence is eroding fast due to inflation, which typically translates into a lower willingness to spend money (and therefore lower loan volume for banks). There's a legitimate chance that the U.S. economy will fall into recession, and that the unemployment rate could start to tick higher, both of which are catalysts for bank loan losses.
However, these fears appear to be overblown at this point. Bank of America has a high-quality loan portfolio and is a well-capitalized bank. Plus, it could be a major beneficiary of rising interest rates -- in fact, management estimates that a 100-basis-point shift in the interest rate yield curve would product $5.4 billion in additional interest income annually for the bank, which could more than offset the consumer spending or loan loss headwinds. At just over 1.07 times book value, its lowest valuation in a year and a half, Bank of America could be a smart long-term buy right now.
Built for steady income and growth
STORE Capital is the only real estate investment trust, or REIT, in Berkshire's portfolio, and its business model certainly sounds like one Buffett would approve of. The basic idea is that STORE Capital acquires freestanding commercial properties occupied by profitable and high-quality tenants, and then collects a predictable and increasing stream of rental income for decades. Just to name a few, the top industries represented in STORE Capital's portfolio of about 1,940 properties are restaurants, early childhood education, and metal fabrication.
STORE Capital has been publicly traded for only about seven years, but the early results have been impressive. The company has grown rapidly and has increased its dividend every year (current yield is just over 6%). This is a rare combination of income, growth potential, and low volatility that could be a great addition to any long-term portfolio.
A powerhouse business that should keep growing
It might come as a surprise, but Amazon is actually the worst performing stock on this list in the downturn, with shares down by 43% over the past year. And there are some valid reasons: In the company's first-quarter earnings report, revenue growth was a bit underwhelming, and reports that the company has too much warehouse space are giving investors reason to be cautious. Plus, with a recession looking rather likely, it's reasonable to expect consumers to pump the brakes on spending.
Having said all that, it's important not to overlook a massive long-term trend just because of near-term headwinds. Fewer than 15% of all U.S. retail sales are e-commerce so far, and this is likely to steadily increase over time. And don't forget about the dominant Amazon Web Services (AWS) cloud computing business, not to mention all of the other potential growth areas (like healthcare) the company is still in the early stages of exploring.
Buy with the long term in mind
As a final thought, I have absolutely no idea what the stock market (or any of these three stocks) will do over the coming weeks or months. Nobody does. If inflation ends up being tougher to control than expected, or if the economy falls into a worse recession than is currently being priced in, they could certainly fall further.
However, all three of these are solid, well-run companies that should weather any economic storm just fine and have lots of potential to produce market-beating returns over the long run. I'm quite confident that I'll be glad I own all three in 10 years. That's why I own them and would feel comfortable adding even more to my positions at the current prices.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Matthew Frankel, CFP® has positions in Amazon, Bank of America, Berkshire Hathaway (B shares), and STORE Capital. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway (B shares), and STORE Capital. 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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