3 stocks Warren Buffett bought hand over fist as the market crashed

Warren Buffett has advised being afraid when others are greedy and greedy when others are afraid, and he has put his money where his mouth is when the market crashed this year. He bought 16 shares in the first quarter of 2022 while other investors fled for the hills.

About half of the shares he bought through his holding company, Berkshire Hathaway (BRK.A)(BRK.B), were additions to positions already held, and the other half were new positions. Some were already revealed, and others were surprises. Some of the more unexpected selections were Activision Blizzard (ATVI), world paramount (PARACA)Y financial ally (ALLY). Should you consider them for your portfolio? We’ll see.

An easy merger arbitration agreement

Buffett already had a small stake in video game maker Activision Blizzard before 2022, so he obviously sees it as a stock worth owning. However, his newfound interest in the company is in preparation for the tech titan’s takeover of the company. Microsoft. The acquisition will take place in mid-2023, with Microsoft paying $95 per share, or about a 26% premium over current price. This could be a risky strategy, as a lot can happen between now and then. But the price is very unlikely to go above $95, and it’s an easy way to see quick profits.

So why doesn’t everyone do this? First of all, although the merger was approved by both parties, there is still a possibility that it will not go ahead. It’s a riskier play for parties not backed by Buffett’s billions. The business itself is going through a tough time, so individual investors shouldn’t count on a surprise to push the price up. In the first quarter, revenue and earnings per share (EPS) declined. As we get closer to the acquisition date and it seems that it will actually happen, the price is likely to increase.

What’s in it for Microsoft or for the investors who are staying right now? It’s an easy way for Microsoft to get into the gaming space, for one thing. More than that, the company is still developing new games to release. Game companies go through phases as they release new products and see how well they do. For example, Activision has several Q2 releases that it hopes will do well. In a positive sign, monthly active users (MAUs) increased slightly from Q4 2021 to Q1 2022.

Activision Blizzard stock has been a hit in the market, but for now, investors may not want to follow Buffett.

A new name in streaming

Paramount Global is the new name of what was previously ViacomCBS. The company has jumped on the bandwagon and is investing in its streaming service, Paramount+, but it operates a number of media networks, including traditional television (CBS) and cable channels like Showtime and MTV. Not as big as competitors like Disney Y Netflixbut what he does have going for him is a Buffett favorite: he seems undervalued.

Revenue was down 1% from 2021 in the first quarter as customers continued to cut the cord, but streaming, or the direct-to-consumer division, was up 82%. That included a 95% increase in subscription revenue, as well as a 59% increase in ad revenue for its ad-supported platform, PlutoTV. Pluto also added 6.3 million new members for a total of over 67 million MAUs.

Paramount+ added 6.8 million subscribers for a total of nearly 40 million. Many of them are crossovers who watch content on both platforms. The media company owns franchises such as star trek Y Sonic the Hedgehog and has new content in both series and much more. There are a lot of growth levers here.

However, it’s competing with bigger guns, and as the field gets busier, Paramount Global may not have what it takes to keep adding viewers and subscribers. That’s the big question mark.

Stocks, meanwhile, are down almost 20% this year despite Buffett’s big gamble, and at this price they are trading at just four times 12-month earnings. That’s woefully low for a company that grew revenue 13% year over year in 2021 and increased EPS (from continuing operations) by 79%.

More bank stocks to love

Bank stocks have a strong presence in Berkshire Hathaway’s portfolio, and Buffett added a new one, Ally Financial, to the group last quarter. Ally fits the Buffett model perfectly, with cheap stock and a strong shareholder-reward culture.

Ally has a large auto loan unit, which has been their core product for decades. But it also operates a consumer bank, which has been showing sequential growth. It grew to 2.5 million retail banking customers in the first quarter, with $136 billion in deposits, up 6% year over year. One of its newer banking companies, Ally Credit Card, had 844,000 active users, up 73% year over year. Net income was down slightly from last year as you moved money into loan loss provisions, but revenue was up 10%. Return on common equity was a high 18%.

The company said it would issue $2 billion in share buybacks in 2022, which is a fifth of its total market capitalization. It also pays a growing dividend that yields a high 3.7%. That’s partly because the stock price is down more than 30% so far this year. At the current price, shares are also trading at the cheap multiple of four times last 12-month earnings, and less than once tangible book valuemeaning they are trading for less than the value of their assets.

Of these stocks, Ally seems the most like a no-brainer that individual investors should consider.

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