Want to invest like one of the greatest investors of all time? You don’t necessarily have to follow in the exact footsteps of Warren Buffett and buy the same stocks that he does in order to invest like him. Buffett is a value investor at heart and he loves a good bargain. Unfortunately, there aren’t many good bargains out on the markets right now as valuations are soaring all over the place.
However, there are a couple of stocks that Buffett would likely approve of and that you should consider adding to your portfolio today if you want to invest like him:
National Bank (TSX:NA) makes for a solid Buffett pick — and it’s easy to see why. For one, Buffett loves bank stocks, and while National Bank may not be one of the Big Five in Canada, it’s still a top stock to own. Its financials are stellar — in each of its last 10 quarterly reports, the bank’s reported a profit and only once during that time has its margin come below even 29%. It’s been remarkably consistent and that’s another thing the billionaire investor loves: stability.
Another great reason he’d love the stock: it’s a cheap buy. Trading at 12 times earnings and less than two times its book value, this is a stock that ticks off a lot of the boxes for value investors like Buffett. And is if that weren’t enough, like a typical bank stock, National Bank pays investors a decent yield. Currently, you can earn about 4% in dividend income on an annual basis just for holding shares of the company.
Year to date, the stock’s up around just 1%. It released its third-quarter results on August 26 for the period ending July 31, and its net income of $602 million was down a modest 1% year over year. It’s shown resiliency amid this pandemic, and that’s definitely a great feature of any stock. With so many positives, it’s hard to not like National Bank as an investment option today.
Hydro One (TSX:H) is another stock that wouldn’t be outside Buffett’s investing style, either. Utility companies scream consistency and Hydro One’s no exception. While its profit margins aren’t as large as National Bank’s, it’s still a good bet to post a profit. Its profit margins been north of 10% in each of its last six quarterly results. One of the unmistakable, differentiating features of this company is that the province of Ontario is a major shareholder of it. It sounds great for dividend investors looking for stability but awful for growth investors who want some aggressiveness and expansion.
The Ontario-based company’s an even cheaper stock than National Bank is, trading at less than 10 times its earnings and a price-to-book multiple of around 1.6. And it pays a quarterly dividend of $0.25 which earns you’ll an annual yield of around 3.6%. It’s slightly lower than National Bank’s payout but it too can help pad your returns and produce some great recurring income.
In its most recent quarterly results, released on August 11 and for the period ending June 30, Hydro One’s sales increased by 18.2% to $1.7 billion. It too, is reminding investors of how resilient of a stock it is to hold, even amid a pandemic. Year to date, its shares are up around 10%.
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