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$45 billion of Warren Buffett’s portfolio is invested in 2 stocks that could rise more than 20% in the next 12 months, according to Wall Street


Warren Buffett doesn’t worry about short-term stock movements. He focuses on the long term. The legendary investor once said, “If you don’t plan on owning a stock for 10 years, don’t even consider owning it for 10 minutes.” »

I suspect Buffett always likes to see the stocks he owns perform well in the short term as well. And analysts are predicting big things for at least a few of its biggest titles. About $45 billion from Buffett Berkshire Hathaway (BRK.A 0.66%) (BRK.B 0.80%) The portfolio is invested in two stocks that could soar by more than 20% over the next 12 months, according to Wall Street.

Bank of America: 21% upside potential

Bank of America (BAC 2.90%) ranks as Berkshire’s second-largest holding, accounting for more than 8% of its total portfolio. Berkshire’s stake in the big bank is currently worth nearly $27.4 billion.

It’s been a tough year so far for Bank of America shareholders, with the stock down about 20%. The failure of several US banks earlier this year sparked widespread concerns that weighed on the entire banking sector.

However, Wall Street remains rather optimistic about Bank of America. The average 12-month analyst price target reflects a 21% upside potential. Of the 30 analysts surveyed by Refinitiv in November who cover the stock, 22 rate it as a buy or strong buy. Most other analysts recommend holding BofA, although there is one outlier who recommends selling the stock.

Bank of America’s business continues to do well. The company’s profits jumped 10% year over year in the third quarter to $7.8 billion. BofA management does an excellent job of managing expenses. The bank’s balance sheet remains strong. Unsurprisingly, CEO Brian Moynihan said during the third-quarter earnings conference call, “(We) are pleased with the path forward. »

Chevron: 23% upside potential

Buffett sold shares of Chevron (CVX -0.77%) in the second trimester. However, the oil and gas producer remains Berkshire’s fifth-largest holding company, with a stake worth nearly $18 billion.

Like Bank of America, Chevron has seen its stock price fall nearly 20% in 2023. The main difference for Chevron, however, is that most of its decline has occurred in recent days. Investors reacted negatively to the company’s announced acquisition of Hesse for $53 billion and its third-quarter results were weaker than expected.

But Wall Street hasn’t given up on the energy giant. The 12-month average price target for the stock is 23% higher than Chevron’s current share price. Of the 24 analysts surveyed by Refinitiv in November who cover the stock, 16 rate it as a buy or strong buy. Seven analysts recommend holding Chevron, with one giving the stock an “underperform” rating.

Interestingly, Bank of America upgraded Chevron from Neutral to Buy after the recent sell-off. Analyst Doug Leggate wrote to investors that the stock’s decline “doesn’t make sense” and that the drop in share price “leaves CVX at levels that we believe deserve another look.”

Is Wall Street Right About These Buffett Stocks?

I think Wall Street’s optimism about these two Buffett stocks is deserved. Both Bank of America and Chevron have strong underlying businesses. I like BofA’s emphasis on technological innovation. I also think Chevron’s acquisition of Hess is a good thing for the company.

The price is right for both stocks, in my opinion. Bank of America shares trade at less than eight times expected earnings and a price-to-book ratio of just 0.81. Chevron’s forward earnings multiple is just over 10.

Finally, the dividends of both companies are attractive. Bank of America’s dividend yield stands at nearly 3.7%, while Chevron’s is close to 4.2%. These top Buffett holdings will reward investors handsomely while they wait for rebounds that I suspect will happen sooner or later.

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Keith Speights holds positions at Bank of America and Berkshire Hathaway. The Motley Fool holds positions and recommends Bank of America and Berkshire Hathaway. The Motley Fool recommends Chevron. The Motley Fool has a disclosure policy.

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