Berkshire Hathaway has just shared updates on its recent investment activities. The new CEO Greg Abel is at the helm for the first transaction, signifying a shift that’s happening relatively quickly. In fact, Berkshire Hathaway experienced one of its busiest trading periods lately, selling off some holdings while picking up others.
Even though Buffett remains chairman, his investment philosophy still influences the company. It’s evident that there has been a comprehensive review of Berkshire’s assets, leaving what seems to be core holdings for the new managerial team.
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Here are five blue-chip stocks worth considering for your portfolio this May, along with reasons for potential investment.
1. Apple
Leading among its home appliances, Apple (NASDAQ:AAPL) remains Berkshire Hathaway’s primary asset. In hindsight, Apple’s cautious approach to investing heavily in artificial intelligence seems smart. The company continues to generate strong cash flow and profits while collaborating with Google on advancements for Siri, the iOS voice assistant. Recently, Apple reinforced its hardware strategy, rolling out the MacBook Neo to make a splash in the entry-level PC sector.
Despite being an enormous tech entity, Apple still shows enough growth potential to merit keeping its stock. If the company decides to dive into AI more confidently, the possibilities could be substantial, considering its extensive base of over 2.5 billion active iOS devices.
2. Moody’s
AI’s influence is impacting numerous industries, including finance. Moody’s (NYSE:MCO) has found itself in the mix of concerns, particularly regarding whether AI could interpret risks well enough to replace traditional credit ratings. Nonetheless, with Moody’s established reputation and unique data, that outcome seems unlikely—for the time being, at least.
There’s been some down pressure on Moody’s stock, which has dropped around 35% from its peak, currently trading at a P/E ratio of 31. That represents its lowest valuation since early 2023. Analysts believe that earnings could grow at 11% annually in the next few years, suggesting this may be an opportunity for classic bargain buying.
3. Alphabet
The technology and AI powerhouse Alphabet (NASDAQ:Google)(NASDAQ:GOOG) was among the select stocks Berkshire purchased in the first quarter, bumping its stake to 6.8% of its overall portfolio. Alphabet’s various AI-driven ventures, from Search to Waymo to its TPU chips for cloud AI workloads, position it uniquely in the market.
Financial performance is promising, with expectations of profit growth exceeding 16% annually over the next three to five years. This growth could validate buying the stock at a 27x forward earnings multiple, especially if investors are willing to hold onto it until those earnings align with rising stock prices.
4. American Express
American Express (NYSE:AXP) is a long-time favorite of Buffett. This renowned payment processor has a complete financial ecosystem—issuing cards, handling payments, and lending—which keeps them in control of their operations. It’s also a major reason why American Express is viewed as a premium brand among high spenders.
With the American public carrying more than $1.25 trillion in credit card debt, American Express is well-positioned. The company has also succeeded in attracting a younger demographic, which is a promising sign for future growth. Wall Street anticipates nearly 14% annual earnings growth, making American Express a solid stock for long-term investment.
5. Coca Cola
Lastly, Coca Cola (NYSE:KO), a classic pick from Buffett, stands out as the only Dividend King in this list, having raised its dividend for over 50 years. This reflects the durability of Coca-Cola’s global beverage operation. It may not be a growth stock, but its current 2.6% dividend yield is projected to increase as dividends keep rising.
Currently, its P/E ratio is around 25, which isn’t exactly a bargain. This valuation may seem high for a company expected to grow earnings by only 7% to 8% annually, but with dividend growth stocks like Coca-Cola, the longer you hold, the more advantageous it is, as the dividends can compound and grow further, especially if reinvested.
Should you buy Apple stock now?
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American Express is a partner of Motley Fool Money. The Motley Fool has stakes in and recommends Alphabet, American Express, Apple, Berkshire Hathaway, and Moody’s.
5 stocks Warren Buffett will buy Hand Over Fist in May originally published by The Motley Fool.
