In a wide ranging interview with CNBC early this week, Warren Buffett talked about everything from cryptocurrencies, to finally trading in his flip phone for a smartphone, to talking to his “science advisor” Bill Gates about the coronavirus.
But the Oracle from Omaha also talked about those stocks that he likes now, and among his top picks are bank stocks.
“I feel very good about the banks we own,” Buffett said. “They’re very attractive compared to most other securities I seen.
In fact, of Berkshire Hathaway’s $248 billion portfolio, banks including Bank of America (NYSE: BAC), BNY Mellon (NYSE: BK), Goldman Sachs (NYSE: GS), JPMorgan Chase (NYSE: JPM), and U.S. Bancorp (NYSE: USB) are among the top 15 holdings.
“Banking is a good business if you don’t do dumb things on the asset side,” Buffett continued. “The banks we own earn between… 12% and 16% or so on net tangible assets. That’s a good business, that’s a fantastic business against the long-term bond at 2%.”
Buffett also added that one of the reasons he likes bank stocks is that they do buybacks. As an example, he highlighted Bank of America which “is buying in a lot of stock every year. So, our ownership of Bank of America this year will probably go up 7 or 8% without us spending a dime.”
“I’d like to own any business, any good business, where my ownership just goes up 7 or 8% every year without me spending any money and, on top of it, I get a dividend,” Buffett said.
As for a company Buffett likes outside of banks, the Berkshire chairman and CEO said Apple (NASDAQ: AAPL) is “probably the best business I know in the world.”
Berkshire disclosed at the end of 2019 that it owns more than 245 million shares of Apple, or 5.7% ownership, an investment worth nearly $72 billion.
“I don’t think of Apple as a stock. I think of it as our third business,” Buffett said, adding that the investment “is a bigger commitment than we have in any business except insurance and the railroad.”
“I should have appreciated it earlier,” Buffett concluded of Apple.