It may be a new year, but not everyone is excited about what 2023 may bring. Stocks are down, economic growth appears to be slowing, and inflation remains rampant.
But Warren Buffett’s right-hand man, Charlie Munger, suggests that we should actually be more content with our current situation.
“People are less happy about the state of things than they were when things were much more difficult,” Munger said earlier this year.
“It’s strange for someone my age because I was in the middle of the Great Depression when the hardships were incredible.”
Best known as vice chairman of Berkshire Hathaway and a longtime business partner of Buffett’s, Munger also serves as chairman of the Daily Journal, a newspaper publisher with a substantial stock portfolio of its own.
So if you’re hoping some of Munger’s blunt realism rubs off on you this year, why not borrow some of his investment suggestions, too? If these three stocks can make a 98-year-old investing veteran happy, maybe they’ll work for you, too.
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Bank of America
The Daily Journal owned 2.3 million shares of Bank of America (NYSE: BAC ) at the end of September, worth approximately $69.46 million at that time. Taking up 42.49% of the portfolio, this makes the bank the largest publicly traded holding in Munger’s firm.
With economic turmoil forecast for next year, this is a reasonable holding for Munger. While many sectors are afraid rising interest rates, the banks are looking forward to them. That’s because banks lend money at higher rates than they borrow, then pocket the difference.
When interest rates increase, the bank’s profit spread widens.
And so it is that Bank of America has steadily increased its payout to shareholders.
In July, Bank of America raised its quarterly dividend by 5% to 22 cents per share — and that follows the company’s dividend increase of 17% in July 2021.
At the current share price, the bank offers an annual yield of 2.7%.
Buffett likes the companyas Bank of America happens to be the second largest holding in Berkshire Hathaway.
With roughly $1.9 trillion in assets, Wells Fargo ( NYSE:WFC ) is another heavyweight in the U.S. financial services industry. It serves one in three US households and more than 10% of the country’s small businesses.
The Daily Journal owned 1.59 million shares of Wells Fargo as of Sept. 30, making the bank its second-largest public holding with a 39.16% weighting.
According to the company’s latest earnings report, Wells Fargo generated $19.5 billion in revenue in Q3, a 4% year-over-year increase. Earnings came in at 85 cents per share for the quarter, down from $1.17 per share at the same time a year earlier.
While the economy faces uncertainty going forward, management remains optimistic.
“Wells Fargo is well positioned as we continue to benefit from higher rates and continued disciplined cost management,” Wells Fargo CEO Charlie Scharf said in a statement.
“Both consumer and business customers remain in strong financial condition, and we continue to see historically low delinquencies and high levels of payments across our portfolios.”
Wells Fargo has a quarterly dividend of 30 cents per share, which translates to an annualized yield of 2.9%.
Chinese tech stocks have not been the darlings of the market lately. E-commerce giant Alibaba Group, for example, is down 26% in 2022 and has plunged more than 60% in the past two years.
But the Daily Journal kept the company as its third-largest holding. As of Sept. 30, she owned 300,000 shares of Alibaba, a stake valued at $24.0 million at the time.
And the decline in Alibaba shares may give opposite investors something to think about.
In Q3, the Chinese tech company increased its revenue by 3% year-over-year to $29.1 billion.
Management noted that the company achieved this top growth despite “the impact on consumer demand from the resurgence of COVID-19 in China, as well as the slowdown in cross-border trade due to rising logistics costs and foreign currency volatility.”
Although Alibaba doesn’t pay dividends, it still returns money to shareholders through its own share buyback program.
As of Nov. 16, the company has repurchased approximately $18 billion of its own shares under its existing $25 billion share repurchase program.
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This article provides information only and should not be construed as advice. Provided without any warranty.
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