Four months after the stock market crash, legendary US investor Warren Buffett has started shopping. He spent nearly $11bn in July on two purchases.
I wrote about the first one of these — an energy business — here. But the Oracle of Omaha has now added a second, spending more than $800m on increasing his existing holding in Bank of America. Buffett’s firm Berkshire Hathaway now owns more than 11% of this $210bn bank.
Follow Buffett in the UK
Buffett doesn’t generally invest outside the USA. And although investing overseas is easier than ever these days, I don’t generally buy foreign stocks either. This isn’t because there aren’t good companies overseas, it’s because I don’t know enough about foreign markets.
The good news is that I believe you can mirror Buffett’s latest buy without leaving these shores. I’ve chosen two FTSE 100-listed banks which I think could offer similar long-term opportunities to Bank of America.
The stock market crash hasn’t been kind to Lloyds Banking Group (LSE: LLOY). Lloyds’ share price has fallen by more than 50% this year and is currently trading at levels not seen since 2011.
The risks are clear enough — a deep recession in the UK could result in a sharp rise in bad debts on mortgages, car loans, and credit cards. Alongside this, near-zero interest rates have made it harder for banks to make money.
Despite these headwinds, I think Lloyds Banking Group — which includes Halifax, Lex Autolease, Scottish Widows and MBNA credit cards — is still a good way to invest in the long-term future of the UK economy.
Lloyds has made good progress over the last decade. Costs are lower than peers such as Barclays and RBS and, in 2019 at least, the group was more profitable than its main high street rivals.
As I write, Lloyds shares are trading at a 50% discount to their book value of 57.4p. City analysts expect a return to dividend payments in 2021, giving the stock a forecast yield of 6.6%.
In my view, a lot of bad news is already priced into this stock. I think that now could be a good time to buy for a long-term portfolio.
Stock market crash won’t stop Asia growth
I prefer to invest in UK-listed businesses, but I still want exposure to global growth — especially in Asia. One simple way to invest in this is through Asia-focused FTSE 100 bank HSBC Holdings (LSE: HSBA).
HSBC’s share price has tumbled 40% lower this year. The stock market crash has combined with political problems in Hong Kong and worsening relations between US and China to create an uncertain short-term outlook.
However, HSBC has been in business for 155 years. It’s survived many difficult periods before and remains a globally-important, profitable bank.
As with Lloyds, HSBC’s shares are currently trading nearly 50% below their book value. However, analysts’ forecasts suggest a dividend of 35p per share in 2021, giving HSBC a potential yield of 7.7%. For income investors with a long-term view, I think now could be a very good time to buy shares in this global business.
The post Stock market crash: I think Warren Buffett would buy these UK shares today appeared first on The Motley Fool UK.
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Roland Head has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Berkshire Hathaway (B shares). The Motley Fool UK has recommended HSBC Holdings and Lloyds Banking Group and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short September 2020 $200 calls on Berkshire Hathaway (B shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020