2 cheap stocks I think Warren Buffett would love

As a long-term investor, I could do a lot worse than listen to a stock-investing genius like Warren Buffett. Here are two top stocks I think he’d approve of.

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Warren Buffett is one of the most successful, and by extension most famous, value-loving investors in the business. Picking low-cost stocks with his Berkshire Hathaway firm and watching them balloon in value has made the ‘Sage of Omaha’ worth an estimated $100.4bn today.

But Buffett’s investing strategy is about much more than just identifying undervalued stocks. Here are two cheap UK shares I think would whet the billionaire investor’s appetite for other reasons.

The FTSE 100 pharma giant

Buying companies which have clear and effective ‘economic moats’ is a cornerstone of Buffett’s money-making strategy. This is the name given to any long-term advantage a business has over the competition. They can include anything from market-leading products and a lower cost base versus rival operators, to creating high switching costs for customers looking to take their custom elsewhere.

GlaxoSmithKline (LSE: GSK) has one of the most formidable economic moats out there, namely significant patent protection. This stops rival drugs manufacturers moving in and copying its expensively-assembled portfolio of world-class treatments. According to DrugPatentWatch, the FTSE 100 company has 1,048 product patents in effect spanning 59 countries.

Pharmaceuticals development is a notoriously difficult business. And GlaxoSmithKline’s great track record of producing market-leading patented products is no guarantee of future success. But I’d argue that this UK share’s undemanding forward price-to-earnings (P/E) ratio of around 13 times still offers terrific value. Especially considering its strong position in many fast-growing therapy areas like oncology, vaccines and respiratory disorders, and the enormous financial clout it has to plough into R&D.

I think Buffett, who already owns Merck and Bristol Myers Squibb, would love this UK share.

Another stock Warren Buffett might adore

The popularity of Britvic’s (LSE: BVIC) brands seems to be timeless. The likes of Pepsi, Robinsons, Lipton and R Whites have been keeping consumers refreshed for many decades (some even have their roots in the 1800s). And their popularity is a strong as ever.

Buffett loves firms with robust brand power, as shown by Berkshire Hathaway’s holdings in Apple, Kraft Heinz and Coca-Cola. This economic moat helps demand for their products grow stronger than the broader market when consumer spending comes under pressure. It also allows companies like Britvic to raise prices without having to worry too much about how this will affect sales volumes.

I think Britvic’s a top buy despite the threat posed by a growing carbon dioxide shortage, a critical component in the company’s fizzy drinks. European fertilizer plants are shutting down operations in response to soaring energy prices, including two major facilities here in the UK. This could naturally damage beverages production and jack up costs considerably.

City analysts currently think Britvic’s earnings will jump 24% in the upcoming financial year (to September 2022). This leaves it trading on a bargain-basement forward price-to-earnings growth (PEG) ratio of 0.7. In my opinion, this provides the sort of bang for your buck that value investors like Warren Buffett adore.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Apple and Bristol Myers Squibb. The Motley Fool UK has recommended Britvic and GlaxoSmithKline and has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. 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.

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