The best Warren Buffett stocks to buy with £250 right now

Warren Buffett stocks tend to exhibit strong signs of value and quality combined, and these UK shares might well fit the mould.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Warren Buffett at a Berkshire Hathaway AGM

Image source: The Motley Fool

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Warren Buffett, aka, the Sage of Omaha, is one of the most successful investors of all time and a well-known billionaire. His investing style, though, has changed over time, partly thanks to his business partner, Charlie Munger.

These are my top Warren Buffett stocks – ones that might fit the mould of how the Sage of Omaha would invest, if he was looking at high-quality, undervalued UK shares.

They are the ones I’d be most tempted to buy with my next £250 of cash.

Top Warren Buffett stocks

The search for Warren Buffett stocks is not easy, of course. Yet I think there are two that fit the mould based on a margin of safety and an enduring brand quality.

Shares in the spreadbetter IG Group (LSE: IGG) have been falling, creating a greater safety of margin. Combining that with a price-to-earnings multiple of seven and a price-to-book value of 1.79 shows that the shares have an undemanding valuation. It is a cyclical business with some regulatory risk, so it may not be a perfect Warren Buffett stock, or indeed everyone’s cup of tea, but it does have decent revenue growth. It also has high margins and returns on equity that make me think it meets quite a lot of Buffett’s quality-focused investing criteria. For example, return on equity is 28%. I already own CMC Markets, a competitor, so I wouldn’t buy the shares, even though they seem to be a Warren Buffett-style of stock.

The next Warren Buffett stock is Somero Enterprises (LSE: SOM), which creates machines used in construction. It’s a niche business. There’s a risk a competitor could produce a better quality product, usurping Somero’s USP, which seems to be that its machines are more precise and higher quality than the competition. It does have the potential for global growth – though it has struggled in China, which is a setback. On the value front, its P/E is 19, while the EV to EBITDA, another important value-focused metric comparing the enterprise value to EBITDA, is seven, which is low and indicates good value. The group has a return on equity of 23%, and margins are high, so it has serious signs of being a high-quality share.

The shares have been falling, though, and clearly the P/E is higher than other UK shares. However, on other metrics, it does show value, as the low EV to EBITDA measure shows. Overall I expect the shares to grow as the company does well in the US. I’m seriously considering buying more Somero shares very soon.

The market dip

One last note is just to say that Warren Buffett is unlikely to be concerned by the recent stock market declines. He’s the consummate long-term investor. I have a strong feeling, that like other long-term investors, he’ll see shares falling as more of an opportunity than a disaster – as painful, and potentially scary, as it may feel right now.

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.

Andy Ross owns shares in Somero Enterprises, Inc and CMC Markets. The Motley Fool UK has recommended Somero Enterprises, Inc. 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.

More on Investing Articles

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 FTSE income stocks investors should consider buying in April

Income stocks are a great way to build wealth. Our writer details two picks she believes investors should consider snapping…

Read more »