Warren Buffett spent $51bn buying US shares during the first quarter of 2022. The US billionaire investor stayed on the sidelines for much of the pandemic but has switched into buying mode this year.
Shares Buffett has bought so far this year have included oil group Chevron, US insurer Alleghany and video game producer Activision Blizzard. I’ve been looking at similar sectors in the UK. I think I’ve found three shares that might be of interest.
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#1: big value?
My first choice is FTSE 100 oil and gas giant Shell (LSE: SHEL). I think this business has many of the characteristics Buffett might look for in an investment.
Shell generates a lot of cash and is one of the biggest companies in the markets where it operates. This business also has global brand recognition and a huge consumer footprint.
One downside is this business still generates most of its profits from producing oil, gas and other petroleum products. If the energy transition happens more quickly than expected, Shell could face unexpected losses.
Personally, I think that’s unlikely. In my view, Shell’s strategy of focusing on its retail and energy trading divisions will give the group the data it needs to keep pace with changing demand.
Shell shares currently trade on just six times forecast earnings, with a 3.9% dividend yield. I think it’s just the kind of UK share Buffett might buy.
#2: A bargain 6.7% yield?
My next pick is £16bn insurer Aviva (LSE: AV). Buffett has a long history of investing in insurers and his recent $11bn deal to buy Alleghany is a good example of this.
Aviva is a business I know quite well, having followed the stock for a number of years. The group’s turnaround under chief executive Amanda Blanc has streamlined the group, cut debt and resulted in a recovery in dividend payments.
Although growth remains a concern, Aviva boasts a strong brand and a big share of its core markets in the UK and elsewhere.
Rather than splashing the cash on expensive acquisitions, Blanc has promised to return much of the group’s spare cash to shareholders.
Aviva shares currently offer a forecast yield of 6.7% and trade on less than 10 times earnings. I’d certainly be happy to add this stock to my portfolio. I think Buffett might too.
#3: UK gaming success story
Video games are one area where the UK has some serious talent. One company I’ve been following with interest for a while is Team17 (LSE: TM17), whose games include Worms, Overcooked and The Escapists.
This group develops some of its own titles, but also partners with third-party developers. This means it can share the risk of new games while still benefiting from big winners.
Team17’s share price has fallen by 45% over the last year as the pandemic-induced gaming boom has cooled. The risk is that sales and earnings will continue to slow as we all return to normal life.
If this happens, I think it will be a temporary glitch as the market recalibrates. Team17’s share slump has left the stock trading on around 18 times forecast earnings. For a growth business with 30% operating margins, I think that could be good value. Team17 is on my list as a potential buy for my portfolio.