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Top 5 Warren Buffett Stocks To Buy For 2019

Stocks pushed higher aggressively on Tuesday, capping a two-week rally that has taken the S&P 500 back above its 50-day moving average in a big way for the first time since early March.

Fears over trade wars, a geopolitical standoff in Syria, and the Special Counsel investigation into President Donald Trump and possible ties to Russia have been replaced by enthusiasm for Q1 earnings results. Also being set aside are any concerns about the Federal Reserve and its quickening pace of rate hikes.

Gains, where they are happening, are extremely impressive. But the good feelings aren’t universal, with pockets of disappointment. Here are three stocks to watch that are helping lead the way higher; and they are pulling back on the reins:

Top 5 Warren Buffett Stocks To Buy For 2019: Facebook, Inc.(FB)

Last year — and for practically every year following 2013 — social media giant Facebook was virtually unstoppable. In 2017, Facebook’s stock tacked on another 55%, pushing its market cap north of $500 billion at one point.

But things have been markedly different in 2018. The surfacing of the Cambridge Analytica data scandal has pushed Facebook’s share price lower by nearly 9%, year-to-date, through April 23. And it probably has a lot of investors wondering whether it can regain the luster it showed in 2017. My suspicion is that it can.

Though the data scandal has been a PR nightmare for Facebook and its CEO Mark Zuckerberg, has had to testify before Congress on his company’s data usage, history suggests it’ll be put into the rearview mirror and forgotten in due time. As my colleague Jeremy Bowman pointed out in late March, an Aegis Capital survey of Facebook users found that few of them have paid much attention to the data privacy concerns raised by Cambridge Analytica. Further, by referencing the #DeleteUber campaign, Jeremy found little impact on the company’s top-line growth. 

More important, Facebook is still only touching the tip of the iceberg in terms of its potential. It’s hardly begun to monetize Messenger and has done almost nothing with regard to monetizing WhatsApp. But don’t mistake this lack of monetization as weakness. If Zuckerberg and team have demonstrated anything, it’s that they understand how to keep users relatively happy, while also generating mad amounts of revenue from advertisers.

There’s simply nowhere else advertisers can go to get instant access to more than 2 billion monthly users other than Facebook. In fact, Facebook owns four of the seven most popular social media sites in the world — Facebook, Messenger, WhatsApp, and Instagram. This is why Wall Street is currently calling for a compound growth rate of 25% over the next four years. That’s an almost unheard of growth rate for a company its size.

Now sporting a reasonably low forward P/E of 19, and a PEG ratio of nearly 0.8 — anything below 1 is considered to be cheap — I’d consider Facebook to be the perfect blend of value and growthfor long-term investors.

Top 5 Warren Buffett Stocks To Buy For 2019: Domino's Pizza Inc(DPZ)

Domino’s Pizza investors were nervous, as sales growth slowed at the end of 2017. Sure, the delivery giant beat rivals like Pizza Hut and Papa John’s, but gains weren’t nearly as strong as they had been. Comparable-store sales, or sales at existing locations, increased 8% in 2017 to mark the first time comps hadn’t expanded at a double-digit rate in three years.

Four people eating pizza from a pizza box

IMAGE SOURCE: GETTY IMAGES.

That appeared to be just a temporary speed bump, though. The chain recently announced that comps sped up to an 8% rate in the first quarter from 4% in the prior quarter, thanks to a solid mix of growth in both its domestic and international segments.

The healthy sales gains mean Domino’s aggressive expansion strategy can continue as management looks to operate as many as 8,000 locations in the U.S., up from 5,000 today. And with most of its orders coming from digital sales channels, it’s clear that e-commerce innovations will play a key role in Domino’s ability to protect its dominant market share position from here.

Top 5 Warren Buffett Stocks To Buy For 2019: American Campus Communities Inc(ACC)

Consumer tastes change over time, and over the past two decades, college students have noticeably shifted their preferences toward off-campus housing options.

American Campus Communities is a real-estate investment trust that has emerged as a market leader in this young and fast-growing segment of residential real estate.

Most on-campus housing options in American Campus Communities’ 68 current markets are residence halls built in the 1950s and 1960s. In fact, the median age of on-campus housing options in these markets is more than half a century. In these markets, 78% of students live in other types of housing, but about two-thirds of the off-campus housing supply consists of landlord-run single-family homes and traditional apartment communities.

 

American Campus Community gives students a third option: modern communities that were specifically designed to meet the needs of college students. These communities have modern technology infrastructure, as well as more student-focused amenities and policies. For instance, in a traditional apartment, you generally aren’t on a separate lease from your roommates, but this can be done in student-focused housing.

Not only is American Campus Communities’ product far superior to its competition, but it’s just as affordable. Outdated on-campus housing costs an average of $722 (shared) or $916 (private) in the company’s markets, making the $751 average monthly price tag of American Campus Communities’ properties surprisingly affordable.

As I mentioned, this industry is still in its infancy, and there’s no shortage of demand for higher-quality student housing. Plus, the company’s 4.7% dividend yield represents less than 70% of 2018’s expected funds from operations, or FFO (the REIT equivalent of "earnings") — a rather low payout ratio for a REIT. So, there’s no reason to think the income won’t get even better over the coming years.