2022 has been a challenging year for investors, with a bear market fueled by surging inflation and stalling economic growth. However, long-term thinkers are seeing the current economic uncertainty as an opportunity and aggressively picking up fundamentally strong businesses at steep discounts.

Warren Buffett has been one of the brightest minds on Wall Street for decades. Hence, the entire market has a keen eye on Berkshire Hathaway's (NYSE: BRK-B) portfolio to see what Buffett and his investing team are buying and selling.

As per its recent 13F filing, Berkshire Hathaway has increased its stake in Activision Blizzard (NASDAQ: ATVI) and Ally Financial (NYSE: ALLY). Here's why I think both of these stocks could be solid long-term investments.

Activision Blizzard

Activision Blizzard owns some of the largest gaming titles in the world, such as Diablo, World of Warcraft, Call of Duty, and the mobile game Candy Crush. 

Back in January, Microsoft announced its intention to acquire the company for $95 per share, but at recent prices, Activision Blizzard's stock was trading around $80, almost 16% lower. The discount can be attributed to the Federal Trade Commission's (FTC) ongoing regulatory review of the proposed deal. However, this price gap may soon close. Per Dealreporter, Microsoft seems to have complied with the FTC's second request for certain documents as part of the assessment of this deal. This is seen as a major milestone for the merger, considering that the agency has to complete the review of the deal within 30 days after the buyer and seller comply the second request for data.

Buffett has long been poised to take advantage of this situation; Berkshire added substantially to its Activision Blizzard position in the first quarter and increased its stake from 64.3 million shares to 68.4 million shares in the second quarter.

However, even if the deal does not go through, Activision Blizzard's financials are quite strong. The company's revenue and net income rose 8.9% and 22.8%, respectively, in 2021 despite strong prior-year comps. The company earned nearly 73% of its revenue from in-game purchases and gaming subscriptions in the second quarter (ending June 30), thereby reducing its reliance on the success of any single gaming title. The company has a strong balance sheet, evident by its net cash position of $7.1 billion.

Activision Blizzard is also gearing up for new versions of already famous gaming titles in the coming quarters, such as Call of Duty: Modern Warfare II, Call of Duty: Warzone 2.0, World of Warcraft, and Overwatch 2. Thanks to its strong fan base (361 million monthly active users in the second quarter), these new launches can significantly boost both product sales and in-game purchases of Activision Blizzard in future quarters.

Ally Financial

Shares of Ally Financial, an online bank focused on auto lending, are down by 25% so far this year on fears of reduced car demand and declining used car prices in a recessionary environment. Analysts and investors are worried about the potential decline in credit quality and a rise in delinquency rates in the coming quarters. These fears are well founded since the company's 30-plus-day retail auto delinquency rate jumped from 2.02% in the first quarter to 2.52% in the second quarter (ending June 30). The rapid rise in benchmark interest rates has also resulted in worries about an increase in the company's cost of capital since retail deposits make up almost 90% of the bank's funding sources.

Despite these cons, there are several pros that make it worthwhile to consider buying this stock now. Ally Financial has relationships with 22,400 U.S. auto dealers. This broad and deep dealer network is not only a major driver for loan originations but also a key entry barrier for competition. The company reported a 3% year-over-year increase in retail auto loan applications, which is impressive considering overall auto industry sales were down 19% year over year in the second quarter. With a major chunk of loan applications stemming from higher-income groups, loan default risk is significantly reduced.

Ally Financial reported $13.3 billion in auto loan originations in the second quarter, the highest quarterly level reached since 2006. The company expects demand to remain strong in the auto market at least in the short run since 4 million to 5 million consumers are estimated to have not been able to purchase vehicles due to inventory shortages.

Besides auto lending, Ally Financial also offers other financial services such as mortgage finance, credit cards, and brokerage services. This has opened up several cross-selling opportunities to its existing auto loan user base.

Ally Financial is also quite cheap, trading at 5.06 times earnings, the lowest it has been since the pandemic-driven market crash of early 2020. The stock is also trading at a significant discount to the financials sector average around 14 and the U.S. market average of 25..

In the second quarter, Berkshire Hathaway increased its stake in this leading auto lender from 9 million shares to 30 million shares. Considering Ally Financial's strong growth prospects and low valuation, this could prove to be an attractive investment for Buffett and those of us who look to him for ideas.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 2 stocks Warren Buffett could not stop buying in the second quarter appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Ally is an advertising partner of The Ascent, a Motley Fool company. Manali Bhade has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Activision Blizzard and Berkshire Hathaway (B shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Activision Blizzard and Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Biotech investing is not for the weak-hearted. While the clinical and regulatory success of a drug can mean huge gains, any failure in the development and commercialization process can literally decimate a biotech investor's portfolio.

Many investors consider Moderna (NASDAQ: MRNA) to be one such risky biotechnology company, with fortunes largely dependent on the success or failure of its experimental COVID-19 vaccine, mRNA-1273. But although Moderna may be riskier than other prominent COVID-19 vaccine players such as Pfizer (NYSE: PFE) and AstraZeneca (NASDAQ: AZN), that doesn't mean it's purely a speculative play. mRNA-1273 is definitely the biggest short-term growth driver for the company -- but Moderna also has much more to offer in the field of mRNA therapeutics.

Here are three reasons why healthcare investors can consider starting a small position in this high-growth stock on any pullback in 2020.

Its COVID-19 vaccine could be a game-changer

With traditional vaccines, a small and/or inactive amount of a virus or disease is injected to provoke the body into mounting an immune response to the proteins the intruder produces. mRNA vaccines are different, using messenger RNA -- a molecule in cells that translates DNA into proteins -- to fool the body into producing some of the virus's proteins itself, then mounting the immune response. No mRNA vaccines have ever been approved for human use, but Pfizer and BioNTech (NASDAQ: BNTX) recently reported 95% overall efficacy for their mRNA-based COVID-19 vaccine candidate, BNT162b2, based on an ongoing phase 3 study. The companies did not report any serious safety concerns.

The positive news from these competitors bodes well for Moderna. The mRNA technology that is Moderna's focus, and that Pfizer and BioNTech used to make their vaccine candidate, is not yet commercialized, so the latter's success should boost confidence in Moderna's approach.

Also, vaccine development is generally more time-consuming than drug development, requiring a wide array of safety studies to ensure that the vaccine does not cause serious adverse events in various populations. But to speed up the process, this protocol has not been followed for potential COVID-19 vaccines, meaning the safety of any vaccine development platform must now be assessed based on the totality of data available from all companies. Because of this, Pfizer and BioNTech's positive safety data is good news for Moderna, too.   

On Nov. 16, Moderna reported efficacy of 94.5% for mRNA-1273 in a phase 3 study that involved more than 30,000 participants. This is important especially considering that many participants were from the populations most affected by the pandemic, including people over 65 years of age, people of color, and people with comorbidities such as diabetes, obesity, and cardiac diseases. Moderna has also not reported any severe side effects for its vaccine in the interim analysis; two-month safety follow-up data should be released at the end of November.

In the end, it may be logistics that prove to be the winning stroke for Moderna. mRNA-1273 can remain stable at -20 degrees Celsius (about -4 Fahrenheit)  for six months, at temperatures of 2 to 8 degrees Celsius (about 35 to 46 degrees Fahrenheit) for 30 days, and at room temperature for 12 hours. Hence, this vaccine can be easily distributed using existing transportation and storage infrastructure. Pfizer's BNT162b2 vaccine candidate, however, has to be stored at -70 degrees Celsius (-94 degrees Fahrenheit), making it pretty difficult to transport and store even in developed countries.

mRNA therapeutics are a big opportunity

Moderna is a key player in the mRNA vaccines and therapeutics landscape, a global market expected to be worth $9.4 billion by the end of 2021.  Investors are showing increasing confidence in Moderna's other clinical programs, such as vaccines for cytomegalovirus (CMV) and Zika, personalized cancer vaccines for solid tumors and melanoma, and other vaccines and treatments for a range of rare diseases.

In September, Moderna announced positive interim results for its CMV vaccine candidate, mRNA-1647. The company estimates the vaccine's peak sales in the range of $2 billion to $5 billion per year , considering that CMV is the leading cause of birth defects in developed countries and there is no approved vaccine against this infection.

An increase in cash will boost R&D

Moderna plans to produce 20 million doses of the coronavirus vaccine by the end of 2020 in the U.S. and 500 million to 1 billion doses worldwide in 2021. The company plans to price mRNA-1273 in the range of $25 to $37 per dose, depending on purchase quantity. Moderna has already secured a $1.5 billion contract from the U.S. government to supply 100 million doses, with an option for an additional 400 million. The company has also received $1.1 billion in cash payments from governments around the world.

Moderna currently has cash and investments worth $4 billion and zero debt on its balance sheet. A significant sales ramp-up in 2021 will add to the company's cash reserve, which in turn can fuel the research and development (R&D) pipeline.

There are risks to be considered

Moderna is trading at a forward price-to-earnings (P/E) multiple (calculated by dividing share price by forecasted earnings per share for the next fiscal year) of 22.4. Other far more diversified and less risky COVID-19 vaccine players -- such as Pfizer, AstraZeneca, and Johnson & Johnson (NYSE: JNJ) -- are trading at forward P/E multiples of 12.9, 21.9, and 16.3, respectively. Moderna is definitely a more expensive pick than any other coronavirus vaccine player.

Moderna's share price depends heavily on the potential success of mRNA-1273. The company has not disclosed information about the time period for which the vaccine protects individuals after dosage and whether it prevents transmission from one person to another. Moderna also did not include children in its phase 3 trial, which may limit use of the vaccine in this population. Investors are concerned about the insider trading activity of some high-ranking Moderna executives, and excessive stock selling by insiders is a potent threat to the company's share prices.

Despite all of these uncertainties, Moderna is essentially a play on the future of mRNA technology. Taking on a big position in this stock right now may prove risky. However, interested healthcare investors with above-average risk appetite can find enough reason to start a small holding in Moderna -- especially on any pullback in stock price.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Moderna Is Less Risky Than You Think appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Manali Bhade has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Johnson & Johnson. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.