Luckily for us, his stock selections are public knowledge because the investment company he runs, Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B), is listed. So, we get regular updates on his holdings.

Here are Buffett's top 10 stocks by value, according to Berkshire Hathaway's FY22 full-year results released in February.

Top 10 stocks that Warren Buffett owns

What are the lessons for investors buying ASX 200 stocks? 

Buy large-cap ASX 200 stocks

Buffett's top 10 holdings are full of multi-billion-dollar global companies that own household-name brands.

Obviously, he's extremely positive on Apple given the almost 40% allocation of his total portfolio!

He refers to Apple as Berkshire Hathaway's "third-largest business" after its wholly-owned insurance and railroad companies. He reckons Apple is "probably the best business I know in the world".

You could also say he's in love with Bank of America, Chevron, and American Express, given they and Apple together comprise an astonishing 68% of the investment pie!

Large-cap companies are typically industry giants with large valuations (or market capitalisations). Their sheer size is a big factor enabling them to weather all types of economic conditions.

This means safety and stability for the investor.

As mature companies, their share price growth may be limited unless they are in rapidly growing and evolving industries, such as technology (like Apple), or have a global market for their products (also like Apple).

The trade-off in the limited share price growth is strong, reliable, and regular dividends. This makes them a favourite choice among income investors and those who want lower-risk investments.

Fun fact: Buffett's Coca-Cola investment returns $704 million in annual dividends.

The three biggest large-cap ASX 200 stocks available to investors are BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), and CSL Limited (ASX: CSL). 

Buy and hold high-quality businesses for the long term

Buffett is a value investor, meaning he targets high-quality businesses and buys them when they are trading below their intrinsic worth or book value.

He also describes himself as a "business picker" rather than a "stock picker".

That means he uses fundamental analysis to get a real understanding of the companies he is considering buying, and to keep tabs on the ones he already owns. He spends most days in his office reading.

Buffett buys long, which means he's patient. He doesn't get caught up in the day-to-day price movements of his investments based on announcements with short-term share price ramifications.

Buffett's strategy means he has fun in both bear markets and bull markets. How smart is that?

Bear markets provide opportunities to buy below value, and bull markets power up those share prices.

A few examples of long-term holds within Buffett's top 10 stocks are Bank of America, which he first purchased in 2011, American Express (1964), Moody's (2000), and Coca-Cola (1988).

He bought Coca-Cola just months after the Black Monday 1987 market crash. He saw an opportunity to nab a high-quality business while the share price was down, and he went hard too — putting $1 billion into the stock. That's a big number today, let alone back in 1988!

There's also a lesson in moving with the times and adapting your investments in accordance with general business and societal trends, such as the rise of technology.

Buffett first bought Apple in 2016 and Activation Blizzard in 2021. Apple is the biggest US tech stock and Activation Blizzard is in the top 30.

The biggest ASX 200 information technology stocks are WiseTech Global Ltd (ASX: WTC) and Xero Limited (ASX: XRO). But they're babies in size compared to the big US tech stocks.

Keep cash on hand for opportunities

As we covered last month, Buffett moved US$23.3 billion (A$35 billion) from the market into cash between 30 June and 31 December 2022.

Berkshire Hathaway went into 2023 with cash, cash equivalents, and treasury securities (bonds) worth US$128.7 billion.

In his annual newsletter released in February, Buffett explained:

As for the future, Berkshire will always hold a boatload of cash and U.S. Treasury bills along with a wide array of businesses.

We will also avoid behavior that could result in any uncomfortable cash needs at inconvenient times, including financial panics and unprecedented insurance losses.

Spare cash means you can enjoy some satisfying dollar-cost averaging on ASX 200 stocks when the market is down.

Let's talk about diversification

In total, Buffett has 49 stocks in his portfolio, which sounds like a lot. But it's not when you look at the enormity of the whole pie (about US$340 billion).

In short, he's got huge sums invested in each of those 49 stocks. Using the top 10 as an example, if one of those companies goes bust, he'll lose billions. That's probably why they're all large caps. The likelihood of a large cap going under is incredibly small, so perhaps that's why Buffett feels safe to invest big.

Things look a little different when you're an ordinary investor with, say, $50,000 in ASX 200 stocks. You can't really afford to make mistakes and not having a diversified portfolio is a huge one for us.

We should point out that Buffett has good diversification across different industries.

Diversification is important because it gives you safety. The more ASX 200 stocks you hold and the more industries you are exposed to, the lesser your risk.

We don't know what is around the corner. Imagine holding a portfolio full of travel stocks in early 2020.

A quick way of ensuring you have great diversification is not to bother trying to pick ASX 200 stocks at all. Instead, take Buffett's advice and buy a low-cost S&P 500 index fund instead.

That's his key recommendation for ordinary investors looking to set themselves up for retirement.

The S&P/ASX 200 Index (ASX: XJO) closed the session yesterday at 7,362.2 points, down 0.05%.

The post Which stocks does Warren Buffett own (and what can ASX 200 investors learn from this)? appeared first on The Motley Fool Australia.

As one of the most successful stock pickers in history, Warren Buffett regularly inspires investors around the world. Some of those folks may be interested to know that Buffett's holding company, Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B), has taken a targeted interest in video game powerhouse Activision Blizzard, Inc. (NASDAQ: ATVI) throughout 2022. 

At the end of 2021, Berkshire Hathaway owned roughly 1.8% of Activision Blizzard. Buffett increased his stake in the games company more than once in 2022, with shares growing from 64.3 million to 68.4 million in August -- or about 8.7% of Activision. Let's take a look at why it has captured Buffett's interest.

A possible deal with Microsoft 

Buffett's move to increase his investment in Activision Blizzard was prompted by Microsoft Corporation's (NASDAQ: MSFT) announcement in January that it would acquire the gaming company for $95 per share in an all-cash transaction valued at $68.7 billion. The deal would be the biggest the gaming industry has ever seen, and thus attracted scrutiny from regulators around the world. Buffett garnered criticism back in April when Berkshire Hathaway first increased its investment in the company, as analysts believed the move was a gamble in the face of pending regulatory decisions.

However, Buffett's move to load up on Activision stock was a vote of confidence that the deal will be completed. The acquisition requires approval from various countries to ensure it does not lead to Microsoft becoming overly dominant in the video game market. The concern stems from Activision's franchise Call of Duty, the world's second-best-selling game series. In 2020 alone, more than 200 million people bought a total of $3 billion worth of products related to the franchise.

Under Microsoft's control, those games could give it a significantly greater edge in attracting players to its consoles and services over those of its competitors. While Activision Blizzard's game library would be a lucrative asset for Microsoft, the company is unlikely to become all-controlling in the market. Even with this acquisition, it would be just the third-largest video game company after Tencent and Sony -- a fact that bodes well for the deal's regulatory approval.

On Aug. 22, Saudi Arabia's regulator became the first authority to give the acquisition its stamp of approval. However, Microsoft most crucially needs sign-offs from the world's three main regulators: the U.S. Federal Trade Commission (FTC), the United Kingdom's Competition and Markets Authority (CMA), and the European Commission. Each of them has the power to block the deal or impose conditions. 

What will the acquisition mean?

As the Activision Blizzard acquisition would be an all-cash deal, investors in the gaming company would see their shares disappear from their portfolios, replaced with the cash value if the purchase goes through. Activision Blizzard stock sits at about $75 a share and has fluctuated in the range of $75 to $79 over the past month.

Consequently, prospective buyers stand to profit by a little over 26% at Microsoft's purchase price of $95 a share. The Berkshire Hathaway stake is currently worth about $5.1 billion, which will become $6.4 billion if the deal goes through.

Even if the acquisition does not occur, Activision Blizzard shares may still make a smart, long-term buy. The share price is still 28% below the height it reached in February 2021, before it began to plummet following negative reports about the company's treatment of its employees. Additionally, Buffett purchased a stake in Activision Blizzard before the Microsoft deal was announced, an indication that he believes in the outlook for the video game company.

How likely is regulatory approval? 

The CMA revealed on Sept. 15 that it planned to take an even more "in-depth" approach to its regulatory process, moving into phase two of its investigation. The British antitrust authority has expressed concerns that Microsoft's Activision Blizzard acquisition would be anti-competitive. The CMA's next step will examine whether the deal means that Microsoft could "withhold or degrade" Activision's content from competing consoles or services and whether it will "raise barriers to entry and foreclose rivals in cloud gaming services."

The main concern is that Microsoft will make Call of Duty exclusive to its Xbox consoles. However, Microsoft has already asserted that it has no plans to do so, which should mitigate antitrust concerns. It's possible that regulators could approve the deal with the stipulation that Activision titles cannot be made exclusive to Xbox consoles -- a condition that would not devalue the deal for Microsoft. 

Both parties have expressed optimism that the deal will go through. Activision Blizzard CEO Bobby Kotick said on Sept. 1 that the process is "generally moving along as expected," and said he expects it to be complete by June 2023. All in all, there seems to be a great deal of positivity surrounding the Activision acquisition, which has only been strengthened by Buffett's confidence in the stock. Now might be the best time to buy. 

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

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Microsoft Corporation (NASDAQ: MSFT) has its hands in many different businesses. Most investors think immediately of the company's Windows computer software or Azure, its public cloud segment. But gaming has long been a part of the company, starting with personal computers and the Xbox gaming console that first launched in 2001.

Gaming remains a rapidly growing business today, and Microsoft is arguably more dedicated to the industry than ever before. Here is how Microsoft is battling for market share in the gaming sector and why it could benefit shareholders over the long-term.

Gaming may be more significant than you realize

Most celebrities rise to fame through the film and music industries, long considered the pillars of entertainment. But you might not have known that the gaming industry's $180 billion revenue in 2021 was more than that of film and music combined.

What's more, the industry is still growing; research from Mordor Intelligence estimates that global gaming could grow to $340 billion in value by 2027, driven by increased accessibility through emerging gaming methods like mobile and cloud-based gaming.

Microsoft's broad exposure to gaming makes it a logical sector for the company to invest in further. For example, PC gaming is in Microsoft's wheelhouse, given that Windows has roughly 76% market share of the global desktop computer operating system market. Additionally, the company has built up its Xbox ecosystem, consisting of multiple console products and a subscription service for gaming content, including cloud-based gaming for phones, tablets, and laptops.

Borrowing a strategy from the streaming wars

Microsoft's subscription service, called Game Pass, is where it has put its financial muscle in recent years. Content has become king in the ongoing video streaming wars. Netflix, Inc.(NASDAQ: NFLX) was the first streaming platform to market, but a company like The Walt Disney Company (NYSE: DIS) has quickly built a rival service because its rich library of intellectual content draws eyeballs. Netflix initially licensed content from third parties but was forced to spend heavily to develop its own after these third parties figured out the importance of that content and launched their own streaming services.

It can work similarly in video games. Many people don't buy an Xbox or a Playstation console because they love the hardware itself; you buy whatever will give you access to your favorite gaming content. That's probably why gaming companies fight and spend to keep key game franchises exclusive to their consoles. You'll probably never see a game franchise like Mario, the second-highest-grossing game franchise of all time, on any hardware other than a Nintendo system.

Microsoft seems to be buying into this content strategy -- literally. It spent $7.5 billion in 2021 to acquire ZeniMax, the parent company of Bethesda Studios, which owns trendy game franchises like Elder Scrolls, Fallout, and Doom. More recently, it has a pending acquisition of Activision Blizzard, Inc.(NASDAQ: ATVI) for $68.7 billion, a deal still undergoing regulatory review. Closing that deal would give Microsoft ownership of some of the most popular gaming franchises in history, including World of Warcraft and Call of Duty.

Recurring revenue is the long-term goal

Microsoft wants Game Pass to be such a good value that it would be silly not to subscribe. The service currently costs $14.99 per month, includes instant access to nearly 500 games, and includes free access to cloud gaming and day-one access to virtually every game released by one of the 32 game studios that Microsoft will own if the Activision Blizzard deal closes (23 without the merger).

Microsoft revealed that Game Pass hit 25 million subscribers when it announced its deal with Activision Blizzard. There is a ton of room for growth -- 5G is helping bring the connectivity required for gaming to more areas of the world, including an estimated 3.24 billion gamers.

Microsoft is spending to acquire top-notch gaming content because Game Pass could eventually become a free cash flow geyser for the company. Getting Game Pass to 100 million subscribers paying $14.99 monthly would total $18 billion in annual recurring revenue, which would be far more profitable than selling gaming consoles alone. Gaming is a vast business, and Microsoft wants to be king of that hill.

There are plenty of reasons to like Microsoft as a long-term investment, but gaming might be its next big thing. 

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

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Warren Buffett has a lifetime of investing experience under his belt, and he's justly earned the reputation as one of history's greatest stock pickers. From 1965 through 2021, his company, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), posted an average annual return of 20.1% -- absolutely trouncing the S&P 500 index's 10.5% return across that stretch.

If you've got some spare cash just waiting to be put to use, taking some cues from the Oracle of Omaha could help you turn that money into a much larger sum. Read on for a look at two Buffett-backed stocks that look like surefire winners for long-term investors. 

1. Amazon

inflation and rising interest rates have caused investors to become much more cautious about growth stocks this year. Inflationary pressures have also led to rising costs for Amazon's (NASDAQ: AMZN) e-commerce business, and this headwind has coincided with the company making some massive infrastructure and technology investments that have hurt the company's profitability.

Making matters worse, the big investments in the company's e-commerce business have coincided with weaker demand as pandemic-related conditions have eased in many parts of the world.

With so many negative catalysts occurring in tandem, it's not surprising that Amazon is down substantially this year. The tech giant's share price is down roughly 20% so far in 2022 and 29% from the high that it hit last year. Despite big sell-offs, the drop-off in profitability has resulted in the company's price-to-earnings (P/E) ratio skyrocketing. However, the stock still looks poised to be a big winner for long-term investors.  

AMZN PE Ratio data by YCharts

Amazon's e-commerce business is going through growing pains, but the company's moves to increase its scale and infrastructure advantages will likely wind up paying off. While the online retail business accounts for the large majority of the company's revenue, it has relatively low margins; in fact, it doesn't contribute nearly as much to overall earnings as Amazon Web Services (AWS), the company's cloud infrastructure business -- and that's even when conditions are more favorable.

But warehouse and delivery automation stands to make the e-commerce business much more profitable over the long haul, and the trend could prove very rewarding for patient shareholders. 

In the meantime, investors can feel confident knowing that AWS is on track to continue serving up profitable growth. The segment posted 33% year-over-year sales growth and a 29% operating income margin in the second quarter, and the long-term demand outlook for cloud infrastructure services remains incredibly favorable. 

With leading positions in two promising industries and a fantastic track record when it comes to innovation and execution, Amazon is built for success. 

2. Berkshire Hathaway

Berkshire has scored big wins this year by investing in energy company Occidental Petroleum and video game publisher Activision Blizzard, Inc.(NASDAQ: ATVI), which is on track to be acquired by Microsoft Corporation (NASDAQ: MSFT). Buffett's investment conglomerate has also outperformed the market in 2022 thanks to its value-oriented approach and focus on backing high-quality businesses.

Apple, Bank of America, Coca-Cola, Chevron, and American Express stand as the investment conglomerate's five largest stock holdings, and investing in Berkshire Hathaway will give your portfolio exposure to these stocks, as well as the company's fully owned insurance and energy businesses and other subsidiaries.

The company also has a massive cash pile to work with, too. As of its last filing, Berkshire had $105.4 billion in cash, and keeping a lot of money on the sidelines has proven to be a smart move due to turbulent trading for stocks this year. With the S&P 500 index down roughly 15% this year and the Nasdaq Composite index down roughly 25%, Buffett now has opportunities to go deal hunting for stocks and potential acquisitions.

News that Berkshire has invested in a stock often sends that company's share price higher, and so owning a stake in the investment conglomerate gives you exposure to those companies before news of Buffett's latest buys hits the wires. Berkshire's market-crushing track record speaks to the quality of the management team, which includes Buffett, Vice Chairman Charlie Munger, and some younger blood who have come on board too -- all working to grow your wealth. 

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

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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.

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Warren Buffett has famously advised to be fearful when others are greedy and greedy when others are fearful, and he has put his money where his mouth is as the market plunged this year. He bought 16 stocks in 2022's first quarter as other investors were fleeing for the hills.

About half of the stocks he purchased through his holding company, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), were additions to positions already owned, and the other half were new positions. Some were already disclosed, and others were surprises. Some of the more unexpected picks were Activision Blizzard (NASDAQ: ATVI), Paramount Global (NASDAQ: PARA), and Ally Financial (NYSE: ALLY). Should you consider them for your portfolio? Let's take a look.

An easy merger arbitrage deal

Buffett already had a small stake in video game maker Activision Blizzard prior to 2022, so he obviously sees it as a worthwhile stock to own. However, his new interest in the company is in preparation for the company's acquisition by tech titan Microsoft. The acquisition is set to go through in mid-2023, with Microsoft paying $95 per share, or about a 26% premium to the current price. This could be a risky strategy, since many things can happen between now and then. But the price is highly unlikely to go above $95, and it's a simple way to see quick gains.

So why isn't everyone doing this? First of all, although the merger was approved by both parties, there's still a chance it won't go through. It's a riskier play for parties that aren't backed by Buffett's billions. The business itself is having a rough time, so individual investors shouldn't count on a surprise beat to raise the price. In the first quarter, revenue and earnings per share (EPS) both declined. As we get closer to the acquisition date and it seems it will really happen, the price is likely to increase.  

What's in it for Microsoft, or investors who are sticking around right now? It's an easy way for Microsoft to enter the gaming space, for one thing. More than that, the company is still developing new games to launch. Gaming companies go through phases as they launch new products and see how well they do. For example, Activision has several launches in the second quarter that it expects to do well. In a positive sign, monthly active users (MAU) increased slightly from the 2021 fourth quarter to the 2022 first quarter.

Activision Blizzard stock has been a market beater, but for now, investors might not want to follow Buffett.

A new name in streaming

Paramount Global is the new name for what was formerly ViacomCBS. The company has jumped on the bandwagon and is investing in its streaming service, Paramount+, but it operates a number of media networks including traditional television (CBS) and cable channels such as Showtime and MTV. It's not as big as competitors such as Disney and Netflix, but what it does have in its favor is a Buffett favorite -- it looks undervalued. 

Revenue decreased 1% from 2021 in the first quarter as customers continued to cord-cut, but streaming, or the direct-to-consumer division, increased 82%. That included a 95% increase in subscription revenue as well as a 59% increase in ad revenue for its ad-supported platform, PlutoTV. Pluto also added 6.3 million new members for a total of more than 67 million MAUs.

Paramount+ added 6.8 million subscribers for a total of close to 40 million. Many of those are crossovers who view content on both platforms. The media company owns such franchises as Star Trek and Sonic the Hedgehog and has new content coming out in both of those series as well as much more. There are many growth levers here.

However, it's competing with bigger guns, and as the field gets more crowded, Paramount Global may not have what it takes to keep adding viewers and subscribers. That's the big question mark.

Meanwhile, the shares are down almost 20% this year despite Buffett's big bet, and at this price they're trading at only four times trailing 12-month earnings. That's pitifully low for a company that grew revenue 13% year over year in 2021 and increased earnings per share (EPS) (from continuing operations) by 79%.

More bank stocks to love

Bank stocks make a strong showing in Berkshire Hathaway's portfolio, and Buffett added a new one, Ally Financial, to the group last quarter. Ally fits right in with Buffett's model, with cheap shares and a strong culture of giving back to shareholders.

Ally has a large auto-lending unit, which has been its core product for decades. But it also operates a consumer bank, which has been demonstrating sequential growth. It increased to 2.5 million retail banking customers in the first quarter, with $136 billion in deposits, a 6% increase year over year. One of its newer bank ventures, the Ally credit card, had 844,000 active users, up 73% year over year. Net income slightly decreased over last year as it moved money into provisions for credit losses, but revenue increased 10%. Return on common equity was a high 18%.

The company said it would issue $2 billion in share buybacks in 2022, which is a fifth of its entire market cap. It also pays a growing dividend that yields a high 3.7%. That's partially because the share price has declined more than 30% so far this year. At the current price, the shares also trade at the dirt-cheap multiple of four times trailing 12-month earnings, and less than one times tangible book value, which means they're trading for less than the value of its assets.

Out of these stocks, Ally looks the most like a no-brainer that individual investors should consider.

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

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Inflation is on the minds of investors, policymakers, and everyday Americans. We can feel it at the pump, at the grocery store, the post office, and even the barbershop. Since inflation is higher than the rate of economic growth, the real gross domestic product for the first quarter of 2022 decreased by 1.4% year over year. If we get another negative reading for the second quarter, the US economy will officially be in a recession.

Both Warren Buffett and Charlie Munger spoke about inflation at Berkshire Hathaway's (NYSE: BRK.A) (NYSE: BRK.B) annual shareholders' meeting on Saturday. Here's what the longtime chairman and vice chairman said and how they're positioning Berkshire to ride out the storm.

An unavoidable consequence

Buffett and Munger both spoke negatively about the state of the economy due to inflation and how it is largely a result of loose fiscal and monetary policy. This policy artificially inflated demand and effectively caused a supply/demand imbalance -- the cure for which was rising prices to try and lower demand. And now, the remedy seems to be raising interest rates to try and reduce demand. "We are seeing an unleashing of the fact that we just mailed a lot of money one way or another," said Buffett.

However, Buffett and Munger view inflation as a necessary consequence to get the US out of what could have been a COVID-19 induced depression.

"We've had a lot of inflation, and it was almost impossible not to have it if you're going give out the kind of money we gave out. And it's probably a good thing we did it, in fact, I think at one point when the Federal Reserve was creating the money, if they hadn't done it our lives would be worse, a whole lot worse. Now that was an important decision," said Buffett.

In another exchange, Munger said, "It happened on a scale this time that we've never seen before. Those checks are just mailed out to everybody who claimed to have a business and claimed to have employees. They probably drowned the country in money for a while, and as you [Buffett] say, they probably had to do it."

"In my book, Jay Powell [chair of the US Federal Reserve] is a hero," Buffett responded. "It's very simple, he did what he had to do."

Find value wherever it's available

One way of growing wealth during inflationary times is looking for opportunities that aren't otherwise available. The trick is having plenty of experience looking for those opportunities in other economic conditions, too. "We depend on mispriced businesses through mechanisms where we aren't responsible for the mispricing of them," Buffett said.

Buffett surprised investors when he disclosed a roughly 9.5% stake in Activision Blizzard. The stake is worth about $6.2 billion as of Friday's close. Buffett owned about $1 billion of Activision before Microsoft announced it would acquire it for $95 a share. Buffett then increased Berkshire's position as a classic arbitrage opportunity under the assumption that Microsoft is a reliable buyer and would come through on the deal. That arbitrage opportunity is sizable, considering Activision Blizzard's stock is currently $75.60 per share.

Buffet's Activision Blizzard play is merely an old-school way of finding value in a challenging market. However, regular investors should probably steer clear of these kinds of investments, as the deal isn't based on fundamentals and could fall through. You don't want to end up owning a company you don't understand and didn't really want in the first place.

So what can you do?

Learn from Buffett's actions

It's all good and well to say that inflation is unavoidable. But the real question many investors are probably wondering about is how to position their portfolios for prolonged inflation.

First off, it's important to remember that economic cycles are simply par for the course in a long investing career. Whether inflation is the cause of a sell-off or not is secondary. The bigger takeaway is that a bear market can create life-changing wealth for investors in companies with bright futures, positive cash flows, and durable balance sheets.

What Berkshire is showing through its actions is an increased buying appetite that we haven't seen in years, which indicates Berkshire is finding value -- mainly in the energy sector. In less than a year, oil and gas went from a minor allocation to a major one. Berkshire's Chevron holding has pole-vaulted to its third-largest position, while Occidental Petroleum has been a top 10 holding since Berkshire increased its stake in February and March. Berkshire also took a stake in HP this year, and its acquisition of insurer Alleghany shows its classic value stock bent.

Chevron is known for its industry-leading balance sheet and a low cost of production that allows it to reach breakeven free cash flow even when oil is in the low $40s per barrel. Meanwhile, Occidental Petroleum is a much more aggressive spender and has a higher breakeven than Chevron. But its relatively high capital expenditures have paid off now that oil and gas prices are at eight-year highs. Meanwhile, Berkshire's other major positions are in diversified large companies like Apple and Coca-Cola, which is one of the most recession-resistant and reliable sources of passive income on the market.

Treading carefully in a challenging market

All told, Buffett's actions show that Berkshire is finding value in the market, more value than it has found in years. But that Berkshire isn't just buying the dip on any company. It is selectively buying companies that are contributors to inflation (upstream producers like Occidental) or have relatively reliable cash flows and inexpensive valuations (like Chevron and HP).

For investors who don't manage billions of dollars in assets, sticking with unstoppable stocks you'll want in your corner if the market crashes can be a great way to rest easy at night and endure the gauntlet of a bear market.

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

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There is no shortage of high-growth trends for investors to be enamored with at the moment. Cloud computing, cybersecurity, telehealth, and even cannabis, represent sustainable double-digit growth opportunities.

Yet, some argue none of these opportunities offer the market potential of the metaverse.

An up to $30 trillion opportunity is on investors' doorstep

Put simply, the metaverse is the next iteration of the internet. It's a 3D virtual environment that will allow people to interact with their surroundings, as well as each other. This means an entirely new digital ecosystem will be built within the metaverse.

According to Matthew Ball, the CEO of venture capital company Epyllion, the metaverse is an opportunity with many zeroes to back it up. In speaking with Bloomberg News in November, Ball had this to say:

"Even if you have more modest expectations, precedent from the digital economy, the internet, the mobile internet, suggests that this is a $10 [trillion] to $30 trillion opportunity that will manifest in a decade or decade and a half."

By comparison, cloud computing has been one of the top-growing industries for years, and it's "only" expected to top $1 trillion in market size by the turn of the decade. That's a far cry from Ball's projection of up to $30 trillion for the metaverse by 2031 to 2036. With forecasts like this, it's no wonder investors have been willing to pile into this hypergrowth virtual ecosystem.

But there's no one-size-fits-all way to invest in the metaverse. Rather, there are three ways investors can stake their claim to this potential $30 trillion pie.

1. Diversify. Diversify. Diversify!

To begin with, investors can gain metaverse exposure by putting their money to work in metaverse-targeted exchange-traded funds (ETFs). The Roundhill Ball Metaverse ETF (NYSEMKT: METV), which Matthew Ball helped bring to market last year, is arguably the best example in the ETF space.

The idea behind a metaverse ETF is simple: Operating a virtual realm is going to require a lot -- and I mean a lot -- of working parts. There needs to be the computational power to support the metaverse, the networking and bandwidth to provide data, payments to handle virtual ecosystem transactions, hardware to allow users access to these virtual worlds, and identity security to ensure that digital assets and user identities remain protected. Mind you, this is just a small snippet of the physical and intangible needs of a massive virtual ecosystem. This means dozens of companies may play a role in supporting the metaverse.

The Roundhill Ball Metaverse ETF has 45 holdings, as of Feb. 3, with seven countries represented in the portfolio. Most importantly, the median market cap of these 45 holdings is $68 billion. In other words, the typical company being held by this ETF is going to be profitable and time-tested. While these stocks will have clear metaverse ties, there's a really good chance these companies also have highly profitable core businesses that'll fund metaverse research and development. Translation: You can sleep well if you choose to buy this ETF.

The one minor knock here is you'll pay a 0.75% net expense ratio, which is a bit higher than the weighted average expense ratio for all ETFs.  But if the metaverse is everything it's cracked up to be, a 0.75% expense ratio could be well worth it.

2. Buy individual stocks with metaverse exposure

If ETFs aren't your cup of tea, a second way to gain metaverse exposure is to directly invest in companies with metaverse ties.

The advantage of this method is it allows you to place greater weighting on the companies you feel will outperform. Plus, with most online brokerages eliminating commission fees and minimum deposit requirements, there are no fees or commissions to purchase stocks on the major U.S. exchanges. Thus, this method can save a little money, relative to purchasing an ETF.

On the flipside, buying individual stocks will require more initial and ongoing research. Thankfully, as noted, most of the companies involved in the metaverse are already well-established.

For example, Microsoft (NASDAQ: MSFT) has a variety of ways that it can benefit from the metaverse. The company's cloud infrastructure segment, Azure, is already No. 2 in global cloud spending. Cloud computing and storage will be necessary to handle the mountains of data and information generated within the metaverse.

Microsoft also made waves with its announced all-cash deal to buy gaming giant Activision Blizzard (NASDAQ: ATVI) for $68.7 billion last month. At the end of September, Activision had 390 million monthly active users, some of which are already playing games within virtual platforms. The Activision deal is another way Microsoft can bring people into its vision of a digital/virtual ecosystem.

3. YOLO with metaverse cryptocurrencies

For those of you with a high tolerance for risk (and reward), the third way to stake your claim in the $30 trillion metaverse is by purchasing relevant cryptocurrencies.

Whereas many of the companies associated with the metaverse are profitable and time-tested, most metaverse cryptocurrencies have only been around for a couple of years. It's not yet clear if they'll have the financial support or gaming interest to last for a significant length of time.

On the other hand, the two biggest players, The Sandbox (CRYPTO: SAND) and Decentraland (CRYPTO: MANA), have respective market values of $3.4 billion and $4.9 billion, respectively. If these two projects can consistently gobble up a significant portion of the capital being invested in virtual worlds, these market values could be an absolute steal.

Both The Sandbox and Decentraland have similar operating models. They're both play-to-earn-styled games built atop the Ethereum blockchain. They allow users to purchase digital plots of land that can be upgraded or built upon to attract other users. These plots of land are stored as non-fungible tokens (NFTs), which provide immutable proof of ownership of a digital asset stored on blockchain. Whereas the ownership of in-game creations stays with the developer in traditional PC and console gaming, Sandbox and Decentraland allow users to own and monetize their own creations via NFTs.

Going the "you only live once" (YOLO) route with cryptocurrencies is effectively a bet on the metaverse being decentralized. This may well be the case. But with many established companies throwing tens of billions at the metaverse, like Microsoft, a centralized future is also a very real potential outcome. 

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

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• This ASX gaming ETF has only been listed for less than two years
• Microsoft is acquiring gaming giant Activision Blizzard for US$68.7 billion
• This could result in a big shakeup for this ETF

The VanEck Video Gaming and Esports ETF (ASX: ESPO) is one of the newer exchange-traded funds (ETFs) on the ASX. Since its debut back in September 2020, this ASX share has been a rather ho-hum investment thus far. It's up 10.15% since its inception around 18 months ago. But it's also down 5.11% over the past year, including a 13.8% drop from where it was just back in mid-November.

But with some big news in the gaming space overnight, ESPO could be set for one of its largest shakeups since it first graced the ASX boards.

Microsoft to acquire gaming giant Activision Blizzard

Why? Well, overnight (our time), we got wind of some big news. The US tech titan Microsoft Corporation (NASDAQ: MSFT), the no-introduction-needed company behind the Office software suite and the Windows operating system, intends to acquire the gaming giant Activision Blizzard Inc (NASDAQ: ATVI).

Activision Blizzard is one of the largest gaming companies in the world. It owns valuable intellectual property such as Call of Duty, Starcraft, Diablo, and World of Warcraft franchises. As well as some popular mobile games like Candy Crush.

So according to our Fool colleagues in the US, Microsoft is putting forward an all-cash offer worth US$68.7 billion. That equates to around US$95 a share. Activision Blizzard shares closed at US$65.39 a share last week, but opened at US$86.55 a share last night when the deal was public knowledge. It closed at U$82.31 a share this morning, up 25.88%.

It's not hard to see why Microsoft might be pursuing the deal. The company is already a gaming powerhouse with its Xbox series of video game consoles as well as ownership of several popular franchises, such as Halo and Gears of War.

But my colleague estimates that, if the deal goes through, it "would make Microsoft the third-largest video game company in the world by revenue, trailing only Chinese tech giant Tencent Holdings and Sony". It would also result in the addition of "nearly 400 million monthly active users to Microsoft's gaming business".

What does this mean for ESPO?

So why is all of this relevant to the VanEck Video Gaming and Esports ETF? Well, as it stands today, Activision Blizzard is the fifth-largest holding in ESPO's portfolio. This ETF currently holds 25 companies that are selected to give investors exposure to "a diversified portfolio of the largest and most liquid companies involved in video game development, eSports and related hardware and software globally".

At its fifth spot in the ETF, Activision Blizzard currently commands a near 6% weighting. Microsoft doesn't even make the cut for ESPO at present. But that of course could change if this deal goes through. So while the deal isn't expected to be closed until 2023 if all goes to plan, it still heralds a dramatic change for this ASX ETF.

The VanEck Video Gaming and Esports ETF charges a management fee of 0.55% per annum.

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Its shares have made a quick turnaround from falling 4.5% to $30.36 on 26 February after its annual general meeting presentation to an earnings upgrade on 17 May that propelled its bullish run to record highs.

Its shares have since taken the foot off the gas, closing May at $41.05.

What a month it was for the Aristocrat share price

Aristocrat shares staged a bullish recovery after its February AGM pullback, delivering three consecutive month-on-month gains from March to May.

Its shares retested pre-COVID highs of $38 on 10 May. But as the Aristocrat share price looked set to break out into new all-time record highs, the S&P/ASX 200 Index (ASX: XJO) staged a sharp ~2.65% fall between 11 and 13 May.

The three-day selloff saw Aristocrat shares tank 3.80% lower from $38.00 to $36.56. And just as some investors might have started to think "the top is in", Aristocrat announced a half-year earnings upgrade on 17 May that pushed its shares right back up to record highs of $39.50 on the day.

The announcement highlighted a 12% increase in normalised net profit after tax and before amortisation of acquired intangibles (NPATA) to $412 million and a 6% increase in normalised earnings before interest, taxes, depreciation, and amortisation (EBITDA) to $750 million.

The upgraded guidance was driven by stronger than expected consumer sentiment and economic conditions in the United States and Australia/New Zealand (ANZ), which drove profit growth in its casino machine business. Its growth was further supported by its digital games business, which delivered revenue and profit growth against the elevated prior corresponding period.

Aristocrat full year results

Aristocrat announced its actual full-year results just a few days later on 24 May, with NPATA and EBITDA of $411.6 million and $750.3 million. The full-year results announcement reiterated the stronger than expected consumer sentiment and economic conditions in the US and ANZ.

Another highlight was Aristocrat's digital games segment. The company advised that its growth had propelled it into a top 5 mobile games publisher in tier 1 western markets, according to leading global data and analytics provider App Annie. This means Aristocrat is going toe-to-toe with household names such as Activision Blizzard Inc, Zynga Inc and Bandai Namco.

Business outlook

Looking ahead, Aristocrat advised that it "plans for strong growth over the full year to 30 September 2021".

Despite no dollar figure guidance, the company expects to enhance its market-leading position in casino gaming operations and drive further growth in its digital games business. The outlook flagged an increase in overhead expenses as it scaled and delivered on its growth strategy.

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Perhaps more tantalising for investors is the performance of the index that ESPO tracks. According to VanEck, this ETF mimics the MVIS Global Video Gaming and eSports Index. The index "comprises companies involved in video game development, eSports, and related hardware and software globally", and evidently does so with great success, seeing as it has reportedly returned an average of 37.17% per annum over the past 5 years.

We don't have to look too far to understand why this ETF has amassed close to $100 million in assets under management in almost 8 months. So what does this ETF really look like under the hood? Let's take a look.

A closer look at ESPO

The Video Gaming and eSports ETF holds a relatively concentrated basket of gaming and eSports shares — 25 at the current time. The fund's current top holding is NVIDIA Corp (NASDAQ: NVDA). NVIDIA is a popular US company that mostly designs and manufactures graphics hardware.

Other holdings that investors might be familiar with include Nintendo Co Ltd, Tencent Holdings Ltd, Activision Blizzard Inc (NASDAQ: ATVI) and Take-Two Interactive Software Inc (NASDAQ: TTWO).

Nintendo is the famous Japanese gaming company behind the gaming characters Mario, Donkey Kong, Pokemon and Zelda. It is also famous for its gaming consoles like the Wii, the old GameBoy, the Nintendo DS and the Nintendo Switch.

Tencent is the Chinese gaming behemoth that is perhaps most famous in Australia for its Fortnite game, although it owns a portfolio of popular Chinese social media and eSports apps like WeChat as well.

Activision Blizzard is the company behind some of the most popular gaming franchises in the world, like World of Warcraft and Call of Duty. Similarly, Take-Two is known for well-known franchises like Grand Theft Auto and Red Dead.

As you might have gathered, the ESPO ETF is relatively well balanced from a geographical perspective — 38.5% of its holdings are US companies, with Japan (21.1%), China (18.4%) and Singapore (6.6%) also well represented.

Finally to note, the VanEck Vectors Video Gaming and eSports ETF charges a management fee of 0.55%. That would equate to $5.50 per year for every $1,000 invested.

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Investors were looking forward to hearing Activision Blizzard Inc.'s (NASDAQ: ATVI) fourth-quarter earnings report on Monday. The video game developer had trounced expectations through most of 2020 as it capitalized on spiking interest in at-home entertainment options. Its core Call of Duty franchise set new records for engagement and in-game spending in recent quarters, too.

That positive investing story held up through the holiday season, with overall results again blowing past the short-term forecast that CEO Bobby Kotick and his team issued.

Let's dive right in and see what the latest report says about this game producer's future.

Strong momentum

Sales landed at $2.4 billion, easily exceeding the $2 billion forecast that management issued back in late October. Growth was led by the Call of Duty franchise, which benefited from popular new releases and a robust ecosystem of content on mobile devices, PCs, and gaming consoles. Call of Duty: Black Ops Cold War, its latest major launch, attracted 70% more players than last year's iteration. The brand grew in the mobile segment and in the free-to-play niche, too, all contributing to Activision reaching a record audience size over the holidays.

Engagement is also setting new highs, according to the report, with average hours played rising and in-game purchasing spiking. "We saw the benefits of fundamental changes to our core franchises [in 2020]," management said, "including deeper and more consistent engagement with current and new players across platforms.

Financial wins

The engagement translated directly into higher earnings. The Activision side of the business more than doubled its profits as operating margin jumped to 47% of sales in Q4. Blizzard had a weaker outing due to a slimmer release schedule, but World of Warcraft still logged growth. Video-game developer King Digital benefited from higher in-game spending and advertising revenue to allow Activision Blizzard to book solid earnings from its casual-gaming division.

ATVI Operating Margin (TTM) data by YCharts

All these wins translated into fourth-quarter earnings of $0.65 per share compared to the $0.44 per share that Wall Street was expecting. "As we expand the opportunities for fans to engage in our [intellectual property]," executives said, "we expect strong financial performance to follow."

Looking ahead

The company issued a bullish outlook for 2021 that implies significant improvements over this past year's record results. Activision also plans to send more cash to shareholders through stock buybacks and a dividend that was just hiked by 15%.

The company's strategy boils down to applying what its learned with Call of Duty to a few other franchises. Investors had worried in 2019 that the brand might be showing its age, but Activision poured resources into its development while extending its reach into new platforms and paying models. Those initiatives worked so well that they're already being used on other brands. "We are accelerating our path to reach a billion people as we apply the Call of Duty framework to other franchises," the company said.

This approach has a good shot at producing several additional brands that consistently achieve at least $1 billion in annual revenue within the next few years.

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

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