Which UK shares would Warren Buffett buy right now?

Billionaire investor Warren Buffett mostly invests in the US. But many of his investing lessons are just as applicable here on the UK stock market.

Today I’m looking at some of his past suggestions, and at recent purchases. And I’m thinking about some shares on the London Stock Exchange that might get the Buffett seal of approval.

Ten years

“If you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes.”

That’s one of his most important recommendations, and it’s helped him greatly over the years. Since talking the helm at Berkshire Hathaway in 1965, Buffett has achieved an average annual growth of 20%. What would an investment in Berkshire Hathaway back then be worth today? More than 100 times the same investment in the S&P 500.

So, investing in the UK, I’m quite sure Buffett would take no notice of the current rate of inflation. Or interest rate forecasts for the next 12 months, or anything like that.

No, he’d be thinking about where, for example, Lloyds Banking Group will be in 10 years, not next year. And where the housing market might lead Taylor Wimpey in another decade. Not what mortgage rates might do in the next few months.

Insurance

Money we hold and can invest but that does not belong to us.

That’s what Warren Buffett said about the pile of cash, or float, that insurance companies hold from premiums paid by their customers. Through big insurance holdings, he’s accumulated billions in float. And he’s invested it to generate even more profit for Berkshire Hathaway shareholders.

Any of us can get into that kind of investment, in a smaller way, simply by buying some insurance shares. Right now, I think Aviva, Legal & General, and most in the sector look attractive.

It can be a cyclical business, and share prices can be a bit volatile over relatively short timescales. But looking at it with a minimum 10-year horizon paints a different picture. Investors who worry how the next couple of years might go are not following the Warren Buffett method.

Oil

When you buy into a huge oil production company, how it works out is going to depend on the price of oil to a great extent.”

That’s what he said about investing in oil and gas shares, and it might sound a bit like the obvious. But it does contain one gem for me.

The surest successes from investing in oil have not come from tiny exploration companies hoping to hit a major discovery. On average, they seem to mostly lose money, with only the occasional one coming good.

We’re more likely to make long-term profits from shares in oil production companies that can extract the black stuff at well below the market price.

In 2022 so far, Warren Buffett has invested more than $20bn in Chevron and Occidental Petroleum. Would he make similar investments in Shell and BP if he invested in UK stocks? I don’t know. But he clearly sees at least another 10 years of profits from the industry, and probably a good bit more!

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