2 Warren Buffett Stocks to Buy Hand Over Fist in February

It's a new era at Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), the conglomerate run by former CEO Warren Buffett. While Greg Abel has taken the reins, Buffett's legacy lives on in the company he built and the massive wealth he generated for investors.

While Abel will soon put his own stamp on the business, the $267 billion Berkshire Hathaway stock portfolio is made up of stocks that Buffett picked with the help of his team. About one-quarter of the portfolio is made up of financial stocks, representing about 40% of the total value.

Two of the financial stocks stand out as great buys as we enter February -- Jefferies Financial (NYSE: JEF) and Ally Financial (NYSE: ALLY). These are two relatively small positions in the Berkshire portfolio, but both have pretty big upside.

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Ally looks like an ally

Ally is a bank that used to be General Motors' financing arm. It eventually grew into Ally, a full-service online bank, but its focus is still on auto loans.

Ally made two moves last year that really will serve it well. It got out of the mortgage origination business, as it was not generating much growth in a difficult market. Plus, it's not a core area, so the resources were refocused in auto lending, which is Ally's traditional strength.

It also got out of the credit card business, selling it to CardWorks. The reasons were similar, as it was a low-growth, tangential business. It catered to non-prime borrowers who were hammered by inflation, which increased charge-off rates.

The moves improved Ally's credit quality, increased its net interest margin, and bolstered net financing revenue. Further, with interest rates trending lower, Ally expects to see margins improve in 2026.

The stock is cheap and considered a buy by 77% of analysts with a price target of $52.50 per share, which would represent a 24% return over the next year.

Jefferies helped by M&A boom

Jefferies Financial is a pure-play investment bank, meaning its main focus is on investment banking, mergers and acquisitions, advisory, etc. So, when the M&A market is hot, like it is now, Jefferies will benefit perhaps more than the diversified firms because it represents a larger percentage of its business.

Last year was one of the best years for M&A in recent history, which propelled Jefferies' investment banking revenue 12% higher.

Unfortunately, the stock price plunged about 19% last year, mostly due to its involvement with bankrupt auto parts supplier First Brands last September. Jefferies took a $30 million loss, which stemmed from First Brands' bankruptcy, as it had bought receivables from First Brands. Then, an SEC investigation followed into Jefferies' exposure to First Brands.

Jefferies is a a buy now for several reasons. First, this has already been baked into the stock price. Further, it got additional backing from Japanese lender Sumitomo Mitsui Financial Group. Also, the M&A market looks to be as good, if not better, in 2026, with interest rates moving lower. Plus, last year's sell-off lowered its valuation.

Analysts are bullish on Jefferies, with a $77-per-share median price target, which suggests 26% upside.

Jefferies, along with Ally, are two Buffett financial stocks that investors should target in February.

Ally is an advertising partner of Motley Fool Money. Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Jefferies Financial Group. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.