Warren Buffett’s investment approach has proven to be extremely successful over time. Berkshire Hathaway‘s (NYSE: BRK.A) (NYSE: BRK.B) The stock has consistently outperformed most major market indexes since Buffett took control in 1965. His strategy involves focusing investments in companies with strong business models and very long-term growth trajectories.
Three of Buffett Largest holdings These companies are characterized by their stability and growth potential in the current market. apple (NASDAQ:AAPL), American bank (NYSE: BAC)And American Express (NYSE: AXP) — It represents a significant portion of Berkshire Hathaway’s stock portfolio and is well positioned to deliver above-average returns to shareholders. Read on to learn more.
Apple: The Tech Giant with the Wide Moat
Apple represents 43.5% of Berkshire’s stock portfolio, underscoring Buffett’s confidence in the tech giant. While the stock’s dividend yield is modest at 0.43%, its price-to-earnings ratio of 34.8 reflects high market expectations.
Analysts are bullish on Apple’s future, especially with the expected launch of Apple Intelligence. This development is expected to significantly boost earnings and revenues. The forecast calls for a 15.6% increase in revenue growth through 2024 and 2025, an impressive forecast for a mature company with a market cap of $3.44 trillion.
Apple’s strength lies not only in its hardware, but also in its software and services segment, which generated $85.2 billion in revenue in fiscal 2023, accounting for 22% of total revenue.
The company’s ecosystem, which includes cloud services, digital advertising, Apple Pay, Apple Card, Apple Music, Apple TV+, and the App Store, creates a powerful platform for customer retention and profitability.
In early May 2024, Apple made headlines by agreeing to a $110 billion share buyback, the largest in U.S. history. While this is a budget, not a guarantee, Apple’s track record of large buybacks—over $20 billion in three of the past four quarters and $81.82 billion over the past year—suggests strong potential for shareholder value creation.
Bank of America: Top-tier Bank
Bank of America stock makes up 10.5% of Berkshire’s stock portfolio. The financial services company pays a generous 2.25% annual dividend and the stock trades at 15 times trailing earnings, well below the company’s average annual return. Standard & Poor’s 500The price-to-earnings ratio is 27.5%. Wall Street expects revenue growth of more than 16% through 2024 and 2025.
Bank of America appears poised for national success, and there appears to be no structural reason why it can’t become a strong franchise bank in the future. Bank of America is seeing exceptional digital adoption, and there appears to be enough cash to save expenses, which could help the bank better absorb inflation-related costs.
American Express: One of Buffett’s Most Important Holdings
American Express makes up 9% of Berkshire’s stock portfolio. The company trades at 18 times past earnings, and analysts expect revenue to grow 17% over the next two fiscal years.
American Express’s main advantage is its closed network, which allows it to collect more revenue per transaction than many competitors. This unique model allows the company to act as both a card issuer and a payment processor, which can lead to higher profit margins.
The company has shown strong performance in net interest income and loan growth. Higher cardmember spending and successful expansion among younger consumers have also driven recent revenue increases.
American Express continues to adapt to the shift toward digital payments, investing in its mobile app and online services. The company’s focus on wealthy consumers and businesses provides some cushion against the economic downturn.
American Express faces competition from traditional banks and fintech startups. However, its strong brand recognition, customer loyalty programs, and unique business model continue to set it apart. The company maintains its relevance in Buffett’s portfolio through continued innovation and expansion of services, blending established success with growth potential.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. George Pudwell Holds positions at Apple. The Motley Fool holds positions at and recommends Apple, Bank of America, and Berkshire Hathaway. The Motley Fool owns Disclosure Policy.
3 Warren Buffett Stocks You Should Buy Now Originally posted by The Motley Fool
