Warren Buffett isn’t one to part with valuable assets easily.
Billionaire investors often showcase their skills in selecting solid stocks, which has everyone’s attention on Buffett’s moves. He seeks out strong businesses that are priced reasonably and suitable for long-term holding. A prime example of this is Coca-Cola, a stock he acquired in the late 1980s and has retained since then.
As the chairman of Berkshire Hathaway, Buffett’s approach has proven effective, with nearly a 20% annual growth over the last 59 years. For context, the S&P 500 has only seen about a 10% annual increase over that same timeframe.
With that in view, let’s look at two stocks from Buffett that you might consider adding for the long haul…
1. Amazon
Buffett’s early involvement with Amazon had its hiccups, leading him to admit he missed out initially. However, in 2019, Buffett’s investment team chose to include Amazon in their Berkshire Hathaway portfolio, a decision they likely saw was wiser late than never.
Since that addition, Amazon’s stock has surged by over 100%, and there’s still potential for growth ahead. While we generally recognize Amazon’s dominance in e-commerce, it’s also a key player in cloud computing. Amazon Web Services (AWS) is among the top cloud service providers and serves as a significant profit engine for the company.
The future looks promising, especially with the rise of artificial intelligence (AI). Amazon is leveraging AI to enhance efficiencies and lower e-commerce costs while AWS offers AI products and services to clients. This has already led to impressive revenue, with AWS generating $123 billion annually. Over time, Amazon’s integration of AI into its operations is expected to streamline functions and bolster revenue growth.
Currently, Amazon’s share price seems quite fair, trading at 34 times its revenue estimates, a decrease from above 50 last year. This provides a solid opportunity for potential investors, as the company’s leadership in expanding e-commerce and cloud markets makes it a worthy long-term hold.
2. American Express
American Express is another long-term investment for Buffett, likely due to its robust competitive edge. The company targets high-income consumers globally and offers various benefits that keep user engagement and revenue on an upward trajectory. It’s tough for competitors to replicate American Express’s business model.
Over the years, the company has consistently displayed revenue growth, and notably, it has been gaining traction with younger demographics recently. In the last quarter, 63% of new global consumer accounts came from millennials and Gen-Z customers.
Furthermore, revenues surged by 9%, hitting a record $17.9 billion, with cardholder spending reaching new peaks. American Express saw a 17% rise in adjusted revenue per share, reflecting strong nationwide performance and revenue projections.
I find it particularly compelling that, even during economic downturns, credit card firms tend to perform well. Their cardholders are often wealthier and less affected by economic shifts, maintaining their spending habits.
American Express currently trades at around 21 times its forward revenue estimates, which is an improvement from below 15 last year. I consider this a reasonable entry point for those looking to invest long-term.
In his 2023 letter to shareholders, Buffett emphasized the value of companies like American Express and Coca-Cola, stating, “If you find a really great business, I’ll stick to it.”
