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Berkshire Hathaway has significant stakes in companies like Apple and American Express.
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Amazon Web Services is experiencing rapid growth.
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Kroger and Chevron may not be the most exciting choices, yet they provide robust options for a long-term investment portfolio.
It’s hard to believe we’re nearing the last quarter with the legendary Warren Buffett at the helm of Berkshire Hathaway. He transformed what began as a textile company into a massive conglomerate spanning real estate, insurance, railroads, and energy.
Throughout his six-decade career, Buffett cultivated an impressive investment portfolio for Berkshire Hathaway, which now includes numerous companies valued collectively at over $300 billion. His buy-and-hold approach has yielded a remarkable annual return of 19.9%, which starkly contrasts with the S&P 500’s 10.4%.
At 95, Buffett plans to retire at the end of the year, but the principles he taught will remain relevant: look for companies that have strong leadership, dominant market positions, dependable earnings, and an established track record.
As you think about what to include in your investment portfolio after Buffett, consider these five stocks as solid foundations.
Berkshire Hathaway holds a 22% stake in American Express. This contrasts sharply with its competitors, Visa and MasterCard, each only having around 0.4%. So, what’s the appeal of American Express for Buffett?
First, the company focuses on a wealthier clientele, offering business and premium personal credit accounts. Its benefits—particularly in travel and entertainment—are hard to match. This allows American Express to charge an annual fee of $895 for the Platinum Card, and remarkably, people are willing to pay it.
Additionally, American Express provides personal loans, a service that neither Visa nor MasterCard offers. The company reported $5.97 billion in interest income from loans in the third quarter, adding a significant revenue stream.
Buffett was somewhat slow to invest in Amazon, but he’s certainly pleased with the outcome. Buffett typically gravitates toward companies that are leaders in their respective fields. Amazon fits this criterion with its vast e-commerce and cloud computing operations.
Amazon generates $147.16 billion in revenue from sales in North America and abroad, but its profit margins there are relatively thin, resting at just 4%. In contrast, Amazon Web Services (AWS) recorded third-quarter revenues of $33 billion, boasting a profit margin of 34.6%, showing consistent growth.
Barclays analyst Ross Sandler has recently praised AWS’s potential, mentioning, “Despite some delays, AWS has built considerable AI capabilities that should fuel accelerated growth moving forward.”
Apple remains Berkshire Hathaway’s largest investment. Even though Buffet’s team has slightly reduced their holdings, Apple still comprises 24.1% of Berkshire’s overall portfolio, equivalent to 280 million shares valued at $75.5 billion.
The iPhone continues to be Apple’s flagship product, driving $49 billion of the company’s $102.4 billion in revenue for the fourth quarter. Yet, it’s easy to overlook the lucrative services sector—like the App Store, Apple Music, and Apple TV—which has seen a year-over-year revenue increase of 15.1%, totaling $28.7 billion.
While Apple’s revenue has been fairly flat recently, there was an upturn in the second half of the year, pushing annual revenue above $400 billion for the first time.
Kroger might not shine as brightly as others on this list, but it embodies a typical defensive investment. Regardless of economic highs and lows, people will always need food, which is why Berkshire holds 50 million shares in Kroger.
Kroger operates over 2,700 stores and owns brands like Fred Meyer and Harris Teeter. They also have more than 40 facilities for food production and manufacturing, focusing on low-cost, private-label products, which can offer better profit margins.
The grocery brand strategy positions Kroger well, especially as consumers look for ways to maximize their budget.
Buffett is also a fan of energy stocks. Berkshire has a sizable investment in Chevron, owning 6% of the multinational energy company through 122 million shares.
Following a slump earlier this year, Chevron has been making a recovery. The stock has risen 7% this year, despite declining oil prices and some global unrest.
Though Chevron reported a dip in earnings this quarter, it reached remarkable production milestones. U.S. production increased by 27% year-over-year, while global production climbed by 21%. Even so, the revenue for the third quarter was $3.53 billion, down from $4.48 billion last year.
This year hasn’t been ideal for Chevron stocks, but it presents a long-term hold. Plus, its 4.5% dividend yield can be quite attractive for investors.
Before settling on investments in Amazon, it’s wise to give some thought to the following:
Our analyst team at Motley Fool Stock Advisor has pinpointed ten stocks they consider appealing for investors right now—and none of them include Amazon. These stocks might have excellent potential for good returns in the upcoming years.
It’s worth noting that if you had invested $1,000 in Netflix back in 2004, it would now be valued at $595,194. Similarly, a $1,000 investment in Nvidia since 2005 would be over $1.15 million today.
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