These Three Warren Buffett Stocks Are Still Excellent Investment Options Today
Under Warren Buffett’s guidance, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) has grown into one of the world’s largest corporations, primarily due to well-timed acquisitions and strategic investments he orchestrated. Berkshire’s investment portfolio is valued at over $300 billion, with over half coming from unrealized capital gains.
Amazon
Berkshire first acquired a stake in Amazon (NASDAQ: AMZN) in 2019, but Buffett has repeatedly lamented not purchasing the stock earlier. Many investors likely share this sentiment, but Amazon remains a valuable investment opportunity today.
Digital advertising, cloud computing, and e-commerce – three markets set to grow rapidly in the next decade – are three areas where the company holds a strong competitive position.
In e-commerce, Amazon is the preferred shopping platform for numerous consumers. 38% of North American and Western European digital retail sales were driven by its online marketplace last year, and its extensive logistics network has given it an edge over its competitors. Amazon streamlines e-commerce for sellers with fulfillment services and digital advertising solutions while enhancing the shopping experience for buyers through quick and dependable shipping. These offerings make its marketplace even more attractive.
Amazon Web Services (AWS) is the leading provider of cloud infrastructure and platform services (CIPS) in the cloud computing industry. For the 12th consecutive year, Gartner recognized Amazon Web Services as the leader in CIPS spending, with 32% of the total in the fourth quarter. The report highlights that AWS offers a more extensive and comprehensive range of cloud services than any other vendor. This advantage indicates an exceptional capacity for innovation, which should keep AWS ahead of competitors for years.
Finally, Amazon is the world’s fourth-largest ad tech company, continuing to gain ground on market leaders last year. As a result of growing market share, Amazon increased its ad revenue by 19% in Q4 compared with Alphabet and Meta Platforms’ declines. This success is attributable to its popular marketplace, which engages consumers and produces valuable shopper data that brands can leverage for targeted ad campaigns.
Industry analysts predict the e-commerce, cloud computing, and ad tech markets will grow approximately 14% annually through 2030. Given its robust balance sheet, brand credibility, and strong presence in all three markets, investors can reasonably expect Amazon to surpass this industry average. This expectation makes its current price-to-sales ratio of 2.1 appear inexpensive, presenting a buying opportunity for long-term investors.
Mastercard and Visa
Berkshire initially invested in American Express in the early 1990s, and by 1995, it owned around 10% of the company. However, Berkshire did not begin acquiring Mastercard (NYSE: MA) and Visa (NYSE: V) until 2011. Buffett has since admitted that he should have invested in both companies earlier.
The bullish cases for Mastercard and Visa are nearly identical: They operate two of the world’s largest payment networks, with acceptance at about 100 million merchant locations, as reported by the Nilson Report newsletter, which analyzes the payments industry. This scale highlights the trust both brands have established, creating a powerful network effect. Merchants feel compelled to accept Mastercard and Visa due to their popularity among consumers.
Scale and brand authority also deter new competitors. Merchants, consumers, and financial institutions know MasterCard and Visa’s payment processing infrastructure.
A card payment start-up would need to dedicate significant time and resources to build similar assets, and even if a potential competitor was willing to undertake that challenge, Mastercard and Visa could likely force the company into bankruptcy by offering lower prices.
Looking ahead, Grand View Research projects digital payment revenue will grow at 21% annually, reaching $361 billion by 2030, driven by increased adoption of e-commerce and mobile wallets.
Mastercard and Visa are well-positioned to capitalize on these trends. Both companies serve as toll booths on the highways of the global economy, collecting fees on each payment that passes through their networks, regardless of whether credit cards, debit cards, or mobile wallets fund the transactions.
Mastercard shares trade 36.7 times earnings, a discount to the five-year average of 42.4. Similarly, Visa shares trade at 32.7 times earnings, a discount from 35.7 over the past five years. The valuations appear reasonable, given the solid competitive positions that Visa and Mastercard hold in a rapidly growing market. Investors should consider adding a few shares of both growth stocks today.
Amazon, Mastercard, and Visa have demonstrated consistent growth and the potential to dominate their respective markets. Their competitive solid positions, innovative capacity, and expanding markets make them appealing investment options for investors looking for long-term growth.
Even though Warren Buffett regrets not investing in these stocks earlier, there is still time for investors to capitalize on these opportunities. By investing in these growth stocks now, investors can benefit from their continued market expansion and financial solid performance in the future.
