Since 1965, Berkshire Hathaway has rewarded its long-term shareholders with a phenomenal 20% annualized rate of return. That level of performance far exceeds the average gain of the S&P 500. It has also made Warren Buffett an investing legend.
While every investor's portfolio should be designed to meet their individual needs, it can sometimes be useful to take a closer look at what successful investors have done to help in the decision-making process. The average investor can find potential ideas by looking at the conglomerate's massive $271 billion portfolio, which has dozens of individual positions in it.
With that being said, here are two no-brainer Warren Buffett stocks to buy right now.
1. Amazon
Investors are certainly familiar with Amazon(NASDAQ: AMZN) as the leader in the e-commerce sector. The company went from selling just books to now selling virtually anything under the sun. It's worth noting that nearly 40% of all e-commerce-related money spent in the U.S. goes through Amazon.com.
However, the business benefits from other secular trends. With Amazon Web Services (AWS), the company has the world's leading cloud computing platform, which has been both a growth and profit driver. Management is finding tremendous demand from AWS customers for the various artificial intelligence (AI) tools it offers.
Digital advertising is another important segment. Revenue increased 18% year over year in Q4 to $17.3 billion. That was a much faster growth rate than the overall business. Only Alphabet and Meta Platforms have a greater market share in the digital advertising industry right now.
Amazon has generally maintained a strong sales growth rate over the years. What's different in recent years is that the company's bottom line has improved drastically. This is further fueling investor bullishness.
Thanks to ongoing cost-cutting and efficiency efforts, the business posted an 86% increase in operating income in 2024. Over the next three years, Wall Street consensus analyst estimates see operating income rising at a compound annual rate of 21%. That's a robust outlook.
Share prices are up 131% in the past five years. However, the market sell-off has resulted in the stock trading 20% off its peak from February. This means that investors can scoop up shares at a forward price-to-earnings (P/E) ratio of 30.6, which looks like a compelling entry point.
2. American Express
Berkshire owns almost 22% of American Express(NYSE: AXP), making it a top position that's certainly more important to Berkshire than the Amazon holding. The credit card giant is another Buffett stock that investors should consider buying today.
The business offers premium credit cards that carry high fees and have impressive perks, which naturally target a more affluent customer base. This makes the American Express brand a key competitive advantage.
What's more, because the company operates its own payments platform, it also benefits from a network effect. The more active cards Amex has, the more valuable it is for merchants looking to generate sales. As the number of acceptance locations grows, cardholders have more places to shop. It's a positive feedback loop.
Thanks to the rise of cashless transactions, American Express has been able to post steady payment volume and revenue gains over the years. Sales were up 9% in 2024, with management expecting a similar jump this year. It's also a good sign that the business is bringing on more Gen Z and millennial customers, a group that could be lifelong Amex cardholders.
Including its dividend, American Express has produced a fantastic total return of 186% in the past five years. That gain crushes the overall S&P 500 (120%). Nonetheless, the stock trades 18% off its all-time high from January.
As of this writing, shares can be purchased at a forward P/E ratio of 16.7. This presents investors with a solid opportunity to buy a top Buffett stock.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. American Express is an advertising partner of Motley Fool Money. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Berkshire Hathaway, and Meta Platforms. The Motley Fool has a disclosure policy.
