American Express tends to serve a demographic that isn't greatly impacted by economic headwinds.
Occidental Petroleum is a powerhouse name within the oil and natural gas business that's far from fading.
Domino's Pizza doesn't seem like a very Buffett-esque pick until you dig deeper into the company's leadership in a growing, resilient market.
Got an extra $1,000 you're ready to put to work but don't know what to invest it in? It doesn't have to be difficult. Just borrow an idea or two from legendary stock picker Warren Buffett. Or more specifically, from Buffett's Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) portfolio. After all, given enough time, it regularly outperforms the S&P 500.
Here's a closer look at three Berkshire holdings that would be at home in most investors' portfolios.
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1. American Express
It's arguably one of Berkshire Hathaway's least talked-about trades. Don't be misled, though. There's a reason credit card powerhouse American Express(NYSE: AXP) has been a Berkshire holding since 2006, sticking around while plenty of other stocks have come and gone to become the organization's second-biggest position, right behind its stake in Apple. All told, Berkshire is sitting on 151.6 million Amex shares collectively worth $40 billion. That's nearly 15% of Berkshire's portfolio, and more than 20% of American Express itself.
Buffett's affinity for this particular company isn't too tough to figure out. While it's anything but a high-growth stock, it is a consistent performer.
Credit its customer base, mostly. Although there's no official or confirmed demographic data, American Express cards tend to appeal to a more affluent crowd that can afford to continue spending even when money gets a little tight for the average consumer. And as CFO Christophe Le Caillec mentioned regarding last quarter's result in an interview with CNBC: "Restaurant spend is up 8%. This is the ultimate discretionary expense, it's not something you can bring forward, and so it's really a good indicator of the strength of our cardmember base and the confidence they have."
There's also the not-so-small upside of American Express' superior perks and rewards programs, which actually help heavy users of its cards ultimately save money.
The stock's dividend isn't too shabby either. While you can find better forward-looking yields than Amex's 1.2% as well as more reliable yearly payment increases (although American Express continues to make dividend payments in times of economic turmoil, it did temporarily halt payout increases in the midst of the subprime mortgage crisis and the COVID-19 pandemic), it's unlikely you'd find stronger dividend growth. This year's dividend increase (announced in March), for perspective, was a hefty 17% year-over-year improvement.
Shares are still down nearly 20% from February's peak, dragged lower with most other stocks since then over concerns about tariffs. But that's an opportunity for you. Just don't tarry. The market seems to be figuring out that American Express' business is actually rather resilient.
2. Occidental Petroleum
It would be easy to justify not taking on a stake in energy outfit Occidental Petroleum(NYSE: OXY). Not only is President Donald Trump doing everything he can to lower the price of gasoline by opening up America's oil and gas production spigots (thus lowering the industry's profits), but fossil fuels are considered a lost cause by some anyway. Cleaner, renewable energy is the future.
Except, the dynamics at work here aren't as simple as this.
First and foremost, yes, alternative energy will eventually replace fossil fuels. We're nowhere near that end though. Goldman Sachs predicts the world's daily consumption of oil will actually continue to grow through 2034, and even after peaking, will only gradually taper off. OPEC's outlook for the wind-down of oil is even less optimistic. It doesn't expect crude's daily global consumption to hit its all-time high until 2045, and again, it will only slowly shrink for many, many years beyond that. And for what it's worth, even though crude oil's consumption is projected to peak within the next 10 to 20 years, demand for (relatively cleaner) natural gas is expected to keep growing well beyond that.
As for Trump's pro-drilling effort, just keep things in perspective. It's easier said than done, and even to the extent it can be done anytime soon, Occidental Petroleum's heavy exposure to Permian Basin properties makes it one of the sector's lowest-cost players. While the company doesn't report a confirmed figure, estimates put its "all in" production costs in the ballpark of $40 per barrel. That means this company is capable of maintaining healthy profits in almost any plausible oil pricing environment.
Let's also not forget that oil and gas production is only part of this company's business. Occidental is making incredible strides on the carbon capture front as well, by (literally) sucking CO2 out of the ambient air. It's currently a fledgling business, but Precedence Research believes the carbon capture and storage market could grow from around $9 billion per year now to more than $50 billion annually by 2034.
Berkshire Hathaway owns nearly 265 million shares of Oxy, by the way, or more than $10 billion worth of the oil and gas stock to make it Berkshire's seventh-biggest position.
3. Domino's Pizza
Last but not least, consider adding one of Buffett's most recent picks to your portfolio as well. That's Domino's Pizza(NASDAQ: DPZ).
It's admittedly a bit off the beaten path. It does make sense, though. The pizza powerhouse brings everything Buffett likes to the table, including an easy-to-understand business model, market leadership, and a proven history that likely points to future success.
Mostly, though, it brings resilient profitability.
Think about it. There's no such thing as a perfect restaurant business to be in. To the extent the perfect business does exist within this industry though, pizza is arguably it. Not only is it always affordable for consumers to buy, it's consistently affordable for restaurateurs to make. Pizza also requires little operational overhead, since most people just want delivery or pick-up, and a pizza can be made in a matter of minutes. That means Domino's can make a lot of pizzas in a minimal amount of space in a minimal amount of time with a minimal amount of staffing.
But why Domino's, as opposed to another pizza chain (or, for that matter, a comparable fast-food chain outside of the pizza slice of the market)? The aforementioned market leadership likely has a lot to do with the decision.
Not that being the biggest single player in the business is everything, but Domino's profitable leadership of the worldwide pizza business with its 21,358 stores confirms it's at least doing most things right. It's likely to continue outpacing the pizza industry's expected growth, too, which market research outfit Technavio believes will average just under 7% per year through 2029, led by the U.S. market that Domino's already dominates.
Domino's stock hasn't exactly been a star performer since Berkshire Hathaway scooped up nearly 1.3 million shares of the pizza chain back in the third quarter of last year and nearly doubled the size of the trade in the meantime. Buffett's also said next to nothing about this holding, where he'd usually at least offer some explanation of what he sees.
Don't sweat either one though. The fact that ultra-patient Buffett owns even a small piece of this company at all speaks volumes about its long-term potential.
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American Express is an advertising partner of Motley Fool Money. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, Domino's Pizza, and Goldman Sachs Group. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
