History Says the Nasdaq Could Soar: 3 Warren Buffett Stocks to Buy Now
The major stock indexes continued to new highs this year, led by the growth-centric Nasdaq Composite, which is up 22.5% over the last 12 months. While Wall Street continues to worry about the health of the consumer amid rising interest rates, history suggests that now is still a great time to be investing in stocks.
Over the last 92 years, there have been an equal number of bull and bear markets. But the average bull market has lasted almost five years on average, according to Stifel, compared to 1.5 years for the average bear market. This means investors could be looking at another three years of positive returns before the next major hiccup in the stock market.
Who better to look to for relatively safe stocks that can grow your savings than billionaire Warren Buffett? From 1965 through 2023, his investing skills delivered a massive 4,384,748% return for Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) shareholders.
Let's look at three Buffett-approved stocks that are surefire bets in the current bull market.
1. Berkshire Hathaway
The first stock to buy is none other than Buffett's largest personal investment -- Berkshire Hathaway. At the end of 2023, Buffett held 38% of Berkshire's class A shares -- an investment that would be worth $143 billion at recent share prices, ranking him No. 6 on the Forbes list of billionaires.
Buffett made his first millions managing money for his partners through Buffett Partnership in the 1960s. One of his big bets during those years was a struggling textile mill in Massachusetts that was trading at a bargain price. Buffett acquired a controlling interest in the stock, and over the ensuing decades as CEO, remade it into an investment vehicle to scoop up quality businesses (and stocks) at fair prices.
Today, Berkshire owns dozens of businesses in consumer goods, utilities, energy, and insurance. These businesses generated an operating profit of $37 billion in 2023, up from $31 billion in 2022.
Now is a good time to buy the stock, since Berkshire's businesses generally do well in a bull market, which usually coincides with a growing economy.
Most importantly, Berkshire has spent billions repurchasing its own shares through the first quarter, which means Buffett sees value in the stock.
2. American Express
Shares of American Express (NYSE: AXP) have surged to new highs this year. The stock is up 50% over the last year, supported by strong card member spending and revenue growth. The ability of this 174-year-old company to keep finding ways to grow speaks volumes about why Berkshire Hathaway has held a stake in it for more than 30 years.
A top credit card company like Amex is obviously dependent on growth in consumer spending. This benefits American Express when the economy is growing, but the stock can fall when there's a recession and lower growth in card member spending. But that's why now is a good time to consider starting a position.
In the second quarter, revenue increased by 9% year over year (excluding currency changes), with adjusted earnings per share up 21%. The company saw balanced growth in U.S. consumer billings across goods and services as well as in travel and entertainment. Importantly, most of this growth was driven by Millennials and Gen Z, which reflects how effective the company has been in marketing its brand and membership perks to a new generation of customers.
This is a solid business that can keep growing for many years, since American Express card members spend more, on average, than users of other credit card brands. This incentivizes merchants to pay Amex fees for the privilege of accepting its cards at checkout. Wall Street analysts expect earnings to grow 15% annually in the coming years, which could potentially double the share price within five years.
3. Amazon
Berkshire Hathaway has held a stake in Amazon (NASDAQ: AMZN) since 2019. It was likely bought by one of Buffett's investing deputies, but Amazon displays all the characteristics that Buffett himself would look for in an investment.
Amazon probably has the strongest retail brand in North America. It surpassed Walmart in U.S. apparel sales in 2021, but Amazon is increasingly focusing on expanding its brand presence in international markets.
Amazon's Prime Day has become a major annual shopping event in the U.S., and the company is applying the same strategy to win customers in Europe and the Middle East. In the first quarter, Amazon finally showed an international operating profit of $903 million, reversing a string of losses. Amazon's increasingly profitable business could send the stock to new highs.
Amazon's long-term bet on international markets is finally starting to pay off, which signals plenty of growth ahead in a multitrillion-dollar global e-commerce market.
Of course, Amazon also has growing revenue streams from cloud services and advertising that are padding the company's bottom line. Wall Street analysts expect earnings to grow at an annualized rate of 23% over the next several years, which should lead to outstanding returns.
Should you invest $1,000 in Berkshire Hathaway right now?
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American Express is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, and Walmart. The Motley Fool has a disclosure policy.
History Says the Nasdaq Could Soar: 3 Warren Buffett Stocks to Buy Now was originally published by The Motley Fool