Who doesn't love Warren Buffett? One of the world's richest men wasn't born with a silver spoon in his mouth. He's just an investing genius who's been letting his fortune compound for decades. And he's humble about the whole experience to boot.
So it makes sense that when investors are looking for a place to put their money, many start by evaluating what the Oracle of Omaha has done with his own money. Three of our Motley Fool investors are here to tell you what their favorite "Warren Buffett" stock is right now.
Read on to find out why Markel (NYSE:MKL), Realty Income (NYSE:O), and Apple (NASDAQ:AAPL) are all worth your consideration. And know that in all three cases, our analysts have backed up their assertions by owning shares of the stock they're recommending.
Mimicking the best
Steve Symington (Markel): Markel Corporation is often referred to as a "mini-Berkshire" for its striking similarities to the business Warren Buffett built, but at less than a 30th of its size based on market capitalization. More specifically, Markel focuses on growing its book value per share as a diversified financial holding company consisting of its core specialty insurance segment, an investment portfolio led by world-class investor and co-CEO Tom Gayner, and a group of stable noninsurance, noninvesting businesses operating under the Markel Ventures moniker.
That diversification has come in handy this year, as Markel accounted for record catastrophe-related insurance policy payments of more than $500 million in the third quarter. But in true Buffett-esque fashion, Gayner reminded investors that this why they manage Markel in "such a conservative and prudent way," as it's "designed ... to be a resilent and durable company that our customers, shareholders, and associates can depend upon." Gayner also noted that the year-to-date pre-tax returns generated by Ventures and its investment portfolio have more than made up for those temporary pre-tax insurance losses.
To be sure, Markel's book value per share at the end of last quarter was $641.20, up 5.2% from the same year-ago period and 5.8% from the end of 2016. And even with shares setting a fresh all-time high in the wake of its earnings announcement a few days ago, Markel stock still trades at a reasonable 1.7 times book value right now.
This industry is a recent addition to Berkshire's portfolio
Matt Frankel (Realty Income): Berkshire Hathaway recently scooped up a roughly 10% stake in net-lease REIT Store Capital, which pays a 5% yield and specializes in entertainment and retail properties. Store Capital has received quite a "Buffett rally" since the news of the investment was announced, but many others in the space haven't, including Realty Income, the largest net-lease REIT in the market and one of my favorite stocks.
If you're not familiar with the concept of a "net" or "triple-net" lease, it's a type of leasing arrangement whereby the tenants are responsible for property taxes, insurance, and building maintenance -- essentially the variable costs of owning property. Plus, net-lease tenants tend to sign long-term leases (10-plus years) with annual rent increases, or escalators, built right in.
In short, net-lease REITs don't have to worry about unpredictable costs or negotiating rent increases every year, and have minimal turnover and vacancy risk.
Realty Income has over 5,000 properties, most of which are occupied by recession-resistant or e-commerce-resistant businesses. To name a couple of Realty Income's major tenant categories, drugstores sell things people need no matter what the economy is doing. Theaters and other entertainment businesses are naturally immune to online competition.
From an income perspective, it's hard to find a better stock. Realty Income pays a 4.5% dividend yield in monthly installments and has increased its payment 93 times since its 1994 NYSE listing.
It isn't classic Buffett, but that doesn't matter
Brian Stoffel (Apple): There's been no shortage of opinion about whether Apple is truly a "Warren Buffett" stock. A case could easily be made in both directions. But regardless of whether Buffett is the man behind Berkshire Hathaway's decision to own 130 million shares of the iPhone maker, Apple is a compelling buy today.
First and foremost, the company has undeniable brand power. That's an important differentiator in a niche -- consumer electronics -- where brand power can be the only real moat. According to Forbes, Apple's brand is the most valuable in the world -- coming in at $170 billion, nearly 70% higher than the next highest company.
That type of brand power leads to a very healthy balance sheet. Over the past year, the company has spit out over $50 billion in free cash flow. That has helped pad the company's cash and investments to over $260 billion against "just" $90 billion in long-term debt.
Considering that the iPhone X will be at the top of many holiday buying lists, and the company is trading for 17 times trailing free cash flow, now is as good a time as any to start a position in this Warren Buffett holding.
Brian Stoffel owns shares of Apple. Matthew Frankel owns shares of Apple and Realty Income. Steve Symington owns shares of Markel. The Motley Fool owns shares of and recommends Apple and Markel. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.