While no investor is perfect, Berkshire Hathaway (BRK.A 0.21%) (BRK.B 0.26%) CEO Warren Buffett has a better track record than most people. You see, over the past 65 years, Buffett has built up his net worth from around $10,000 to a present-day value of $89.4 billion. He's also managed to outpace the market (in terms of book value creation for Berkshire Hathaway) far more years than not, and has created more than $400 billion in value for shareholders over the years.
In short, when Buffett buys a stock, Wall Street and investors tend to pay very close attention.
Right now, Berkshire Hathaway's portfolio consists of 48 securities of various weightings totaling $244 billion in value. But there are three Buffett stocks, in particular, that I believe offer the best chance of yielding positive returns for investors in 2020. If you wish to ride Buffett's (and Berkshire's) coattails in 2020, the following three stocks should make you richer.
First up is payment processing giant Visa (V 0.72%), which has gone nearly a decade since its stock had a down year. There are three specifics about Visa that make it a likely company to thrive in 2020, and beyond.
For one, it's the clear market share leader in the U.S. when it comes to traditional payment processing platforms. In 2018, Visa was responsible for a whopping 53.1% of network purchase volume in the U.S., equating to almost $2 trillion. That's up from 42.5% of network purchase volume market share 10 years ago, and is more than double its next-closest present-day competitor, Mastercard, which stood at 22% market share in 2018.
Another aspect about Visa investors need to understand is that it's not a lender. Unlike some of its peers, such as American Express and Discover Financial Services, it solely focuses on the payment process of a transaction. While this means Visa is unable to double dip when the economy is firing on all cylinders by also collecting interest on the money it lends, this absolves Visa from being hit by delinquencies when interest rates rise or when the U.S. or global economy weakens.
Lastly, Visa is a geographic powerhouse with a long-tail opportunity to deliver high-single-digit or low-double-digit growth. The company significantly broadened its horizons with the 2016 purchase of Visa Europe, and will be laying the groundwork in the years and decades to come to monetize currently underbanked regions of the world, including the Middle East, southeastern Asia, and Africa. There's virtually nothing that seems to slow Visa down, which is why it looks poised to make investors richer in 2020.
Next, we have satellite-radio operator Sirius XM (SIRI -2.10%), which is a relatively small position for Berkshire at $965 million in value. But don't let the dollar amount fool you, Sirius XM could be poised for an incredible year.
The thing to understand about Sirius XM is that it completed the $3.5 billion acquisition of Pandora in February, and as a result has been contending with substantially higher costs and one-time expenses throughout 2019. Through the first nine months of the year, Sirius XM's income from operations is actually down $20 million from the prior-year period, with acquisition-related expenses, general and administrative costs, marketing costs, and revenue share/royalties all significantly higher than at the same time in 2018. In short, it's made for some disappointing quarterly reports in 2019.
On the flipside, cost-saving synergies between these two companies, as well as having a broader base of subscribers, should allow Sirius XM to absolutely throttle its year-over-year comparisons in 2020. Remember, Sirius XM is still the only game in town when it comes to satellite radio, which affords the company incredible pricing power and ensures that its transmission costs remain low.
What's more, even with the addition of Pandora, which has a business model that's primarily built around collecting advertising revenue, Sirius XM is far less levered to advertising than online or terrestrial radio operators. In the third quarter, 18% of the company's sales were derived from ads, compared to 77% from subscriptions. This is an important point, because subscribers are less likely than advertisers to scale back their spending when the next recession strikes. It effectively puts Sirius XM in far better shape than its peers to survive anything the economy may throw its way.
It's for all these reason that Sirius XM looks ready to make investors richer in 2020.
Teva Pharmaceutical Industries
Lastly, despite a truly awful year for branded and generic-drug developer Teva Pharmaceutical Industries (TEVA -0.31%), 2020 looks a whole lot more promising.
As a refresher for those of you who may not be following Teva all that closely, the company has contended with generic-drug pricing weakness this year, as well as lawsuits from 44 states over its role in the opioid crisis. Tack on the company's monstrous debt load and a host of other issues that have plagued it since the summer of 2017, and you have a recipe for year-to-date losses of nearly 40%.
However, turnaround specialist CEO Kare Schultz has been adamant that 2019 would be Teva's trough year. In that trough year, the company looks to have worked out a deal to settle a substantive portion of its opioid liability without outlaying a lot of precious cash, and has continued to reduce expenditures with the goal of saving $3 billion in annual expenses (about a 16% total cost reduction, compared to 2017's operating expenses). In other words, were going to see these savings really translate into improved margins in 2020, and a number of restructuring charges and one-time costs should be moved off the books.
Furthermore, generic-drug pricing weakness should begin to ease throughout the year, all while Teva's newer branded therapies, Ajovy and Austedo, continue to see sales climb. The upcoming year should also bring a steadying to sales of Copaxone, Teva's blockbuster multiple sclerosis treatment that was exposed to generic competition. The table is set for Teva to begin rebounding from a perfect storm of bad news, and it should make patient investors richer in 2020.