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The 3 Best Warren Buffett Stocks to Buy Right Now

By Joe Tenebruso – May 3, 2020 at 6:00AM

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The legendary investor's top stocks could help you make a fortune in the stock market.

Warren Buffett is considered by many to be the best investor of all time. For more than five decades, Buffett has generated incredible returns for shareholders of Berkshire Hathaway (BRK.A 2.16%) (BRK.B 2.46%), the company he helped build into a $440 billion masterpiece of American capitalism and one of the most admired businesses in the world.

Berkshire owns a massive portfolio of publicly traded stocks, most of which were selected by Buffett himself. Berkshire's portfolio is closely watched by investors who wisely seek to tag along with the Oracle of Omaha's investment moves.

If you'd like to invest alongside this legendary investor, here are three of Berkshire Hathaway's stocks that look particularly appealing today.

Warren Buffett

These Warren Buffett-approved stocks can help you build lasting wealth. Image source: The Motley Fool.

Costco Wholesale

Buffett and his partner, Berkshire vice chairman Charlie Munger, have long been fans of Costco Wholesale (COST 1.63%). Berkshire bought stock in the warehouse chain back in 2000. The shares it held on to are now worth more than $1.3 billion. 

Costco has been a highly profitable investment for Berkshire -- and it's likely to continue to reward investors in the years ahead. The discount retailer has enjoyed strong sales during the COVID-19 pandemic. Many shoppers have turned to Costco to stock up on food, cleaning supplies, and other household essentials. They're likely to continue to do so for the remainder of the pandemic and thereafter.

Costco's membership model gives it a powerful advantage over other retailers. Once people pay a membership fee, they have an economic incentive to maximize their investment by conducting as much of their shopping at Costco as they can. Costco makes it easy to do so, by pricing its goods only slightly above cost, and choosing to make the majority of its profits from membership fees.

Low prices entice more people to become members, which leads to higher profits -- it's a powerful formula that has propelled Costco's growth for decades, and that should continue to fuel its expansion for many years to come.

Amazon.com

Berkshire has also built a sizable stake in e-commerce colossus Amazon.com (AMZN 4.86%). Berkshire's initial investment in Amazon was made by either Todd Combs or Ted Weschler, Buffett's hand-picked lieutenants, who oversee sizable portions of the mega-conglomerate's investment portfolio. Buffett has clearly signed off on holding Amazon since then, and he has lamented on several occasions his failure to invest in the market-crushing stock sooner. Nevertheless, Berkshire's stake in Amazon has grown to a value of more than $1.2 billion -- and plenty more gains lie ahead.

Amazon has three primary growth drivers -- all of which should help to fuel the company's impressive expansion well into the next decade. The first is its dominant e-commerce business, which is enjoying particularly impressive growth during the coronavirus crisis as more purchases shift online and away from traditional retail channels. The second is Amazon Web Services, the rapidly growing cloud computing platform. And the third is Amazon's booming digital advertising business, which is being driven by its swelling army of third-party merchants eager to get their wares in front of more online shoppers.

Together, these powerful growth drivers give Amazon -- and its investors -- many ways to profit in the years ahead.

Apple

Apple (AAPL 2.46%) is Berkshire's largest holding and a favorite of Buffett's. In fact, Buffett once referred to Apple as "probably the best business I know in the world." His affection for it has led Berkshire to amass an enormous $72 billion stake in the technology titan. 

Buffett appreciates Apple's strong consumer appeal and the loyalty its customers show to its devices, including, of course, the iPhone. He understands the value of Apple's growing services business, which generates a steadily expanding -- and increasingly, recurring -- stream of high margin revenue. Buffett also loves Apple's fortress-like balance sheet, awesome cash-generating abilities, and propensity to gobble up its own shares. 

If you agree with Buffett and likewise value these aspects of Apple's business, you might want to consider buying some of its stock today. Buffett will likely buy more shares of his favorite holding at some point, as he once said he'd "love to own 100%" of Apple. That might prove to be too large a bite to swallow, even for a behemoth like Berkshire. But buying now gives you a chance to claim your slice of Apple -- before Buffett scoops up even more shares.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Apple, and Berkshire Hathaway (B shares). The Motley Fool recommends Costco Wholesale and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), short June 2020 $205 calls on Berkshire Hathaway (B shares), short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$145.95 (2.46%) $3.50
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$121.51 (4.86%) $5.63
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$422,219.50 (2.16%) $8,919.50
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$279.51 (2.46%) $6.71
Costco Wholesale Corporation Stock Quote
Costco Wholesale Corporation
COST
$485.50 (1.63%) $7.77

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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