Warren Buffett likes 44 stocks plus two exchange-traded funds (ETFs) enough for them to be included in Berkshire Hathaway's (NYSE:BRK.A) (NYSE:BRK.B) portfolio. Of course, Buffett likes Berkshire itself most of all. Based on position sizes and his past comments, I'd say that Apple was his second favorite.
Of these 45 stocks, including Berkshire, I like five enough to own them in my investment portfolio. Picking my favorite from this group wasn't easy. But if I could buy only one Warren Buffett stock right now, this would be it.
Leading the charge
My favorite Buffett stock right now is... Mastercard (NYSE:MA). The payment processing giant narrowly beat out other stocks that the legendary investor likes.
Like Buffett, I'm still a big fan of Apple. My view is that the company should enjoy a nice sales bump as it rolls out 5G-enabled iPhones and as its services business continues to grow.
I also really like Amazon.com. The company is crushing it with its AWS cloud business. The COVID-19 pandemic has boosted Amazon's e-commerce sales. I think that Amazon has tremendous opportunities in new markets as well, particularly in the healthcare sector.
Bank of America is another longtime Buffett favorite that remains a leader in the financial services arena. The stock is also really attractively valued right now, in my opinion.
Speaking of attractive valuations, I'd put Berkshire itself on the list. With the company's massive cash stockpile thrown into the mix, I couldn't resist scooping up shares of the conglomerate last month.
But as much as I like all of these Buffett stocks, I think that Mastercard is leading the charge (pun fully intended) for two primary reasons.
Winning the war
First, Mastercard is a major winner in the "war on cash." Cash, along with other physical payment methods like checks, is going the way of the dodo and the eight-track tape. Consumers are increasingly shifting to electronic forms of payment, including debit cards, credit cards, digital wallets, and (to a lesser extent) cryptocurrencies.
The biggest factor driving this war on cash is the rise of e-commerce. Since people can rarely if ever buy online using cash or check, they have to use an electronic form of payment. In many cases, that form of payment is a Mastercard debit or credit card.
However, many people also prefer to use digital payments. Mastercard has an option on that front with its Masterpass digital wallet. Even when individuals use other popular electronic payment methods like PayPal, they often have their accounts tied to their Mastercard credit card.
Of course, Visa is one of the credit cards supported by PayPal. It's larger than Mastercard and is also owned by Berkshire Hathaway. So why do I like Mastercard better than Visa?
Basically, I think that Mastercard is outhustling Visa. This is evidenced by Mastercard's higher revenue growth rate over the last five and 10 years. Because Mastercard's payment volume is significantly smaller than Visa's, my take is that it will be easier for the company to continue delivering stronger growth than Visa will be able to deliver.
The price is right
The second reason why I especially like Mastercard right now is its price. The fintech stock is still nearly 15% off its highs from earlier this year after plunging more than 40% at one point.
It's understandable why Mastercard's share price fell. The stay-at-home orders and business shutdowns due to the COVID-19 pandemic are taking a toll on the company's revenue and profits. However, this should only present a temporary challenge for Mastercard.
I think that Mastercard's business will pick up with most states allowing businesses to reopen. If and when a vaccine becomes available for the novel coronavirus (which some project will happen early next year), it should clear the way for Mastercard to again fire on all cylinders.
You might argue that Mastercard's valuation is steep even with the stock's year-to-date decline. After all, its shares trade at nearly 44 times expected earnings. I think, though, with the company's long-term growth prospects as cash goes by the wayside, the price is right to buy Mastercard.