Berkshire Hathaway (BRK.A -0.34%) (BRK.B -0.01%) CEO Warren Buffett may be taking some heat for underperforming the benchmark S&P 500 over the last decade, but there are few, if any, investors who can match his performance over the past 55 years. Through the end of 2019, Berkshire Hathaway's per-share market value had increased by 2,744,062%, which compares pretty darn favorably to the S&P 500's return of 19,784%, inclusive of dividends, over the same stretch.
What's made Buffett such a successful investor over so many decades is his desire to buy great businesses with clear-cut competitive advantages, and to hang onto his investments for long periods of time.
You could certainly say that Buffett's investment style contrasts with that of the typical Robinhood investor, who is perceived on Wall Street to be a millennial or novice chasing today's hottest stocks. This high-risk strategy caused a lot of short-term traders to crash-and-burn two decades ago during the dot-com bubble.
Yet, you might be surprised to learn that even the Oracle of Omaha is a big fan of a select few popular stocks on the Robinhood platform.
Berkshire Hathaway CEO Warren Buffett at his company's annual shareholder meeting. Image source: The Motley Fool.
Apple
Although Robinhood investors are known for chasing high-volatility stocks or penny stocks, they do own a handful of well-known companies. One of those brand-name companies that Buffett would strongly approve of is Apple (AAPL 0.64%), which happens to be the sixth-most-held stock on the Robinhood platform.
One factor that continually makes Apple successful is its branding. Apple is easily one of the most recognized brands in the world, and it has an almost cult-like following for its products in the United States. This is especially true anytime the company releases its latest edition of the iPhone in late summer or early fall. Though not every product Apple puts out is necessarily going to be a success, they all serve a purpose of drumming up interest and getting consumers hooked on the company's ecosystem of products and services.
Apple's CEO Tim Cook has also played a major role in the company's success over the past nine years. Even though Apple continues to generate most of its revenue from the sale of smartphones, Cook is angling to turn the company into a wearables and services giant over time. Since product revenue recognition can be a bit lumpy, this ongoing transition should yield higher margins and fewer revenue ebbs and flows.
Buffett also happens to be a big-time fan of Apple's capital return program. It already has one of the biggest dividends on the planet, in terms of nominal payout each year, and has repurchased an incredible amount of its own stock, which can have a positive impact on earnings per share.
Image source: Amazon.
Amazon
The Oracle of Omaha would also give a resounding thumbs-up to Robinhood investors for making Amazon (AMZN 1.30%) the 13th-most-held stock on the platform. Though Buffett's investment team made the decision to buy Amazon for Berkshire Hathaway, and not the Oracle of Omaha himself, he nevertheless has great respect for CEO Jeff Bezos and what Amazon has done over the past two decades.
Most investors are probably most familiar with Amazon's marketplace. According to various estimates, Amazon controls in the neighborhood of 40% of all online commerce in the United States. That's a great position to be in considering that approximately 70% of U.S. GDP is based on consumption.
Though margins associated with retail tend to be razor thin, Amazon is able to use its more than 150 million Prime memberships worldwide to its advantage. The fees collected from these memberships help Amazon undercut brick-and-mortar retailers on price, as well as provide an incentive for its members to stay within its retail and content universe.
But make no mistake about it, the future for Amazon is very much dependent on the cloud. Amazon Web Services (AWS) is the company's cloud infrastructure segment that supplies small and medium-sized businesses with the building blocks needed to construct their cloud. AWS was already seeing incredible growth well before the coronavirus disease 2019 (COVID-19) pandemic. However, the need to work remotely or with a shared cloud has only accelerated cloud infrastructure demand. As AWS grows into a larger share of total sales for Amazon, the company is bound to see its operating cash flow skyrocket.
Image source: Getty Images.
Bank of America
Warren Buffett is also a huge fan of Bank of America (BAC 1.70%), which is the second-largest holding in Berkshire Hathaway's portfolio, behind only Apple. On Robinhood, BofA is the 15th-most-held stock, with nearly 344,000 members holding a stake.
While Bank of America has a bit of a checkered past tied to its poor loan standards during the financial crisis in 2008, it's done an excellent job of putting those miscues in the rearview mirror. The BofA you see today is far better capitalized than it's arguably ever been, and the credit quality of its loan portfolio has improved drastically since the Great Recession.
Among big bank stocks, Bank of America is probably set up best to benefit from the economic recovery. That's because it's the most interest-sensitive of all money-center banks. When the Federal Reserve does begin increasing its federal funds rate (likely in 2023), BofA should see a significant expansion in its interest income.
Furthermore, Bank of America deserves plenty of credit for controlling its noninterest expenses. With consumers using digital and mobile banking options in greater numbers, Bank of America has been able to reduce its physical branch count to save money.
And let's not forget the best thing about bank stocks: their juicy capital return programs in an expanding economy. Prior to COVID-19, Bank of America unleashed a $26 billion capital return program in June 2018, followed by another $37 billion in June 2019. Since the U.S. economy spends far more time expanding than contracting, investors should expect BofA to continue to reward its shareholders handsomely.
