It's almost hard to believe how successful Berkshire Hathaway (BRK.A 1.18%) (BRK.B 1.30%) has been since Warren Buffett took over as the company's CEO in 1965. Back then, the company's stock was priced at $19 per share. Today, a single share of the company's class A stock is valued at roughly $418,000. That means that a $1,000 stake in the company at the beginning of Buffett's tenure would now be worth about $22 million. Not too shabby.
Berkshire's most explosive days of growth may be in the rearview mirror, but the company already has one of the most impressive investment legacies in history, and a panel of Motley Fool contributors has identified three Buffett-backed companies that are poised to keep winning. Read on to see why they think that these stocks will help you beat the market.
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One of Buffett's all-time favorite stocks
Keith Noonan: With its leading role in the mobile computing revolution, Apple (AAPL -1.22%) stands as one of the most influential companies of the last half-century. It's also one of the stock market's all-time great success stories and has created generational wealth for investors who bought at opportune times and held on to their positions.
Apple's strong brand and design expertise has allowed it to build one of the most loyal customer bases in the world and generate profits that absolutely trounce its competitors in the mobile computing market. The company has also used its dominant position in mobile to build a hugely profitable software ecosystem, rolling out its own subscription services and charging a commission on applications sold through its App Store.
So entrenched and numerous are the company's strengths that Buffett moved to make Apple Berkshire Hathaway's single largest stock holding, and The Oracle of Omaha has been effusive in his praise for the tech giant. In 2020, he said that it was probably the best business he knew of, and this year he hailed CEO Tim Cook as "one of the best managers in the world." That's noteworthy praise from a man who is famously brilliant at identifying quality companies that have what it takes to be big long-term winners.
In addition to its mobile and software businesses and early success in the wearables market, Apple appears to be on the verge of benefiting from potentially revolutionary technology shifts including 5G and augmented reality. There's a good chance it will continue to spearhead new tech and services movements that have far-reaching impacts.
Even better, Apple also pays a dividend, and shareholders can look forward to big payout growth over the long term. The company has boosted its annual payout each year since initiating a dividend in 2012, and its payout ratio remains at a relatively low level that opens the door for continued dividend hikes.
This is one industry leader that looks poised to go the distance.
"Mastering" the future of electronic payments
Jason Hall: Fintech is a hot space for investors, with so many companies working to disrupt the status quo in the financial services industry. And the fact is, there has never been a better time to be a user of financial products. But with that said, it's a mistake to ignore a stalwart like Mastercard (MA 0.15%) when looking for ways to profit from the changing ways money changes hands.
As a starting point, Mastercard is an innovator in this space. Over the past few years, it has invested heavily in technology to make it easier for people and merchants around the world to transact, including the huge opportunity in business-to-business, or B2B, payments market. To put it simply, Mastercard isn't playing defense while the upstarts of the world take share from it: The company is fully on offense, adding more features and entering new markets to attract more users to its massive, secure, and well-known payments platforms.
MA Dividend data by YCharts
Lastly, Mastercard's network effect, underpinned by the trio of merchants, consumers, and financial services providers, all want access to one another. The more of each group that is in the Mastercard family, the more appealing it becomes to the other cohorts.
With the global middle class adding about 1 billion new members over the coming decade, and technology that gives even more people access to electronic payments becoming commonplace, this long-term winner should keep winning for many years to come.
You don't have to pick just one Buffett stock -- here's how to own them all
Jamal Carnette: Instead of picking one "Buffett stock," aka a stock from Berkshire Hathaway's portfolio of companies, why not own them all? The easiest way to do this is to buy shares of Berkshire Hathaway itself. As of year-end 2020, more than half of Berkshire's value is due to its minority position in companies like Apple, Bank of America, and The Coca-Cola Company.
But wait, there's more... In addition to owning these companies you have ownership of Berkshire Hathaway's operating companies -- companies in which it owns a controlling stake -- including GEICO, BNSF Railroad, and Berkshire Hathaway Energy (BHE). In fact, Berkshire's operating companies could be better poised to take advantage of recent economic conditions.
We all know the supply chain is breaking. As a result, transportation costs are exploding and allowing BNSF to charge premium freight rates. The Federal Reserve is finally discussing raising interest rates, which will let GEICO better profit from its near-$150 billion float. BHE is also poised for strong growth as earlier investments in the grid and clean energy now seem prescient considering recent grid failures and an increased desire among Americans to lower carbon emissions.
But wait... there's even more. Finally, you get two of the greatest capital allocators in the history of modern capitalism making decisions on how to employ future cash flow at a valuation discount to the overall market. Last year this was on full display when Berkshire repurchased nearly $25 billion of its own shares, a figure then equal to 5.2% of its market capitalization.
Warren Buffett owns many strong portfolio companies, but you don't have to pick just one if you own shares of Berkshire Hathaway.
