When it comes to investing greats, Berkshire Hathaway (BRK.A 0.63%) (BRK.B 0.52%) CEO Warren Buffett deserves to be in a class of his own. Since becoming CEO in 1965, he's overseen the creation of nearly $650 billion in value for his shareholders (himself included), and delivered a better than 3,600,000% total return on his company's Class A shares (BRK.A).
Although no investor is infallible, Warren Buffett's incredible track record speaks for itself. It's why everyone from Wall Street professionals to everyday investors waits on the edge of their seats to find out what the Oracle of Omaha has been buying, selling, and holding.
While Buffett utilizes a number of strategies to make his shareholders richer, including a love of cyclical businesses and dividend stocks, it's his use of time as an ally that's, arguably, been his biggest key to success -- and it can be your golden ticket, too.
What follows are four Warren Buffett stocks that have the brand power and innovative capacity to turn an initial investment of $300,000 into $1 million by 2030.
The first Buffett stock with the ability to generate a 233% return for patient shareholders over the coming eight years is FAANG stock Amazon (AMZN 0.90%). Even though Amazon sports one of the largest market caps on Wall Street, a $4.5 trillion valuation by the end of the decade is perfectly reasonable given the company's expected growth in operating cash flow.
When virtually anyone hears the Amazon name, they instantly think of its industry-leading online marketplace. According to estimates from eMarketer, Amazon is on track to bring in about $0.40 of every $1 in online retail spending in the U.S. this year.
However, this primary revenue driver for Amazon isn't what'll send its operating cash flow ascending to the heavens throughout the 2020s. Rather, it's the company's considerably higher-margin sales channels, such as subscriptions, advertising, and cloud infrastructure services, which could more than triple its operating cash flow by mid-decade.
For instance, the popularity of Amazon's online marketplace has helped the company sign up more than 200 million people worldwide to Prime. In exchange for giving Prime members cheaper and faster shipping options and access to proprietary streaming content, Amazon nets, at minimum, $28 billion in high-margin added revenue each year. Not only are Prime members more likely to remain within the Amazon ecosystem of products and services when making purchases, but this tens of billions in added cash flow allows Amazon to reinvest in innovative projects.
Speaking of high-growth innovation, Amazon Web Services (AWS) is the global leader in cloud-service market share. During the first quarter, AWS accounted for an estimated 33% of worldwide cloud-service revenue, according to a report from Canalys. Cloud growth is still in the early innings, and more importantly it generates substantially juicier margins than online retail sales. As AWS grows into a larger percentage of Amazon's net sales, it'll have a disproportionately larger positive impact on the company's operating cash flow.
After consistently being valued at a median of 30 times year-end cash flow throughout the 2010s, a share of Amazon can now be scooped up for less than 10 times Wall Street's estimated cash flow for 2025.
The second Warren Buffett stock with the brand power and innovation to turn a $300,000 investment into a cool $1 million by the turn of the decade is Detroit-based automaker General Motors (GM 1.23%).
Auto stocks are facing a veritable mountain of headwinds at the moment. They're contending with general parts and semiconductor chip-supply shortages, which have caused certain production lines to be pared back or shut down for short periods. Additionally, historically high inflation is causing companies to choose between eating higher expenses or increasing new vehicle prices, which could sap demand. The cherry on top is that rapidly rising interest rates may also price prospective buyers who finance their purchases out of the market.
Yet in spite of these short-term challenges, General Motors is in great shape to sustainably grow its top and bottom line throughout much of the decade. That's because the long-awaited growth catalyst for legacy automakers has arrived: the electrification of vehicles.
Through the end of 2025, GM plans to allocate $35 billion for electric vehicles (EVs), autonomous vehicles, and batteries. The stated goal by the end of 2025, per CEO Mary Barra, is to release 30 new EVs globally, have more than 1 million EVs being produced annually in North America, and have two fully dedicated battery plants online by the end of 2023.
The company's initial focus will be on trucks (e.g., Chevy Silverado EV) and SUVs. Larger vehicles are typically less fuel-efficient than smaller vehicles, which makes them a logical target with fuel prices recently hitting all-time highs. It also doesn't hurt that larger vehicle produce higher margins than sedans.
Investors should be aware that General Motors has a sizable presence in China, the world's largest auto market. After selling 2.9 million vehicles (mostly internal combustion engine) in China in 2020 and 2021, it's clear GM has an established brand and the tools necessary to become a global force in the rapidly growing EV industry.
Visa and Mastercard
The third and fourth Warren Buffett stocks that can turn respective $300,000 initial investments into $1 million by 2030 are payment processors Visa (V 0.58%) and Mastercard (MA 1.62%). If you've wondering why I'm discussing both companies together, it's because their operating models and catalysts throughout the decade are virtually identical.
On a year-to-date basis, both Visa and Mastercard have been given the cold-shoulder treatment by Wall Street. That's because financial stocks are cyclical, and therefore prone to weakness when the U.S. and/or global economy shrinks. U.S. gross domestic product has shrunk in each of the first two quarters of 2022, which signals the potential for consumers and businesses to pare back their spending... at least in the short run.
However, there are two sides to being a cyclical company. Although recessions are an inevitable part of the economic cycle, they typically don't last very long. On the other hand, periods of expansion are almost always measured in years. The takeaway is that Visa and Mastercard benefit from expansions lasting significantly longer than contractions or recessions. Investors simply have to be patient to take advantage of these long-winded periods of expansion.
Visa and Mastercard are also the respective No.'s 1 and 2 in market share in the U.S., based on credit card network purchase volume. The U.S. is the largest market for consumption in the world, and according to 2020 filings with the Securities and Exchange Commission, Visa and Mastercard controlled 54% and 23% of respective credit card network purchase volume.
What's more, neither Visa nor Mastercard are lenders. By strictly sticking to the payment processing side of the equation, both companies excuse themselves from the potential to be hurt by rising loan delinquencies and/or charge-offs when recessions strike. Not having to set aside capital to cover potential loan losses is a big reason why both companies bounce back from recessions faster than other financial stocks.
Lastly, the expansion runway for both companies is still enormous. With most global transactions being conducted with cash, there's plenty of opportunity for organic or acquisitive expansion into underbanked regions of the world.