Since Warren Buffett purchased a controlling stake in Berkshire Hathaway in 1965 and made it the foundation for his investing empire, the stock has seen staggering gains of more than 2,677,400%. That means that you'd now be sitting on a position valued above $26.7 million if you were fortunate enough to own a $1,000 position stake in the company all those years ago and held on to it through the decades.
While Berkshire's market capitalization of roughly $703 billion and status as the world's sixth largest publicly traded company means that its most explosive growth is almost surely in the past, the Oracle of Omaha's company remains one of the best-run investment conglomerates on the planet, and it's absolutely trounced the S&P 500 index across the past year of trading. With that in mind, read on for a look at five Buffett-backed stocks that have what it takes to deliver long-term wins for your portfolio.
Image source: The Motley Fool.
1. Snowflake
Snowflake (SNOW -2.61%) might not be a great fit for every investor. In fact, if you just looked at the company's valuation profile, you might be surprised to see that the data-services specialist has a place in Berkshire's stock holdings.
SNOW PS Ratio (Forward) data by YCharts
With a market cap of roughly $40 billion and the company valued at roughly 19.5 times expected forward sales, Snowflake has a high forward-looking valuation even after a big pullback for its share price over the past year.
Why has Berkshire initiated and maintained a position in a company with a valuation profile that looks so unusual compared to the rest of its holdings? It's probably because Snowflake is solving a crucial problem in today's increasingly data-driven world, and it has a tantalizing long-term growth outlook.
Cloud infrastructure providers including Amazon (AMZN -2.87%), Microsoft, and Alphabet don't make it easy for businesses and institutions to combine and analyze data generated from their respective services. Snowflake's data-warehousing platform remedies this issue and allows users to proceed with the full picture, whether for organizational planning and operations or running applications in real time. Because of these advantages, some customers are starting to build apps natively on Snowflake's platform, and the company has a tremendous growth opportunity ahead as demand for its core data-warehousing service increases and more applications are built and scaled on top of its tech.
2. Amazon
After Berkshire Hathaway finally initiated a position in Amazon in 2019, Buffett publicly lamented not buying the e-commerce and cloud-computing leader's stock earlier. But even today, Amazon accounts for just 0.4% of Berkshire's total stock holdings.
With Amazon's share price now down roughly 49% over the last year and 54% from its high, it wouldn't be shocking to see the investment conglomerate increase its holdings in the tech company's stock.
AMZN PS Ratio (Forward) data by YCharts
Facing macroeconomic pressures that have depressed valuations for growth stocks at large and created headwinds for its core online-retail and cloud businesses, Amazon's forward price-to-sales multiple has been pushed below 1.6 -- a level that sees the historically growth-oriented stock trading in value territory.
While economic headwinds and consumer shifts amid the decline of pandemic-related demand are hurting Amazon's sales growth and profitability, the company still looks primed for long-term success. Warehouse and delivery automation offer paths to improved margins in e-commerce, and Amazon Web Services will likely retain a leadership position in the highly important and influential cloud-infrastructure-services market.
Amid the pullback for the broader market, Amazon is one beaten-down stock investors should pounce on.
3. Apple
Mobile computing has completely changed the way that the world communicates and does business. While it wasn't the first company to introduce a smartphone, Apple's (AAPL -0.32%) completely changed the game.
But while commodification tends to elevate competition and eat into sales and profit potential, Apple has remained absolutely dominant in the mobile space. The tech giant generates roughly 80% of profits made on smartphone sales worldwide, and it's scored laudable wins in other categories as well.
As with mobile hardware, Apple leads the pack when it comes to profitability and market share in the wearable-technologies category. The company stands as the clear leader in smartwatches, and its Air Pods have also proven to be massive hits.
Apple isn't always the first to the market in consumer product categories, but it doesn't need to be. The company's design expertise and massive brand appeal mean that it often winds up defining entire product categories, and it's been enormously successful in building a software-and-services component that ties its ecosystem together.
4. Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing (TSM 1.15%), also know as TSMC, is one of the newest additions to the Berkshire Hathaway stock portfolio. Buffett's company invested in the leading chip fabricator in the third quarter, and it has the distinction of being the only pure-play semiconductor company among Berkshire's holdings.
TSMC stock is a bet on the long-term growth of the semiconductor space, and rising demand for chips looks to be a very safe bet. Rather than competing with other chip players to design the best chips for a given function, TSMC commands a dominant position in semiconductor fabrication. Nearly all of the world's top semiconductor-design companies rely on its manufacturing capabilities.
TSMC controls roughly 55% of the global chip fabrication market. Even more impressive, it manufactures more than 90% of the world's high-performance chips.
With the stock trading at roughly 13.5 times expected earnings and paying a dividend yielding 2.3%, this dominant industry leader offers an attractive risk-reward profile for long-term investors.
5. American Express
American Express (AXP -0.99%) stands as Berkshire's fifth-largest overall stock holding and accounts for approximately 6.9% of its total equity portfolio. Berkshire also owns roughly 20% of AmEx's total outstanding shares, signifying an impressive vote of confidence from the Oracle of Omaha, Co-Chairman Charlie Munger, and their team of analysts.
AXP PE Ratio (Forward) data by YCharts
American Express has built a powerful brand, using membership perks and rewards programs to build customer loyalty. The company also scored wins by focusing on a premium-oriented segment of the credit card and financial-services industry, and its brand cachet is translating to impressive performance among millennial and Generation Z age demographics that bodes well for the future.
With the stock trading at roughly 7 times free cash flow and 14 times expected forward earnings, AmEx is valued at multiples that leave room for long-term capital appreciation. The company also pays a dividend yielding roughly 1.4%, and it's maintained a payout for 33 years straight without implementing a payout cut.
