Warren Buffett is one of the greatest investors in history. The proof is quite simple: He took an obscure textile company in Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) and transformed it into the largest investment company on the planet.
This is why investors would be wise to consider the dozens of holdings in Berkshire Hathaway's portfolio for their own portfolios. Here are two blue chip stocks with bright futures that appear to be attractive picks for investors for this month and beyond.
1. Visa: The present and the future of financial transactions
If you're like a growing number of people, you probably use your credit or debit card on a regular basis to pay for purchases. And chances are, your transactions may be getting processed on Visa's (V -0.76%) payment network.
Accepted at over 80 million merchant locations around the world, the company is the clear leader of the payments industry. For context, Visa's $463 billion market capitalization is far greater than the $343 billion market cap of its biggest competitor, Mastercard.
Processing hundreds of billions of transactions each year is a very lucrative business model for the company. Merchants want to get a piece of the growing, $14 trillion-plus pie that people spend on Visa's payment networks. This is why merchants willingly submit to small percentage fees every time a cardholder begins a transaction using the company's payment network, which is how Visa regularly achieves profit margins of more than 50%.
Buffett tends to invest in businesses with high margins, because high margins signal a business with competitive advantages over its peers. Few businesses fit this more to a tee than Visa, which is why Berkshire Hathaway owns a stake in the company valued at $1.9 billion. And with growth catalysts like e-commerce becoming more common, the demand for alternative payments should continue to grow. That's how analysts expect Visa's earnings to grow by 15.5% annually over the next five years, which is better than the credit services industry average of 14.3%.
Investors can acquire shares of the stock at a forward price-to-earnings (P/E) ratio of 23.6. This valuation is well above the credit services industry average forward P/E ratio of 16.3. But it is arguably justified by the fact that Visa has superior growth prospects and a lower-risk business model not reliant on extending credit to cardholders.
2. Mondelez International: A world-class consumer staple
Few business models are better than those that couple necessary products with high brand recognition. Mondelez International (MDLZ -1.72%) is one of the smaller holdings in Berkshire Hathaway's portfolio, with the stake worth just $41 million. But everybody needs to eat, and Mondelez offers iconic products that fit just about everyone's taste preferences, such as Triscuit crackers, Trident chewing gum, and Oreo cookies.
Buffett and company surely appreciate the fact that the consumer staple maintains the leading market share in cookies and crackers and the No. 2 spot in chocolate. And as Mondelez expands with additional product launches and acquisitions, analysts anticipate that earnings will grow by 6.5% annually over the next five years.
The stock's 2.2% dividend yield is also meaningfully higher than the S&P 500 index's 1.7% yield. And with the dividend payout ratio clocking in at just under 49% in 2022, Mondelez should have the flexibility to hand out high-single-digit annual payout raises over the medium term.
The stock's valuation seals the deal, with Mondelez's forward P/E ratio of 20.8 coming in below the confectioners industry average forward P/E ratio of 22.7. That's why dividend growth investors should add the stock to their portfolios.
