Anytime you receive a nickname like "The Oracle of Omaha," you know you're doing something right. Warren Buffett, through his company, Berkshire Hathaway (BRK.B -0.69%), has achieved stock market success that few can claim to have rivaled. That's why investors pay attention when he and Berkshire Hathaway make moves.
Since Buffett took control of the company in 1965, Berkshire Hathaway's Class A stock has increased well into the seven-figure percentage range, wildly outpacing the S&P 500's roughly 24,000% gains over the same span. Needless to say, Berkshire Hathaway has made quite a few investors rich along the way.
Here are three Buffett stocks investors should consider adding to their own portfolios.
1. Snowflake
Snowflake (SNOW 3.69%) is a data warehousing platform that lets clients aggregate and analyze their data from across all major cloud platforms. It's also one of the rare stocks that Buffett and Berkshire Hathaway have invested in at its IPO. Snowflake shares are down by almost 30% since its IPO, but the company is just getting started.
Buffett may be the poster child for value investing, but he's recently come around a bit more when it comes to investing in tech stocks. He used to be infamously uninterested in technology companies, mostly because he felt he was not as effective at evaluating them. Snowflake, in particular, is in an excellent position as a leader in an industry that's here to stay: big data.
Stock price aside, Snowflake's business has been growing at an impressive rate, especially in terms of its high-dollar customers, as the table below illustrates:
| Fiscal Year* | Customers Spending $1 Million-Plus Annually | Customers Spending $5 Million-Plus Annually | Customers Spending $10 Million-Plus Annually | Customers Spending $20 Million-Plus Annually |
|---|---|---|---|---|
| 2021 | 80 | 13 | 3 | 1 |
| 2022 | 185 | 31 | 9 | 3 |
| 2023 | 330 | 60 | 20 | 10 |
Data source: Snowflake 2023 Investor Day presentation. *Snowflake's fiscal years end on Jan. 31 of the corresponding calendar year.
High-spending customer growth and a 151% dollar-based net retention in its most recently reported fiscal quarter (meaning Snowflake's established customers, on average, spent 51% more with the company than they did the year before) all add up to a company with longevity potential.
2. Procter & Gamble
Procter & Gamble (PG -0.78%) is a consumer goods giant that owns some of the most well-known brands you can find -- Tide, Pampers, Gillette, Tampax, Crest, and many more.
P&G is what many would consider a recession-proof stock. Regardless of economic conditions, its products sell. When money is tight, consumers are much more likely to cut back on upgrading the technology, eating out, and other splurges than they are to stop shopping for the baby care, home care, personal healthcare, oral care, and other products that P&G sells.
Buffett likes businesses that have a margin of safety. P&G has two: First, consumers largely view its products as needs instead of wants, and second, the company pays a healthy dividend that is incredibly unlikely to be cut. P&G is a Dividend King, having increased its dividend annually for 67 consecutive years, and with a payout of $0.94 quarterly, its 12-month trailing yield sits at around 2.5%.
P&G likely won't have outsized sales growth, but its stability makes up for a lot of that.
3. Visa
One of Buffett's most famous quotes is, "If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes." Visa (V -0.23%) fits the bill as a stock you'll be happy to hold for a decade or more, mainly because of its core competitive advantage: its vast reach.
As of the end of 2022, Visa was accepted at more than 100 million merchant locations, almost 40 million more than just a few years prior. Not only is this a testament to its reach, but the continued growth also shows the company isn't letting its position as the payments industry leader let it get complacent.
Its reach is no accident; it's a byproduct of intentional and well-thought-out investments in expanding its infrastructure. These investments may have previously weighed on Visa's bottom line, but since most of the costs involved have already been incurred, Visa is now in a position to operate with profit margins few companies can compete with.
As the world becomes more digital-dominant, Visa's in great shape to continue growing. When it comes to companies I feel comfortable holding without second-guessing the long-term value, Visa is high on the list. The company should be in a leadership position for the foreseeable future.
