If you want to improve your investment acumen, it pays to learn from the best. And no investor is as prominent and successful as Warren Buffett.
Also known as the "Oracle of Omaha," the veteran investor has chalked up an amazing investment track record since he purchased his first investment at the tender age of 11. Together with his partner Charlie Munger, Buffett runs Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%), an investment holding company with stakes in both listed stocks and wholly owned businesses.
Berkshire has grown into a $744 billion behemoth and has reported a 19.8% compounded annual gain from 1965 to 2022, handily beating the S&P 500 index's 9.9% return over the same period. Warren Buffett is well-known for his long-term focus and views buying stocks as becoming part-owners of businesses.
Going through Berkshire's portfolio is a useful way of looking for solid stocks that you can own for the long run. Here are three choice picks that you might consider adding to your portfolio.
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Apple
Apple (AAPL -0.35%) occupies an outsized position within Berkshire's portfolio, taking up 46% of its total value as of March 31, 2023. The technology company is responsible for revolutionizing the smartphone industry with the invention of its iconic iPhone back in 2007.
Apple is well-known for its innovative products and services and has a legion of loyal customers who dutifully purchase every new iteration of their devices such as iPads, iMacs, and Apple Watches. This strong brand loyalty generates steady recurring income for the business, enabling it to continue reporting increasing profits and cash flow.
Total revenue for the company rose steadily through the pandemic from $274.5 billion to $394.3 billion from fiscal 2020 (ending Sept. 30th) to fiscal 2022. Over the same period, net income jumped from $57.4 billion to $99.8 billion.
Free cash flow improved from $73.4 billion to $111.4 billion from the 2020 to 2022 fiscal year for an average of $92.6 billion in free cash flow generated. In tandem with rising free cash flow, Apple's annual dividend per share has also risen from $0.795 to $0.90.
The technology behemoth just released its latest new product Vision Pro, a mixed-reality headset that's easy to use and promises to revolutionize the wearable-technology sector. Apple has plans to sell it in 2024 at a retail price of $3,499. This will be the company's next big product and may bring in even higher revenue to support its dividend payouts.
Mastercard
Mastercard (MA 0.07%) may not take up a significant portion of Berkshire's portfolio, but the $381 billion payments-processing company is a giant within its industry. Mastercard has 3.1 billion cards in use as of March 31, up 9% year over year, and is present in more than 210 countries and regions.
The company's financials have been stellar. Revenue rose from $15.3 billion in 2020 to $22.2 billion in 2022, with net income climbing from $6.4 billion to $9.9 billion over the same period.
Free cash flow improved from $6.5 billion to $10.1 billion from 2020 to 2022, allowing Mastercard to increase its quarterly dividend from $0.40 to $0.49. Its current dividend has improved to $0.57 per quarter and has increased without fail since 2012, a fact that should delight income-seeking investors.
There could be more growth to come for the payments company as borders reopen and economies rebound from the pandemic with an increase in air travel and consumer spending. Mastercard is also working with partners to expand its presence and increase its capabilities.
Just two months ago, the company expanded its partnership with UniCredit to 13 banks in 12 markets across Europe for 20 million cards. This collaboration should increase Mastercard's customer base and enhance the customer experience in a win-win situation for both parties.
Floor & Decor
Like Mastercard, Floor & Decor (FND 2.66%) also occupies a small position within Berkshire's portfolio, but the $11.8 billion business has seen steady and consistent growth over the years. The flooring and tile specialist operates 194 warehouse stores and five design studios as of March 31, 2023, offering a wide range of flooring types and installation materials. Sales more than doubled from $1.7 billion to $4.3 billion from 2018 to 2022, with warehouse-store count surging from 100 to 191 in the same period.
Floor & Decor is still in expansion mode and recently opened its 200th store in May in Louisiana. Its fiscal 2023's first-quarter results saw continued revenue growth of 9.1% year over year to $1.1 billion, although higher expenses meant that net income inched up just 0.8% year over year at $71.5 million.
The company is also pursuing growth through acquisitions with the purchase of Salesmaster Flooring Solutions last month. Salesmaster is a flooring and installation supplies distributor that has around 80 employees. It will help to expand Floor & Decor's presence in the New York City and New England markets.
