Born in Omaha, Nebraska on Aug. 30, 1930, Warren Buffett has become one of the most successful investors in history. The Berkshire Hathaway CEO has led his company on an incredible run of market-beating success and generated fantastic returns for long-term shareholders. He's also been an inspiration to millions of investors around the world and helped popularize wisdom, strategies, and individual investment opportunities that have put people on a path to financial freedom.
If you're looking to follow in Buffett's footsteps, read on to see why two Motley Fool contributors believe that investing in these Berkshire Hathaway portfolio components would be a smart move this month.
This is Buffett's favorite stock
Keith Noonan: If you're looking to replicate Buffett's investing moves, it makes sense to own Apple (AAPL 2.48%) in your portfolio. In a stunning vote of confidence, the Oracle of Omaha has made the tech stock Berkshire Hathaway's largest portfolio holding by far. Apple currently accounts for 46.9% of the company's stock portfolio. For comparison, Bank of America is Berkshire's second-largest stock position and makes up 8.9% of its total portfolio.
In recent years, Apple has often ranked as the world's most profitable company or taken second place behind oil giant Saudi Aramco. The tech giant stands as the world's largest company and currently has a market capitalization of nearly $3.1 trillion. Buffett loves companies with strong brands that are capable of serving up consistent profits, and Apple's world-beating business performance has made the stock a big winner for Berkshire Hathaway.
Berkshire first bought Apple shares in the first quarter of 2016, and investing in the tech giant has played a huge role in powering the tech conglomerate to beating the S&P 500 index since then. Berkshire's share price has climbed 171% since the beginning of 2016, handily topping the S&P 500 index's total return of 158% across the stretch.
Meanwhile, Apple stock has delivered a dividend-adjusted total return of 718% across the stretch.
AAPL Total Return Level data by YCharts
In addition to claiming more than 85% of global operating profits from smartphone sales, Apple has been gaining ground in the computers market, growing its software-and-services segment and scoring wins in emerging categories like wearable hardware. With one of the strongest brands in the tech space and a proven penchant for design excellence, the company could also go on to be a big winner in categories like augmented reality, smart cars, and artificial-intelligence-powered personal assistants.
Apple's brand and ecosystem strengths are unmatched in the consumer hardware space, and the company will likely continue to be a technology leader for decades to come.
Visa has built one of the most profitable businesses in the world
Parkev Tatevosian: One of my favorite Warren Buffett stocks to buy right now is Visa. The financial processing company has spent decades building a network of merchants that accept its cards as a payment method. On the other side of the transaction, there are over 4 billion Visa cards in consumer wallets today. Arguably, the most challenging part of its business plan is behind it.
That can certainly be observed in Visa's financial figures. Revenue grew from $11.8 billion in 2013 to $29.3 billion in 2022. The company benefits from moderate inflation since Visa primarily generates revenue as a percentage of transaction value using a Visa card.
More importantly, Visa has built an extremely profitable business. Its operating income rose from $7.2 billion to $19.7 billion in the abovementioned years. For 2023, Visa earned an astounding 67.1% operating profit margin. That figure is among the highest of any companies in Buffett's Berkshire Hathaway portfolio. It's also the highest of any of the businesses I follow.
V PE Ratio (Forward 1y) data by YCharts
Fortunately, investors don't have to pay an arm and a leg for this incredible stock. Visa is trading at a forward price-to-earnings multiple of under 24.5. Paying a fair price for an excellent business is a reasonable recipe for investment success. I'm not surprised that one of the greatest investors of all time has Visa stock in his portfolio.
Apple and Visa are classic, Buffett-style stocks
When it comes to picking stocks, Warren Buffett famously prefers to keep it simple and avoid companies and situations that are overly complex. Within that mold, Apple and Visa are large, well-known companies that can be counted on to reliably generate significant profits. They might not be the most explosive stocks on the market, but they offer well-balanced risk-reward profiles, and it's not hard to see why Buffett's company has invested in them.
