Warren Buffett has long been arguably the most recognizable name in investing. Through decades of strategic investments, Buffett and his team have built Berkshire Hathaway into one of the world's most valuable public companies, with a market capitalization of over $780 billion.
Given the success that Buffett and Berkshire Hathaway have had in picking stocks and acquisitions, it's common for investors to look at the conglomerate's holdings to get ideas for where to put their own money. That portfolio includes more than 50 stocks today, but here are two in particular that I'd recommend buying right now.
1. Visa
Buffett has long been a fan of companies with competitive moats, and few have one as wide as Visa (V -0.23%). It is the global leader in payment processing and benefits nicely from network effects. As it stands, Visa has over 4.2 billion cards in circulation, and its payment processing network is used by over 100 million merchants worldwide.
Merchants are incentivized to join the Visa network because so many consumers have Visa cards, so not accepting them would limit potential customers. For consumers looking for credit cards, there are incentives to go with Visa because it's the most widely accepted card globally, and having a different card could mean not being able to use it.
This network effect has worked wonders for Visa because it doesn't incur too many additional costs to add cardholders or merchants. Yet, additional cardholders and merchants mean more transactions and more revenue for Visa. The company's margins and free cash flow are a testament to this phenomenon.
V Profit Margin data by YCharts.
Visa's high margins and free cash flow are important because they support an underrated aspect of Visa's business: its dividend. With a yield of just over 0.8% at the current share price, Visa doesn't scream "dividend stock."
However, long-term investors should note how much the company is actively raising its annual payout. Visa recently increased its quarterly dividend by over 15% to $0.52 per share, and its payout is more than double what it was just five years ago.
Visa is a top-tier growth stock with the potential to consistently increase its dividend over the long haul. Given the company's market position and financial standing, there's no reason to believe it won't do both.
2. Apple
Apple (AAPL -0.35%) is by far Berkshire Hathaway's largest equity holding, accounting for more than 48% of the value of its stock portfolio as of Sept. 30. The conglomerate made its first Apple investment in the first quarter of 2016, so it seems fair to say that Buffett and his team have become major fans of the tech giant.
Apple has ascended to being the world's most valuable public company, primarily because of the success of its hardware products (iPhone, MacBook, iPad, Apple Watch, etc.); however, its ability to maintain its place at the top of the tech world will likely rest on how well it succeeds with its services.
The iPhone is Apple's most important moneymaker, accounting for over 52% of its revenue in its fiscal 2023 (which ended Sept. 30). However, that's a noticeably lower percentage than just a handful of years ago.
Meanwhile, its services segment has been consistently pulling more weight. In its latest fiscal year, Apple's services revenue increased 9% year over year to $85.2 billion, while sales of iPhones, Macs, iPads, and wearables all decreased.
Having hardware drop in sales isn't ideal (although it was expected this year), but having services account for more of its revenue is great for Apple because subscriptions and recurring revenue provide a more stable and predictable income stream -- especially compared to the cyclical nature of the hardware market.
As Apple continues to expand its footprint in financial and health services, it'll open the door for significant growth opportunities. Both industries are primed for tech-based disruptions (see fintech and telehealth), and who better to provide those disruptions than a company known for technological innovation, and one with massive resources to deploy in its efforts?
Apple should continue to provide great shareholder value going forward.
