With a net worth of nearly $140 billion, Warren Buffett seems always to be in the spotlight. His investing acumen in running Berkshire Hathaway has made him a favorite in the industry.
It's not a surprise that the average investor closely scrutinizes what the Oracle of Omaha is doing in his portfolio. Among the dozens of stocks the conglomerate owns, there are bound to be some potential investment opportunities.
Indeed, I think these are two of the best Warren Buffett stocks you should buy with $1,000 right now.
Amazon: E-commerce heavyweight with multiple growth drivers
NASDAQ: AMZN
Key Data Points
The first stock on Berkshire's list that should be on your radar is none other than Amazon (AMZN +0.20%). The e-commerce juggernaut only makes up 0.5% of Buffett's portfolio, but it possesses numerous favorable qualities.
No other business can compete with Amazon when it comes to online shopping. According to Statista, nearly 40% of all e-commerce spending in the U.S. flows through Amazon. It has massive scale, particularly with its broad product assortment and sprawling logistics footprint, to better serve customers. As online shopping continues to represent a larger chunk of total retail spending, Amazon is set to keep benefiting.
But this business has other growth engines working in its favor. Investors focus on Amazon Web Services (AWS), the industry-leading cloud computing segment. It consistently posts double-digit revenue gains and an operating margin that hovers around 30%. With a booming interest in AI, as well as other back-end infrastructure services, AWS is poised to see strong demand over the next decade and beyond.
Investors will certainly appreciate the management team's focus on efficiency. Ongoing cost cuts across the board have pushed up profitability for Amazon, and this positive trend is set to continue. According to Wall Street consensus analyst estimates, earnings per share (EPS) are set to rise at an annualized clip of 34% over the next three years.
Shares are up 121% since the start of 2023 (as of April 10). But they don't appear to be that expensive. Investors can scoop up the stock at a price-to-sales ratio of 3.4. That's in line with Amazon's trailing five-year average. Buying $500 worth of shares could boost your portfolio in the years ahead.
American Express: High-end credit card issuer benefiting from network effects
NYSE: AXP
Key Data Points
The second Warren Buffett stock that investors should look to buy is American Express (AXP +1.53%). While this business carries a market cap less than one-tenth of Amazon's, it has a much larger weighting in Berkshire's portfolio, representing 9% of all the company's holdings.
You'd assume that in the higher-rate environment we are in -- one also characterized by inflationary pressures -- American Express would be registering a notable slowdown. But that's just not the case.
Revenue and diluted EPS were both up 14% in 2023. And executives predict another double-digit rise in the current year.
This strong fundamental performance points to American Express's position in what is otherwise an extremely competitive industry. The company's premium brand attracts an affluent clientele that's willing to pay high fees for Amex credit cards. This also results in lower default rates compared to peers, with greater spending per card.
American Express is unique in that it also operates its own closed-loop payments system. Consequently, the business benefits from network effects. Merchants want to plug into the Amex network because of the potential spending capacity available from cardholders. Customers want Amex cards because they are accepted almost everywhere, not to mention the impressive array of perks, rewards, and partnerships.
Investors are being presented with the chance to buy this competitively advantaged financial services firm at 2.7 times sales. As with Amazon, this valuation is in line with the stock's trailing five-year average. Investing $500 in American Express looks like the smart move.
