Warren Buffett's legendary run at Berkshire Hathaway will come to an end this year as he enters retirement, although he will remain chairman. Buffett created tremendous wealth for Berkshire shareholders, with the stock appreciating a remarkable 5,502,284% from 1965 through 2024.
However, investors can still find Buffett-approved stock picks from the company's $267 billion portfolio. If you have around $1,000 you can afford to commit to a long-term investment plan, here are two stocks that can help you grow your savings.
Image source: The Motley Fool.
1. Amazon
Amazon's (AMZN 0.66%) commanding lead in e-commerce and growing revenue streams from cloud computing and advertising make it a solid investment for the long haul. The investing gurus at Berkshire recognized this in 2019 when they acquired a stake in the e-commerce giant. Berkshire still held 10 million shares in the second quarter, which would be worth $2.3 billion at current share prices.
The global e-commerce market is worth about $6 trillion and growing, according to eMarketer. Amazon has an almost impenetrable competitive moat in online shopping. It has spent three decades investing billions to build more than 700 million square feet worth of fulfillment centers, data centers, and other facilities. This massive infrastructure is allowing Amazon to achieve same-day or next-day delivery to millions of customers across thousands of small cities and towns.
The company's advantage is further supported by its cloud computing business. The artificial intelligence (AI) capabilities it has gained from serving large enterprises through Amazon Web Services is having an impact on the shopping experience with new AI assistants. Amazon also has deployed more than 1 million robots at its warehouses, which are improving efficiency and shipping speed.
Amazon is a large business with $670 billion in trailing revenue across e-commerce, cloud, advertising, subscriptions, and third-party fulfillment fees. Over the last three years, Amazon's trailing-12-month operating income increased from $13 billion to $77 billion, thanks to lower costs in e-commerce and strong growth in non-retail services.
All said, Amazon is a profitable growth machine with several revenue streams to reward shareholders. It remains one of the best growth stocks to hold for the long term.
2. American Express
American Express (AXP 0.75%) is one of Buffett's favorite businesses of all time, and it remains one of Berkshire's largest and longest-held positions. At the end of Q2, Berkshire held more than 151 million shares, which would be worth about $50 billion at the current share price, or close to 20% of Berkshire's stock portfolio.
Buffett has patiently held the stock for Berkshire since the 1990s. American Express has a very strong brand, which is evidenced by its recent success winning over millennials and Gen Z. It still serves a lot of baby boomers and Gen Xers, but the younger demographics are driving most of its new account growth.
American Express' brand also creates pricing power. From 2015 through 2024, the average fee per card climbed from $39 to $103. This shows the company delivers value far above what it charges to use one of its premium cards. The value it brings cardholders should lead to more growth in fees per card. The ultimate benefit of this pricing power is that fees are high-margin revenue that boosts the company's profits.
Growth in new card members, strong spending trends, and growth in international markets has contributed to record financial results. In Q2, revenue grew 9% year over year on a constant-currency basis, with adjusted earnings up 17%. Analysts expect the company to maintain around 12% annual earnings growth over the long term.
American Express stock is trading at 22 times this year's earnings estimate, which is somewhat expensive for an established financial services company. But this reflects the momentum the business is experiencing in a relatively soft consumer spending environment. When more jobs are being created and the economy is firing on all cylinders again, American Express could create outstanding returns for shareholders. From that perspective, the stock's valuation may be more reasonable than at first glance.
