Warren Buffett's portfolio holds numerous stocks that have generated considerable returns, either in the past or present. Unfortunately, many investors might wrongly assume a Warren Buffett investment is a buy simply because it remains in the Berkshire Hathaway portfolio.
This calls for investors to do some due diligence of their own. However, such analyses might persuade investors to put approximately $5,000 in these stocks. Here's why.
Amazon
Admittedly, the approximate $2.35 trillion market cap for Amazon (AMZN +0.38%) might make this company a more surprising choice. To double one's investment from that level, it would take the market cap to $4.7 trillion, slightly higher than the current market cap leader, Nvidia.
Still, the state of Amazon's business means such a market cap is realistic over time. While the online sales business is no longer a high-growth enterprise, it makes the company's faster-growing subscription, third-party seller, and advertising businesses possible, which may drive a positive operating income for its two e-commerce-related segments.
NASDAQ: AMZN
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Investors should also note the majority of its operating income continues to come from the Amazon Web Services (AWS) segment, which pioneered the lucrative cloud computing industry. AWS has also driven its expertise in artificial intelligence (AI), which boosts the entire enterprise.
Moreover, Amazon stock sells at a P/E ratio of 34, a far cry from past years, when it was routinely above 100 times earnings. At just over $220 per share, an $1,640 investment could buy an investor 7.4 shares. While that sounds modest, it could still start investors off to market-beating gains.
Domino's Pizza
Domino's Pizza (DPZ 1.23%) is a stock Buffett's team has accumulated recently. As the world's largest pizza chain, it continues to drive growth both domestically and internationally, claiming more than 21,500 locations in more than 90 countries as of the end of the second quarter of fiscal 2025 (ended June 15).
Despite intense competition, it has offered a digital-first approach, menu innovations such as parmesan-stuffed-crust pizza, and an asset-light business model, helping it stand out in a crowded market.
Additionally, it operates a vertically integrated supply chain with distribution centers. These make the company's pizza dough and distribute ingredients to many of its locations.
NASDAQ: DPZ
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Furthermore, the company has raised its dividend annually since reintroducing it in 2013. At $6.96 per share annually, it has a dividend yield of 1.6%, well above the S&P 500 (SNPINDEX: ^GSPC) average of 1.2%. With those returns in mind, investors should note that during the first half of the year, dividend costs of $60 million were well below the $332 million the company generated in free cash flow it generated over the same time frame, ensuring the safety of the payout.
Finally, its 24 P/E ratio means it sells at a discount to the S&P 500 earnings multiple of 31. Thus, if one makes a $1,660 investment, they will have four shares of Domino's, giving an investor a foothold on which one can build later.
Constellation Brands
Constellation Brands (STZ 2.45%) might be the most controversial of these picks. Americans have shown a lower propensity to consume alcohol, leading to revenue declines. Also, nearly 92% of the company's net sales in the first half of this year came from beers imported from Mexico. Thus, rising tariffs could threaten Modelo's No. 1 position in the U.S. market, as well as its beer sales in general.
However, since the fourth quarter of 2024, Berkshire has continued to accumulate shares of Constellation, despite being a net seller of stocks. For investors with a risk-tolerant mindset, this could indicate that Constellation is an excellent contrarian play.
NYSE: STZ
Key Data Points
Also, Buffett has long invested in stocks with a rising dividend income, and Constellation fits that bill. Its payout has risen every year since the company began it in 2015. Today, the $4.08-per-share annual payout yields 2.9%.
During the first half of the year, the nearly $1.1 billion Constellation generated in free cash flow easily covered the $361 million in dividend costs, making its payout sustainable. That also left it with cash to buy shares, reducing the shares outstanding by 2.5% to just over 176 million.
Finally, the stock trades at a P/E ratio of 13, and with that, investors can buy 12 shares for about $1,700. Given the low likelihood that alcohol consumption will end, this low valuation, high-paying dividend, and falling share count should make Constellation stock an excellent buy.
