When choosing stocks to buy, it's tough to argue against investing alongside Warren Buffett.
According to Berkshire Hathaway's (NYSE:BRK-A) (NYSE:BRK-B) latest SEC filing, the company owns shares of 45 publicly traded companies. So, which are the best choices for your portfolio? We asked three of our top analysts which Warren Buffett stock they would buy right now, and this is what they had to say.
Patrick Morris: One -- of many -- stocks owned by Warren Buffett's Berkshire Hathaway that are worth buying is American Express (NYSE:AXP). Berkshire owns nearly 15% of American Express, and there are three reasons why you should consider it, too.
The first is its incredibly entrenched position in the highly competitive credit-card market. It operates a closed-loop network, meaning it collects revenue from both customers paying interest and fees on their credit cards, and also fees from the merchants where customers use those cards.
This diverse revenue stream differentiates it from companies like Visa and MasterCard (which principally only see revenue from merchants) and banks like Capital One and Citigroup (which collect revenue from consumers), meaning as cash is used less and less, the top line revenue to American Express will become even more pronounced.
Next, with Apple Pay and other alternative payment mechanisms bursting onto the market, there has been concern about what this could mean for companies like AmEx. But in a recent Fortune interview, American Express CEO Ken Chenault squelched all fears:
We have the largest integrated global payments platform. We bring together users, card members, and merchants, and the data is incredibly valuable. We know where they spend online and offline. We want to deliver benefits and services when our card members want it, where, and how they want it.
With its aforementioned closed-loop network AmEx has positioned itself to maintain its dominant market standing no matter how the payment landscape evolves.
Lastly, there is the simple reality American Express has delivered incredible returns to its shareholders. Through the first nine months of 2014 its net income has risen by 14% over last year and its return on average equity stands at a remarkable 29%. Add in its very reasonable valuation, with a trailing-12-month price-to-earnings ratio of 15.6, and all signs point to AmEx being a great investment for this and many years to come.
Shares have slumped in the wake of the firm's (relatively) dispiriting Q3 results. Revenue and net were both down slightly, while the company admitted it likely won't make its earnings target for this year.
Yet there has been encouraging growth if you know where to look. On a regional basis in Q3, the company saw a nice 5% year-over-year increase in net revenues from Asia Pacific, its No. 2 region behind North America. In terms of product segment, volume sales of water and energy drinks advanced by 7%.
Besides, with a proven long-term performer like Coke investors shouldn't fret too much over quarterly or even annual hiccups. From 2009 to 2014, for example, annual net profit advanced by 26% and revenue a fizzy 50%. The company's net margins, meanwhile, are consistently in the 20% neighborhood.
Better, Coke's got a competitive dividend it habitually raises every year. At $0.305 per share, it yields 2.8%, comparing favorably to the S&P's average of 2%.
Goldman just announced excellent quarterly results that easily surpassed analysts' expectations. Advisory revenue is up by 40% year over year, investment banking revenue is up 26%, and the company saw net inflows of about $20 billion into client accounts. And, despite total revenue rising by about 25%, Goldman ran more efficiently, with operating expenses only rising at about half that rate.
And perhaps most importantly, Goldman is a very adaptable company. As CFO Harvey Schwartz pointed out during the company's recent conference call, Goldman has adapted extensively since going public in 1999, and will continue to do so in the future.
And despite a tremendous quarter and the recent market rebound, Goldman is still about 5% cheaper than it was a couple of weeks ago.
When he first invested in Goldman Sachs during the financial crisis, Buffett referred to his investment as a "bet on brains." And after seeing the company's latest results, it's a bet I'd be willing to make as well.
Eric Volkman has no position in any stocks mentioned. Matthew Frankel has no position in any stocks mentioned. Patrick Morris owns shares of Apple, Berkshire Hathaway, and Coca-Cola. The Motley Fool recommends American Express, Apple, Berkshire Hathaway, Coca-Cola, Goldman Sachs, MasterCard, and Visa. The Motley Fool owns shares of Apple, Berkshire Hathaway, Capital One Financial., Citigroup, MasterCard, and Visa and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.