It is almost hard to believe how successful Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) since Warren Buffett took over the management of the company in 1965. At the time, the company’s shares were listed at $ 19 per share. Today, a single Class A share of the company is valued at approximately $ 418,000. This means that a $ 1,000 stake in the company at the start of Buffett’s tenure would now be worth around $ 22 million. Not too bad.
Berkshire’s most explosive growth days may be in the rear view mirror, but the company already has one of the most impressive investment legacies in history, and a panel of Motley Fool contributors have identified three companies. backed by Buffett who are ready to continue winning. Read on to see why they think these stocks will help you beat the market.
One of Buffett’s all-time favorite stocks
Keith Noonan: With its role as a leader in the mobile computing revolution, Apple (NASDAQ: AAPL) is one of the most influential companies of the last half century. It is also one of the greatest stock market success stories of all time and has created generational wealth for investors who bought at the right times and held their positions.
Apple’s strong branding and design expertise has enabled it to build one of the world’s most loyal customer bases and generate profits that absolutely outperform its competitors in the mobile computing market. The company has also used its dominant position in mobile to create a hugely profitable software ecosystem, rolling out its own subscription services and charging a commission on apps sold through its App Store.
The company’s strengths are so deep and numerous that Buffett decided to make Apple Berkshire Hathaway the largest equity portfolio, and the Oracle of Omaha praised the tech giant. In 2020, he said it was probably the best company he knew, and this year he hailed CEO Tim Cook as “one of the best managers in the world.” This is commendable praise from a man known to be brilliant at identifying quality companies that have what it takes to be big winners in the long run.
In addition to its mobile and software business and early successes in the apparel market, Apple appears poised to benefit from potentially groundbreaking technological changes, including 5G and augmented reality. Chances are it will continue to spearhead new technological and service movements that have far-reaching impacts.
Better yet, Apple is paying a dividend as well, and shareholders can expect strong payment growth over the long term. The company has increased its annual payout every year since launching a dividend in 2012, and its payout ratio remains at a relatively low level, opening the door to continued dividend increases.
He is an industry leader who seems ready to go the distance.
“Mastering” the future of electronic payments
Jason hall: FinTech is a hot space for investors, with so many companies striving to disrupt the status quo in the financial services industry. And the point is, there has never been a better time to be a user of financial products. But that said, it is a mistake to ignore a devotee like MasterCard (NYSE: MA) when you are looking for ways to profit from the changing way money changes hands.
For starters, Mastercard is an innovator in this area. Over the past few years, it has invested heavily in technology to facilitate transactions for individuals and merchants around the world, including the huge opportunity in the business-to-business or B2B payments market. To put it simply, Mastercard is not playing the defense as the upstarts of the world take part: the company is fully offensive, adding more features and entering new markets to attract more users to its massive, secure and good site. known. payment platforms.
Finally, the network effect of Mastercard, supported by the trio of merchants, consumers and financial service providers, all want to have access to each other. The more each group is part of the Mastercard family, the more attractive it becomes to other cohorts.
With the global middle class adding around 1 billion new members over the next decade, and the technology that allows even more people to access electronic payments becoming mainstream, this long-term winner is expected to continue to win for many years to come. years to come.
You don’t have to choose just one Buffett stock – here’s how to own them all
Jamal Carnette: Instead of choosing one “Buffett share,” that is, a stock in the Berkshire Hathaway portfolio of companies, why not own them all? The easiest way to do this is to buy shares of Berkshire Hathaway itself. At the end of 2020, more than half of Berkshire’s value is due to its minority position in companies like Apple, Bank of America, and The Coca Cola Society.
But wait, there’s more … In addition to owning these companies, you own the operating companies of Berkshire Hathaway – companies in which it has a controlling interest – including GEICO, BNSF Railroad and Berkshire Hathaway Energy (BHE ). In fact, Berkshire’s operating companies may be in a better position to take advantage of recent economic conditions.
We all know the supply chain is breaking down. As a result, transportation costs skyrocket and allow BNSF to charge higher freight rates. The Federal Reserve is finally discussing an interest rate hike, which will allow GEICO to better take advantage of its nearly $ 150 billion float. BHE is also poised for strong growth, as past investments in grid and clean energy now appear premonitory given recent grid failures and Americans’ heightened desire to reduce their carbon emissions.
But wait … there is still more. Finally, you get two of the largest capital distributors in the history of modern capitalism making decisions about how to use future cash flows at a valuation discount to the overall market. Last year, this was fully on display when Berkshire bought back nearly $ 25 billion of its own stock, a figure then equal to 5.2% of its market cap.
Warren Buffett has many strong holding companies, but you don’t have to pick just one if you own Berkshire Hathaway shares.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.