If anything, studying Warren Buffett's investments gives one clarity in an investment world that can seem quite chaotic. Yes, I am a self-proclaimed follower of the Oracle of Omaha. The 93-year-old breaks things down to make complex ideas simple. In doing so, he has taken the rest of the investment community to school for decades. Since 1996, Buffett's beloved Berkshire Hathaway (BRK.A -0.45%) (BRK.B -0.28%) has beaten the S&P 500 by nearly 1,180%.
Let's take a look at three stocks in his portfolio that you should consider buying now.
Credit cards, baby
Over the last three years, payment services juggernaut Visa (V -1.54%) has delivered double-digit annual revenue growth, with increasing value to shareholders. In 2023 alone, Visa's revenue increased 11.4%, with net income increasing 16.1% to $17 billion. Visa is positioned within an indispensable piece of American finance. Although I'm still a fan of cash, most people are looking for more convenient ways to pay for their purchases, and Visa continues to be right at the front line.
One of the big things here is Visa's remarkable profitability. The company's operating margin has averaged a whopping 66% over the past decade.
Insurance
Chubb (CB -2.65%) might not be as popular a name as Coca-Cola, but the Swiss insurance company is an easy addition to any portfolio. This is a stock that has returned 36% over the last 12 months, with reliable annual financial performance. Buffett bought in in the first quarter of the year, which is a fascinating move, as he already has huge insurance exposure through GEICO. But Chubb Limited is getting tough to ignore.
First-quarter 2024 revenue increased 15.5% increase year over year to about $12.9 billion, with a 13.2% increase in net income to $2.1 billion. With a trailing P/E ratio of just over 11, this seems like a pretty solid deal at this time.
Analyst estimates are calling for full-year earnings of $21.66 per share, but Chubb has beaten estimates four quarters in a row, so I think there could be some unseen upside potential there. With the insurance company's track record over the last five years of continued growth, and great momentum in the start of 2024, it's not hard to see why Buffett likes this one.
Why not Berkshire itself?
Perhaps the greatest stock in Buffett's portfolio is Berkshire Hathaway itself. In addition to the stocks mentioned in this article, Berkshire holds an array of private businesses ranging from GEICO to Dairy Queen. In the last five years, Berkshire stock has nearly doubled in value, while producing revenue growth averaging in the double digits.
This is a stock that trades at 12 times earnings, saw revenue gains of over 20% in 2023, and made roughly $96 billion in net income. The effect of the company's value-oriented approach cannot be disputed. As previously mentioned, shares have outpaced the S&P 500 over time, and Buffett has wisely steered into businesses like Apple and Amazon in recent years.
There is, of course, one looming question that many might ponder when looking at this suggestion. The great Charlie Munger is now gone, and Buffett is 93 years old. If something happens to him, what will happen to Berkshire Hathaway? It's a sad thing to think about, but it warrants consideration. Overall, I think there are a number of reasons to believe the company will be fine.
For one, the cohort that have had the rare privilege of being trained by Buffett and Munger have had a classical education in the simple, yet incredibly successful style of value investing that made Buffett the success story that he is today. Second, the company will still retain its ability to use the "float" from its insurance businesses to carry out investment activities.
Third, and perhaps the biggest thing of all, Berkshire Hathaway has nearly $190 billion in cash and cash equivalents at its disposal for investing. This entity is primed and ready to take advantage of any market downturns, or advantageous scenarios. The company is set up for continued success.
