It’s tough to compete with the success of Warren Buffett. Here are three investments from the Berkshire Hathaway portfolio that I love.
It’s hard to call Warren Buffett anything but the king of investing. The “Oracle of Omaha”‘s company, Berkshire Hathaway (BRK.A) (BRK.B 0.27%) has seen its shares outpace the S&P 500 by over 931% since 1998. Buffett and the late Charlie Munger made this epic run by focusing on quality and value. Here are three investment options from Berkshire Hathaway’s portfolio that I think are good long-term options for any investor.
Vanguard S&P 500 ETF
Sometimes the easiest ways are the best ways. Everyone should have an S&P 500-focused index fund in their portfolio, and the Vanguard S&P 500 ETF (VOO 0.43%) fits the bill. Exchange-traded funds (ETFs) like this one focus on tracking the movements of the S&P 500. This Vanguard fund is a simple and easy way to gain broader exposure to large-cap stocks in the market.
By simply investing in the market through an instrument such as this, investors have passively seen their share price nearly double over the last five years. This is perhaps the simplest, most straightforward investment strategy there is. Even the best of hedge fund managers often struggle to outpace the S&P 500, and an ETF like this should be a piece of any reasonable investor’s portfolio.
Moody’s
My thesis for Moody’s Corp (MCO 0.51%) is simple. The business of bond credit ratings is not going to go away anytime soon, and Moody’s is pretty much at the top of the food chain. It’s outpaced the S&P 500 by 22% over the last five years, and by a much much broader margin over the long term, so Moody’s just makes sense. The credit rating behemoth has had a great 2024 so far, with revenues up 22% year over year and diluted earnings per share up 32% year to date through the third quarter.
For the full year, Moody’s is anticipating diluted earnings of $10.85 to $11.05 per share. Going on the conservative end of that guidance, the stock is admittedly a little pricey at over 40 times forward earnings, but when you have such a steady and integral business, it’s hard to overlook this stock.
American Express
American Express (AXP 0.97%) tends to offer a credit card for the higher-income consumer. That means that the business is likely to keep rolling even if we see weaker consumer trends on a broader basis.
Aside from that niche benefit — though perhaps because of it — I like American Express for its strong annual growth rates, and strong guidance for the remainder of 2024. This is a steady stock. You might not see the wild performance of something like Nvidia, but this is a company that has beaten the S&P 500 by nearly 28% over the last five years.
We’ve seen three years of double-digit revenue growth, and that has continued through 2024. The financial services company reported its 10th consecutive quarter of record revenue growth, reaching $16.6 billion in revenue in its third quarter, an 8% increase year over year. The financial trends are so positive that American Express raised its full-year guidance to $13.75 to $14.05 in earnings per share, compared to previous guidance of $13.30 to $13.80. Conservatively, this would have the stock trading at a forward price-to-earnings multiple of a little under 20 times earnings. According to YCharts, that’s just a little bit above the five-year average.
I think this is one to buy and hold. The use of credit isn’t a fad that’s going away. That makes companies like American Express very appealing for the long-term investor, and I suspect it’s also the reason that Berkshire Hathaway has over $40 billion invested in it.
American Express is an advertising partner of The Ascent, a Motley Fool company. David Butler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Moody’s. The Motley Fool has a disclosure policy.