Berkshire did report some of its latest financials for the quarter ending 30 September 2025 more than two weeks ago. However, this report only told us that Buffett was a net seller of stocks over the quarter. We didn't know exactly which stocks he, or his two investing lieutenants, had actually been buying and selling.

Well, today, that veil has been lifted. Thanks to the company's most recent '13F' filing, we get to have a good look at what's been happening in the Berkshire portfolio.

What has Buffett been buying at Berkshire?

Well, as we've already established, Buffett did a whole lot more selling than buying. Many of Berkshire's top holdings were trimmed. This includes a significant US$10.6 billion sell-down of Apple shares, representing about 15% of Berkshire's position.

Even so, the iPhone-maker remains Berkshire's largest holding, with the company retaining a US$64.9 billion stake. That's roughly 21% of Berkshire's portfolio.

Berkshire also offloaded meaningful chunks of Bank of America, Verisign and D.R. Horton.

Although Buffett, or his underlings, were net sellers of stocks, they were still picking up some shares.

As my Fool colleague Kevin reported earlier today, the most significant new position for Berkshire was in Google-owner Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL). The filing shows that Berkshire initiated its first-ever position in Alphabet over the September quarter. The company recorded a US$4.34 billion position, or just over 17.8 million Class A shares, in Alphabet, as of 30 September.

Who really bought Alphabet stock?

This is a significant development for Berkshire, as Buffett has always shown, and discussed, a reluctance to invest in tech stocks. He famously pined about missing out on Alphabet's success back in 2019, and only initiated a small position in Amazon that same year.

Even the purchase was reportedly initiated by one of Buffett's lieutenants, Todd Combs or Ted Weschler. It's possible, even perhaps likely, that one of those two managers is responsible for the Alphabet purchase. Or perhaps it was a call made by the incoming CEO, Greg Abel. Abel is due to take the reins of Berkshire in January when Buffett sadly is scheduled to step back from the CEO role he has held since the 1960s.

We probably won't find out for a while, if at all.

Some other stocks Berkshire added to over the quarter just gone include Chubb, Domino's Pizza and Sirius XM.

Berkshire's five largest positions remain, in order: Apple, American Express, Bank of America, Coca-Cola and Chevron.

The post Here are the stocks Warren Buffett just bought (and sold) appeared first on The Motley Fool Australia.

But legendary investor Warren Buffett has shown time and again that you don't need to start big to end up wealthy. His golden method for investing has been the same for decades — focus on quality, consistency, and compounding.

Warren Buffett's golden method

Warren Buffett built his fortune by buying high-quality businesses, holding them through thick and thin, and letting time do the heavy lifting. This isn't about chasing the hottest stock or timing the market. It is about patience.

While Buffett has made mistakes, his standout winners all share common traits — durability, strong cash flow, and competitive advantages.

Take Coca-Cola (NYSE: KO). Buffett first bought in the 1980s and still holds billions worth today. It is a global brand with reliable demand and dividends.

Or look at Apple (NASDAQ: AAPL). Despite being a tech stock, it fits Buffett's mould perfectly. It has dominant products, loyal customers, and immense pricing power.

Another classic is American Express (NYSE: AXP). Warren Buffett snapped it up decades ago when others doubted it. Today, it remains a cornerstone of his portfolio thanks to its wide moat in financial services.

Each of these picks shows that Buffett looks beyond the short-term noise. He buys businesses that can compound value over decades.

Easy investing

Don't worry if you don't have time to find picks like the above.

That's because Buffett has long championed the idea of just buying an index fund for easy investing.

For Australian investors, the iShares S&P 500 ETF (ASX: IVV) could be the answer.

This ASX ETF tracks the S&P 500 index, giving you exposure to 500 of America's best stocks — many of the exact types of businesses Buffett has favoured throughout his career.

To put the power of compounding in perspective, investing just $250 a month into the iShares S&P 500 ETF with an average 10% annual return could grow to around $180,000 in 20 years. Stick with it for 30 years and it could swell to nearly $520,000. Starting small today could transform your financial future.

Foolish takeaway

Buffett's golden method is simple: invest in quality stocks, reinvest consistently, and give your money time to grow.

Even if you're starting from scratch today, a disciplined approach could put you on the path to serious wealth over the long run.

The post Near-zero savings? Start building wealth with Warren Buffett's golden method appeared first on The Motley Fool Australia.

In general, Warren Buffett has stayed away from tech companies in Berkshire Hathaway's investment portfolio. But one big tech trend has expanded well beyond tech companies: artificial intelligence (AI). AI is everywhere, and if a business isn't using it to improve productivity and reduce costs, it's going to fall behind.

In fact, some of Berkshire's biggest investments are looking to advance AI research, with clear business benefits if they can improve their algorithms and effectively implement new use cases for generative AI. As such, about 40% of Berkshire's $293 billion portfolio is invested in five companies pushing AI forward.

1. Apple (21.8% of portfolio value)

Apple (NASDAQ: AAPL) has been slow to develop generative AI capabilities. After showing off plans for its Apple Intelligence system over a year ago, the company made very slow progress. Meanwhile, other big tech names continue to push new models and capabilities to their platforms, leaving Apple in the dust.

Apple's biggest challenge is maintaining security and privacy for its users. As a result, it's focused on on-device AI. Practically every other AI system relies on remote servers with powerful GPUs loaded with tons of high-bandwidth memory. That makes them much more powerful, but far less private. As a result, Apple's handicapped itself by focusing on capabilities it can run on an iPhone or Mac.

There's still a lot of time for Apple to catch up though. Its ecosystem of products still has very high retention rates, and with an expanding services segment, more and more users are unlikely to give up their iPhone. In fact, that observation is what led Buffett to make his initial investment in Apple. Its strong brand and customer loyalty give it a massive competitive advantage.

Apple is reportedly exploring potential acquisitions that could expand its AI capabilities, including the potential purchase of Perplexity, an AI-powered search engine. With $133 billion in cash and marketable securities on its balance sheet, Apple can afford to make a big acquisition if it needs to.

Apple stock isn't exactly cheap right now, though. The stock currently trades for about 30 times forward earnings expectations. That high price may be why Buffett sold off about two-thirds of Berkshire's stake in the company last year.

2. Amazon (0.8%)

Amazon (NASDAQ: AMZN) was also slow to catch onto the AI trend relative to its peers in cloud computing. It worked quickly to catch up, though, developing Amazon Bedrock and acquiring a significant stake in Anthropic, ensuring access to leading edge models and a massive customer for Amazon Web Services.

Since mid-2023, Amazon's cloud computing segment, AWS, has reaccelerated its growth, driving strong demand for AI services on its platform. In fact, management says it remains supply constrained and committed to spending about $100 billion on capital expenditures this year, mostly going toward building new data centers.

Meanwhile, Amazon's integrated AI capabilities into its logistics network to ensure inventory is well positioned across its warehouses in the United States. That's enabled it to offer more items with one-day shipping for Prime members and reduce its shipping expenses per unit. As a result, Amazon's retail business has seen strong operating margin improvement over the last few years.

Amazon's decision to sink tons of cash into building new data centers to meet the insatiable demand for AI-related compute has weighed on its free cash flow. As a result, the stock looks expensive relative to its free cash flow over the trailing 12 months. But if and when Amazon takes its foot off the gas with capital spending, it should prove a good value at its current price with strong future free cash flows.

3. American Express (15.8%)

Even a company that's 175 years old can still prove an innovator in AI. American Express (NYSE: AXP) looked to incorporate AI across its business, and it's helping improve its operations.

American Express uses AI to help identify and prevent fraud for its customers. Its algorithms can analyze real-time data and help make a decision whether a transaction is suspicious and needs further confirmation or not.

Amex also uses AI to target offers for potential and existing customers. These help improve its marketing efforts, optimizing customer acquisition costs and retention rates.

Internally, Amex integrated AI into its IT support system, which dramatically reduced the number of tickets requiring human intervention. Its travel concierge team also uses generative AI tools to curate travel recommendations personalized for each customer based on their purchasing habits with Amex.

One of the fastest growing sources of revenue for Amex over the past few years has been the annual fees on its cards. Its ability to continue raising the fees on its products speaks to the strength of its brand and its ability to provide better customer experience and create more enticing offers for its customers.

With the stock trading at 20 times earnings, shares still look relatively attractive. The company is pushing its revenue growth higher led by higher annual fees without losing customers, and that's pushing its margins higher as well. As such, the company's expected to produce double-digit earnings-per-share growth.

4. & 5. Visa (1%) and Mastercard (0.8%)

Visa (NYSE: V) and Mastercard (NYSE: MA) are both using AI in similar ways to improve their payments networks. Like Amex, they've each developed their own machine learning algorithms to help prevent fraudulent transactions. But they're also developing tools for AI that could increase the number of transactions on their payments networks.

Visa and Mastercard are developing systems that will enable AI agents to use credit card credentials to make transactions on behalf of individuals or businesses. By working with AI systems to ensure security, both payments networks are positioning themselves to be at the center of advancements in agentic AI capabilities. For example, you could have AI restock office supplies and cater next week's lunch, and it will simply do it without any further input.

Both payments networks are well positioned, winning the vast majority of electronic payments partnerships with credit card issuing banks. As the two largest payments networks, they exhibit strong economies of scale and produce very high margins. And if AI can push more transactions onto their networks, it could see improved revenue and profits over the next few years.

The two stocks trade for much higher valuations than American Express, at 31 times earnings for Visa and 35 times earnings for the smaller, but faster-growing Mastercard. Those valuations may be a bit high for both companies, as they're expected to grow revenue at a high-single-digit to low-double-digit rate with modest operating margin expansion. While both companies have strong competitive moats thanks to their scale, it might be worth holding off for a better price.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Warren Buffett has 40% of Berkshire Hathaway's $293 billion portfolio invested in 5 artificial intelligence (AI) stocks appeared first on The Motley Fool Australia.

According to CNBC's Berkshire portfolio tracker, Buffett, as of 31 March, has US$347.7 billion in cash and cash-equivalent investments ready to go at Berkshire. That cash pile is worth more than the combined public stock portfolio of Berkshire right now (although not if combined with its private, unlisted investments). It's also the highest cash position Berkshire has ever had. Not a bad problem to have, all things considered.

But let's move from the factual to the hypothetical. If I had a cash pile as large as Warren Buffett's, what would I spend it on?

Well, apart from a nice house and perhaps a vintage Aston Martin DB5, I would, of course, buy stocks.

The ASX shares I would buy with Buffett's cash pile

I would be happy to spend a large chunk of the pile on a simple index fund tracking ASX shares, probably the Vanguard Australian Shares Index ETF (ASX: VAS). This exchange-traded fund (ETF) offers investors exposure to the largest 300 shares listed on the ASX, weighted by market capitalisation.

This is a great hands-off investment that will likely grow in line with the broader Australian economy over time, which I find appealing as a cornerstone investment.

Following VAS, I would then opt for some additional ASX shares that balance a supply of reliable dividends with some of the ASX's most exciting growth stocks.

For dividends, I would choose a mixture of Washington H. Soul Pattinson and Co Ltd (ASX: SOL), Coles Group Ltd (ASX: COL), Telstra Group Ltd (ASX: TLS), Wesfarmers Ltd (ASX: WES), and National Australia Bank Ltd (ASX: NAB). These companies all have a strong history of providing hefty and steadily rising dividends, which is a trait Buffett himself often looks for.

I would add investments in TechnologyOne Ltd (ASX: TNE), REA Group Ltd (ASX: REA), and Xero Ltd (ASX: XRO) for some growth exposure too.

Never bet against America

But I wouldn't just stick with ASX shares. Warren Buffett himself has expressed his belief that the US markets, and the companies that reside on them, are the world's best. As such, I would probably invest more of that enormous cash pile into US stocks than those on the ASX.

My top priorities would be the companies that are leaders in their fields and have a long history of delivering for shareholders. I would start with the magnificent seven stalwarts Amazon.com Inc (NASDAQ: AMZN), Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL), and Microsoft Corporation (NASDAQ: MSFT). I think these names are the best that the US currently has to offer, and have long growth runways still ahead of them.

Then, I would add quality names like Mastercard Inc (NYSE: MA), Netflix Inc (NASDAQ: NFLX), American Express Inc (NYSE: AXP), and Costco Wholesale Corp (NASDAQ: COST).

Perhaps I would also consider Caterpillar Inc (NYSE: CAT), McDonald's Corporation (NYSE: MCD), and Procter & Gamble Inc (NYSE: PG).

With these stocks, which range from growth engine companies like Mastercard to consumer staples fortresses like Procter & Gamble, I think I would have a portfolio that could look after my family's financial interests for the rest of my days.

Shame about the lack of a Buffett-style cash pile, though.

.

The post If I had a big cash pile like Warren Buffett, here's how I'd spend it in 2025 appeared first on The Motley Fool Australia.

Buffett has been at the helm of Berkshire for as long as anyone can remember – 1962, to be specific. Over the subsequent six decades, he has led Berkshire to unprecedented success. He has delivered a compounded annual growth rate of almost 20% per annum for Berkshire shareholders and turned the company into one of the largest in the world.

But time sadly waits for no one. At the age of 94, Buffett has finally decided to close the curtain on what is arguably the most consequential career in American corporate history.

Berkshire's board has just formally determined that Buffett will be succeeded by his hand-picked vice-chair, Greg Abel, on 1 January 2026. Saying that, it has also elected Buffett to stay on as chairman of Berkshire. So he isn't riding off into the sunset just yet.

So, now that we know Buffett's decades-long tenure as Berkshire CEO is sadly coming to an end, it's a great time to look back on some of the best decisions of his career.

Warren Buffett's best bets

Many of Warren Buffett's best investments are his most famous. And his most famous investment is arguably the US$1.3 billion stake that Buffett first started amassing in Coca-Cola Co (NYSE: KO) back in the 1980s. Buffett has long been known for his love of the classic American soft drink, with the distinctive red cans usually on his desk at Berkshire's annual shareholder meetings.

Buffett reportedly wanted to buy Coca-Cola shares for years. But, in classic Buffett style, he bided his time until the right price came along. Back in his 2022 letter to shareholders, Buffett confirmed that Berkshire received a total of $704 million in dividends alone (up from US$75 million in 1994) from that US$1.3 billion investment.

That means his yield on cost had grown to an astonishing 46.9% of his original investment. It would be even higher today, noting Buffett's quip that dividend "growth occurred every year, just as certain as birthdays".

The US$1.3 billion Coca-Cola position? It's now worth almost US$28.7 billion.

It's a similar story with another famous Buffett investment – his purchase of American Express Inc (NYSE: AXP). Buffett first bought American Express stock in the 1960s, but accelerated Berkshire's buying up until the 1990s. By 1995, the company's stake was also worth US$1.3 billion. In that same letter, Buffett revealed that the dividends from Amex shares had risen from US$41 million in 1995 to US$302 billion by 2022. The total position is today worth US$42.15 billion.

The best until last…

A final winner to note has been one of Buffett's more recent buys. And, despite some selling over the past year or so, it remains Berkshire's largest investment by far. It is none other than Apple Inc (NASDAQ: AAPL).

Despite an aversion to tech companies (more on that later), Buffett first started buying Apple stock back in 2016 when the company was around US$25 per share, and loaded the boat over that year and 2017. He eventually amassed a ~$US$35 billion stake, which subsequently rode a 915% increase in the Apple share price by December 2024. This stake was worth north of US$170 billion by 2023, but Buffett has sold a lot of that since.

Today, Berkshire's Apple investment sits at US$59.67 billion. In the weekend shareholder meeting, Buffett stated that "I'm somewhat embarrassed to say that [longtime Apple CEO] Tim Cook has made Berkshire a lot more money than I've ever made".

The post Warren Buffett's career in review: His best investment decisions appeared first on The Motley Fool Australia.

The new year can be a time to reevaluate your portfolio. Did you buy too many high-risk stocks that did poorly in 2024? Now is the perfect time to switch things up and build a durable portfolio that can sustain and grow your wealth over the long haul.

Many of us wait for the new year to invest more money into our retirement accounts. Maybe you had a nice bonus at the end of 2024 that you want to tuck away as savings. If you have $10,000 ready to invest in 2025, there are plenty of cheap-looking stocks you can buy and hold for the long haul.

Here are three stocks legendary investor Warren Buffett owns at Berkshire Hathaway to buy in 2025.

1. American Express: A durable credit card giant

One of Buffett's largest and longest-held positions is American Express. The credit card giant has been a fantastic long-term performer, especially since Buffett started buying it in 1991. With its vertically integrated payments network, American Express has a competitive position over other credit card companies. And with big travel perks like travel lounges, hotel deals, and cash-back savings with partners such as Uber, American Express has an enviable position with wealthy clients around the world.

This value proposition is why American Express should durably grow over the long haul, and why Buffett has never sold a share since initially buying the stock. The brand continues to add new credit cards to its network — 3 million added last quarter alone — which will drive more spending and profits over the long term.

Management sees revenue growing 10% annually and earnings per share (EPS) growing even faster. Today, the stock trades at a price-to-earnings ratio (P/E) of 23. That's slightly above the company's long-term average, but is still attractive for a business that plans to grow EPS at the mid-teens level annually. Buy some American Express stock for your portfolio in 2025 and sit tight with the position.

2. Occidental Petroleum: US fossil fuel production

The world still consumes oil and natural gas. Fossil fuels have been a big part of our energy picture and will be for decades. Even places like Norway — which has rapidly adopted electric vehicles — still consume similar levels of oil compared to a few decades ago.

The United States is far behind in electric vehicle adoption and is in a transition of rapid industrial build-out due to the government's reshoring policy. One big beneficiary of these trends should be Occidental Petroleum, one of the largest oil and natural gas producers in the United States. Last quarter, the company was producing 1.4 million barrels of oil (or natural gas equivalent) per day, which was a record. Even with oil prices well below highs set a few years ago, Occidental Petroleum generated $1.5 billion in free cash flow last quarter.

Over the last 12 months, Occidental Petroleum has generated $4.5 billion in free cash flow. This looks rather cheap versus a market cap of $49 billion, and likely why Buffett has piled into the stock. Unless oil prices crash, this stock will do well over the long term and can be a permanent energy hedge for your portfolio in 2025 and beyond.

AXP PE Ratio data by YCharts

3. Ally Financial: Banking for the 21st century

The last stock on my list is a lot smaller than Occidental Petroleum and American Express, making it a smaller position in the Berkshire Hathaway portfolio. Still, the conglomerate is the company's largest shareholder and owns around 10% of its common stock. Enter Ally Financial, one of the largest digital banks in the world.

Spun out from General Motors during the financial crisis, the automotive lending giant turned itself into an online-only consumer bank, with over $100 billion in deposits. Customers have flocked to the bank because of the high interest rates it pays on deposits, something legacy banks can't match with higher overhead costs.

Investors are tepid about Ally Financial because of rising loss rates in the automotive sector and the headwinds presented by rising interest rates on its loan book. With the Federal Reserve lowering interest rates and the automotive sector stabilising, I think Ally Financial can get back on the right footing in 2025. Buffett and his team likely agree, which is why they haven't sold a single share during this downturn.

As of this writing, Ally Financial has a P/E of around 15 based on a net income figure that is well off of its all-time high. As earnings recover in 2025 and 2026, Ally's P/E should shrink to dirt-cheap levels, which will likely lead to a rising stock price, rising dividend payouts, and share repurchases. This formula should make investors who buy and hold Ally stock quite happy over the long haul.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post The best Warren Buffett stocks to buy with $10,000 in 2025 appeared first on The Motley Fool Australia.

Rising over 13% in 2024, the Dow Jones Industrial Average lagged the S&P 500, which soared 23%. But the diversity among the performances of the individual Dow Jones stocks was considerable.

While Boeing dragged the index down last year, Nvidia (NASDAQ: NVDA) took up the slack and was the best-performing Dow Jones stock of 2024. Let's take a look at the other names that rounded out the top-performing Dow Jones stocks.

1. Nvidia (up 171%)

From consistently surpassing analysts' expectations when it reported quarterly financial results to proclaiming that it continues to benefit from enthusiasm surrounding artificial intelligence (AI), Nvidia -- a new addition to the Dow Jones -- provided investors with plenty to get excited about last year.

2. Walmart (up 72%)

Walmart (NYSE: WMT) management had recognised the importance of expanding its e-commerce business to remain competitive, and its initiatives showed success in 2024 -- highlighted in the third quarter of fiscal 2025, ended October 25, 2024, when the company reported comparable sales growth of 22% and 43% for U.S. and international businesses, respectively.

3. American Express (up 58%)

Apple may be the largest holding in the Berkshire Hathaway portfolio, but American Express (NYSE: AXP) holds a prominent spot as the second-largest position. While Warren Buffett sold other financial stocks in 2024, he remained committed to American Express, a financial stalwart that provided investors with plenty of reasons to click the buy button last year.

4. Goldman Sachs (up 48%)

Goldman Sachs (NYSE: GS) achieved consistent year-over-year earnings-per-share (EPS) growth when it reported quarterly financial results last year, one of many reasons why investors chose to buy the banking stock.

5. Amazon (up 44%)

Failing to match its 167% gain in 2023, Amazon (NASDAQ: AMZN) stock still rose notably last year as investors chose it for its prominent position in AI as well as its commanding e-commerce presence.

Should you buy these Dow Jones darlings now?

While the top-performing Dow Jones stocks of 2024 are worthy of serious consideration, potential investors should certainly perform their due diligence to ensure that the stocks match their individual investing goals.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post These were the 5 top-performing stocks in the Dow Jones Industrial Average in 2024 appeared first on The Motley Fool Australia.

Apple is well known as Warren Buffett's largest investment at Berkshire Hathaway. It has netted shareholders over $100 billion in gains, making it one of the most successful investments ever.

However, did you know that Buffett has greatly trimmed this position? That's right -- Berkshire Hathaway has been selling Apple shares throughout 2024, likely due to the stock's rising valuation. Clearly losing his optimism about the future returns of Apple stock, Buffett is adding a ton of cash to Berkshire Hathaway's balance sheet, which now numbers over $300 billion.

There is one stock he has never sold since buying in 1991, though: American Express (NYSE: AXP). Buffett owns over 20% of the credit card issuer and bank, making it the second-largest position in the Berkshire Hathaway portfolio. The position trades at a value of $40 billion as of this writing.

Let's see why Buffett is attracted to American Express stock, why he has never sold a share, and whether you should join him and buy shares today.

A durable consumer financing institution

Buffett has been following American Express ever since he first bought shares in 1963. Back then it was a radically different company, dealing in traveler's checks. By 1991, the company had become one of the largest credit card networks in the United States, focusing on serving a premium customer base.

There are a few durable qualities to American Express' business model. It sells high-fee credit cards such as the Platinum card, which debuted in 1984. People sign up for these cards because of the travel benefits and premium perks such as access to airport lounges. However, they also come with an intangible brand benefit built up over the last few decades. Customers feel like they are in an exclusive club shopping with the metallic American Express cards, which gives the company a brand value that is tough to replicate.

On the back end, the American Express infrastructure is hard to replicate. Like Visa and Mastercard, American Express has been entrenched as a payment method for merchants for decades. If another credit card network were to try to compete, it would have to go to virtually every merchant across the country to try to convince them to add another credit card to its payment terminal. This is an uphill battle that insulates American Express from the competition.

Buffett likely saw these qualities in 1991 when he bought American Express for Berkshire Hathaway. Since then, American Express stock has posted a cumulative total return of 10,130%. Even though Buffett has only purchased more shares a few other times since 1991, the stock has compounded at such a high rate that it now makes up a large portion of his equity portfolio.

Buffett's never-sell mentality

Many, perhaps most, people have sold American Express while Buffett remains a shareholder. This is a lesson for beginning investors: You don't generate wealth by buying a stock, but by holding it for the long term.

Buffett espouses this mentality for what he deems the best businesses in the Berkshire Hathaway portfolio. As long as he believes American Express stock isn't getting to an unreasonable valuation and still has plenty of runway left to grow, he believes the best course of action is to just hold. Long holding periods for your big stock winners is a lesson investors should take away from studying Buffett, with American Express being the quintessential example.

If you think this contradicts the Apple sales, readers should note that Apple is still Buffett's largest stock holding today. He likely didn't want too large of a position in a slow-growth company trading at a price-to-earnings ratio (P/E) of 37. American Express still has plenty of runway left to grow, especially with its permanent inflation hedge. As a take-rate of the entire payments space in the United States (and increasingly around the world), American Express' revenue grows along with inflation.

AXP PE Ratio data by YCharts

Is American Express a buy today?

American Express stock is having a phenomenal year, up 58% year to date (YTD) as of this writing. The stock has a P/E of 22, which is much lower than Apple but higher than its historical average.

Even so, I think American Express can do well by shareholders over the long term. Management believes it can grow earnings per share (EPS) at around 15% through acquiring new customers, inflation, pricing power, and its robust share repurchase program. Even if the stock's P/E compresses, investors should benefit by holding it over the long term -- which is why Buffett isn't selling a single share.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Is this Warren Buffett's favourite US stock? (Hint: it's not Apple) appeared first on The Motley Fool Australia.

In fact, the last dividend Berkshire paid out was back in the 1960s. Buffett has even joked that he must have been in the bathroom when the payment was approved.

Ever since then, Berkshire shareholders haven't received a single dollar of dividend income.

But that doesn't mean Buffett himself is averse to receiving dividends. In fact, Berkshire is probably one of the largest single recipients of dividend income in the world. Our Foolish colleagues in Buffett's home country of the United States estimated back in June that Berkshire is on track to bank more than US$6 billion in passive dividend income over the coming 12 months.

What's even more mindboggling is that it is estimated that US$5.17 billion of that passive income will be coming from just seven underlying shares in Berkshire's portfolio.

Those Berkshire bankrollers are as follows:

• Occidental Petroleum Corp (NYSE: OXY)
• Bank of America Corp (NYSE: BAC)
• Apple Inc (NASDAQ: AAPL)
• Chevron Corporation (NYSE: CVX)
• Coca-Cola Co (NYSE: KO)
• Kraft Heinz Co (NASDAQ: KHC)
• American Express Company (NYSE: AXP)

So Buffett is someone who evidently knows a thing or two about building a stream (in this case a raging torrent) of passive income.

But how can we take Warren Buffett's experience to our own ASX and build a stream of passive income from ASX dividend shares that will last a lifetime, as Buffett's has?

Building a Buffett-inspired passive income portfolio

I think there are two key lessons here.

The first is that investors should find high-quality dividend payers that have the financial strength to raise their dividends over time in a meaningful, inflation-beating way.

Take Apple and Coca-Cola. Apple only started paying its investors dividends in 2012. But since then, it has increased its annual payouts substantially every year. Just this year, the technology titan boosted its quarterly dividend payouts by 4.35% from 23 US cents a quarter to 24 US cents.

Meanwhile, Coca-Cola has one of the best dividend growth streaks in the world, having just raised its annual dividend for the sixtieth (yes, 60) year in a row.

The second is that investors should seek a wide range of these quality passive income payers. You'll notice that of those seven Berkshire bankrollers listed above, two are oil shares (Chevron and Occidental), one is a tech stock (Apple), two are financials stocks (Bank of America and American Express), and two are consumer staples giants (Coke and Kraft-Heinz).

Buffett, and Berkshire by extension, is thus able to rely on a wide range of top-tier companies that all operate in different corners of the market. This reduced the portfolio's single-sector risk substantially and ensures that Berkshire's stream of passive income remains strong.

I myself attempt to incorporate these two lessons into my own passive income portfolio. That's why I invest in a range of high-quality shares like Washington H. Soul Pattinson and Co Ltd (ASX: SOL), Wesfarmers Ltd (ASX: WES), National Australia Bank Ltd (ASX: NAB), MFF Capital Investments Ltd (ASX: MFF), Telstra Group Ltd (ASX: TLS), and Endeavour Group Ltd (ASX: EDV).

Collectively, I hope these companies will be half as kind to me in terms of generating passive income as Buffett's investments have been to him.

The post Here's how I'd use the Warren Buffett method to target lifetime passive income from ASX shares appeared first on The Motley Fool Australia.

He's the poster boy for growth investing, perhaps more precisely growth-at-a-reasonable-price (GARP). 

However, if you look closely at how his investment vehicle Berkshire Hathaway Inc (NYSE: BRK.A) rakes in dividends, you might think differently.

The Motley Fool US reported earlier this year that the company is due to collect a whopping US$6.1 billion of dividends in 2023 from just a handful of stocks.

Recently The Motley Fool US' Keith Speights profiled five of these income stocks that Buffett relies on.

For those Australians that dabble in ASX shares, it's easy enough to try to replicate what the world's most famous investor does.

Here are my five ASX dividend shares that are similar to Buffett's beauties:

1. Apple Inc

The tech giant is Berkshire Hathaway's largest position currently.

Within the ASX, I think online jobs classifieds platform Seek Ltd (ASX: SEK) has similar qualities to Apple Inc (NASDAQ: AAPL).

Seek has been one of the leaders in the Australian technology scene over the past 26 years, and has delivered much handsome capital growth for investors.

But, as a mature company, it also spits out a small but useful fully franked dividend yield of 2%.

That's actually better than Apple's yield of just 0.5%.

2. Bank of America

According to Speights, Buffett has recently gone cool on the banking sector but Bank of America Corp (NYSE: BAC) seems to be an exception.

"After Buffett bought more BofA shares in the first quarter of 2023, Berkshire now owns close to US$29.6 billion of the stock."

For me, Macquarie Group Ltd (ASX: MQG) is the ever-reliable financial giant that can match it with the likes of Bank of America.

In fact, over the past five years stocks of the Aussie investment bank have done far better than its American counterpart.

Over that time the Macquarie share price has risen 40.4%, while Bank of America has actually lost almost 1%.

The Australian company pays out better dividends too, with a current 4.3% yield of which 40% is franked. That compares to 3.1% for Bank of America.

3. American Express

The credit card company is one of Buffett's oldest holdings, according to Speights.

"The legendary investor first bought shares of American Express Company (NYSE: AXP) for Berkshire's portfolio three decades ago," he said.

"Amex is also one of Berkshire's biggest positions, with a valuation of over $26 billion."

For me that durability is matched on the ASX by the likes of Washington H Soul Pattinson and Co Ltd (ASX: SOL).

Soul Pattinson is well-known for constantly hiking its dividends each year. In fact, that streak hasn't been broken since 2001.

Add to that share price appreciation of 646% since November 2001 and full franking of the dividends, and you have yourself an enduring winner.

4. The Coca-Cola Company

Perhaps one of the most famous symbols of American consumerism, I think the beverage giant's equivalent on the ASX is supermarket chain Coles Group Ltd (ASX: COL).

Much like Coca-Cola Co (NYSE: KO), the Australian supermarket chain enjoys loyal patronage through economic downturns.

And Coles plays in a near-duopoly, which is a market position similarly strong to Coke.

As recession fears have played out, the Coles share price has soared more than 9.1% higher year to date.

The supermarket pays out a more-than-handy dividend yield of 3.35%, which is fully franked no less. 

This beats Coca-Cola's yield of 3.1%.

5. Chevron Corporation

According to Speights, the oil and gas company is Berkshire Hathaway's fifth biggest investment, even after it sold some off earlier this year.

Chevron Corporation (NYSE: CVX) is one of Buffett's best income producers, with a dividend yield just shy of 4%.

For mine, Whitehaven Coal Ltd (ASX: WHC) is an Australian match.

Both stocks are obviously correlated to energy and oil prices, which in turn fluctuate according to the economic cycle and the whims of OPEC.

Both produce energy that will be valuable as the world awaits renewable infrastructure to play catch up and to backfill the missing supply from Russia.

The Whitehaven share price has gained a handsome 40% over the past year, while paying out a stunning dividend yield of 10.7% fully franked.

That's the sort of income that US stocks can rarely match.

The post Warren Buffett has $400 billion invested in these 5 dividend stocks. Here are some ASX shares I think are similar appeared first on The Motley Fool Australia.

We are very fortunate to be able to get a comprehensive look at Warren Buffett's investments every three months. That's because his investment house, Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B) is a publically traded company that has to disclose its investments every quarter.

So to kick things off, let's take a look at the current top ten investments of Berkshire Hathaway, according to CNBC's Buffett portfolio tracker:

1. Apple Inc (NASDAQ: AAPL), at 47% of Berkshire's portfolio
2. Bank of America Corp (NYSE: BAC) at 8.3%
3. Coca-Cola Co (NYSE: KO) at 7.5%
4. American Express Company (NYSE: AXP) at 6.7%
5. Chevron Corporation (NYSE: CVX) at 6.2%
6. Kraft Heinz Co (NASDAQ: KHC) at 3.9%
7. Occidental Petroleum Corporation (NYSE: OXY) at 3.6%
8. Moody's Corp (NYSE: MCO) at 2.3%
9. Activision Blizzard Inc (NASDAQ: AVTI) at 1.2%
10. HP Inc (NYSE: HPQ) at 1.1%

So a rather interesting and somewhat eclectic collection of investments there.

How to invest, Berkshire Hathaway style

What immediately stands out is Berkshire's massive stake in Apple. At 47% of Berkshire's entire portfolio, it's clear that Buffett has chosen this company as its ride-or-die stock. And it's not hard to see why. Apple indisputably possesses one of the best brands on the planet. The company and its management are of the highest calibre and have shown a consistent ability to generate monstrous profits for decades now.

The other investments are worth analysing on their own merits though. Bank of America, American Express, and Moody's are all financial stocks. Chevron and Occidental are both oil shares. Coca-Cola needs no explanation and nor does food behemoth, Kraft Heinz. Activision Blizzard is a gaming giant behind names like Call of Duty and World of Warcraft. And HP Inc is the office supplies company most of us would be familiar with.

So how would Buffett invest $5,000 in ASX shares today if he could? It's difficult to compare the ASX and US markets, seeing as we simply don't house the same kinds of world-dominating companies that America does.

But let's give it a go anyway.

If I were to deploy $5,000 into ASX shares to try to replicate a Buffett portfolio, here's what I would do.

Building a $5,000 ASX share portfolio like Buffett

I would start with $1,000 in Commonwealth Bank of Australia (ASX: CBA) shares. CBA is Australia's largest bank and shares many of the same characteristics as Bank of America. CBA also provides popular credit products, a la American Express, and provides other financial services for ASX bankers and investors, although not quite in the same manner as Moody's.

But I, and many other analysts, regard CBA as the ASX's best-run bank, and I think that it would be Buffett's pick on the ASX.

Another $1,000 would go into Woodside Energy Group Ltd (ASX: WDS) shares. Woodside is the ASX's largest oil and gas producer, and shares similarities with Occidental and Chevron in this regard. Buffett is clearly bullish on energy right now, and I think Woodside would be a strong contender for energy exposure on the ASX.

Bega Cheese Ltd (ASX: BGA) could be a nice local substitute for Kraft Heinz. Bega's dairy products and nut spreads are popular here in Australia, and provide similar exposure to the kinds of defensive consumer sales products as Kraft Heinz. So there's another $1,000 gone.

With the final $2000, I would invest in the iShares S&P 500 ETF (ASX: IVV). For one, Buffett has often touted the benefits of investing in a low-cost S&P 500 index fund, which the IVV ETF most certainly is.

However, the primary reason I have chosen this ETF is that it gives us ASX investors an easy way to invest in many of those top Buffett holdings ourselves. Buffett's top investment, Apple, is also the largest holding in the iShares S&P 500 ETF with a 7.4% weighting. Berkshire Hathaway itself is number six, while Chevron, Coca-Cola, and Bank of America are also weighted towards the top of the pile.

Foolish takeaway

That's how I think Warren Buffett would build a $5,000 ASX share portfolio here on the ASX today. I don't claim to speak for the great man, of course. But I think this is the closest way that ASX shares can reflect the intentions of what Buffett has done with his own holdings.

The post How to invest $5,000 in ASX shares today like Warren Buffett might appeared first on The Motley Fool Australia.

Luckily for us, his stock selections are public knowledge because the investment company he runs, Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B), is listed. So, we get regular updates on his holdings.

Here are Buffett's top 10 stocks by value, according to Berkshire Hathaway's FY22 full-year results released in February.

Top 10 stocks that Warren Buffett owns

What are the lessons for investors buying ASX 200 stocks? 

Buy large-cap ASX 200 stocks

Buffett's top 10 holdings are full of multi-billion-dollar global companies that own household-name brands.

Obviously, he's extremely positive on Apple given the almost 40% allocation of his total portfolio!

He refers to Apple as Berkshire Hathaway's "third-largest business" after its wholly-owned insurance and railroad companies. He reckons Apple is "probably the best business I know in the world".

You could also say he's in love with Bank of America, Chevron, and American Express, given they and Apple together comprise an astonishing 68% of the investment pie!

Large-cap companies are typically industry giants with large valuations (or market capitalisations). Their sheer size is a big factor enabling them to weather all types of economic conditions.

This means safety and stability for the investor.

As mature companies, their share price growth may be limited unless they are in rapidly growing and evolving industries, such as technology (like Apple), or have a global market for their products (also like Apple).

The trade-off in the limited share price growth is strong, reliable, and regular dividends. This makes them a favourite choice among income investors and those who want lower-risk investments.

Fun fact: Buffett's Coca-Cola investment returns $704 million in annual dividends.

The three biggest large-cap ASX 200 stocks available to investors are BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), and CSL Limited (ASX: CSL). 

Buy and hold high-quality businesses for the long term

Buffett is a value investor, meaning he targets high-quality businesses and buys them when they are trading below their intrinsic worth or book value.

He also describes himself as a "business picker" rather than a "stock picker".

That means he uses fundamental analysis to get a real understanding of the companies he is considering buying, and to keep tabs on the ones he already owns. He spends most days in his office reading.

Buffett buys long, which means he's patient. He doesn't get caught up in the day-to-day price movements of his investments based on announcements with short-term share price ramifications.

Buffett's strategy means he has fun in both bear markets and bull markets. How smart is that?

Bear markets provide opportunities to buy below value, and bull markets power up those share prices.

A few examples of long-term holds within Buffett's top 10 stocks are Bank of America, which he first purchased in 2011, American Express (1964), Moody's (2000), and Coca-Cola (1988).

He bought Coca-Cola just months after the Black Monday 1987 market crash. He saw an opportunity to nab a high-quality business while the share price was down, and he went hard too — putting $1 billion into the stock. That's a big number today, let alone back in 1988!

There's also a lesson in moving with the times and adapting your investments in accordance with general business and societal trends, such as the rise of technology.

Buffett first bought Apple in 2016 and Activation Blizzard in 2021. Apple is the biggest US tech stock and Activation Blizzard is in the top 30.

The biggest ASX 200 information technology stocks are WiseTech Global Ltd (ASX: WTC) and Xero Limited (ASX: XRO). But they're babies in size compared to the big US tech stocks.

Keep cash on hand for opportunities

As we covered last month, Buffett moved US$23.3 billion (A$35 billion) from the market into cash between 30 June and 31 December 2022.

Berkshire Hathaway went into 2023 with cash, cash equivalents, and treasury securities (bonds) worth US$128.7 billion.

In his annual newsletter released in February, Buffett explained:

As for the future, Berkshire will always hold a boatload of cash and U.S. Treasury bills along with a wide array of businesses.

We will also avoid behavior that could result in any uncomfortable cash needs at inconvenient times, including financial panics and unprecedented insurance losses.

Spare cash means you can enjoy some satisfying dollar-cost averaging on ASX 200 stocks when the market is down.

Let's talk about diversification

In total, Buffett has 49 stocks in his portfolio, which sounds like a lot. But it's not when you look at the enormity of the whole pie (about US$340 billion).

In short, he's got huge sums invested in each of those 49 stocks. Using the top 10 as an example, if one of those companies goes bust, he'll lose billions. That's probably why they're all large caps. The likelihood of a large cap going under is incredibly small, so perhaps that's why Buffett feels safe to invest big.

Things look a little different when you're an ordinary investor with, say, $50,000 in ASX 200 stocks. You can't really afford to make mistakes and not having a diversified portfolio is a huge one for us.

We should point out that Buffett has good diversification across different industries.

Diversification is important because it gives you safety. The more ASX 200 stocks you hold and the more industries you are exposed to, the lesser your risk.

We don't know what is around the corner. Imagine holding a portfolio full of travel stocks in early 2020.

A quick way of ensuring you have great diversification is not to bother trying to pick ASX 200 stocks at all. Instead, take Buffett's advice and buy a low-cost S&P 500 index fund instead.

That's his key recommendation for ordinary investors looking to set themselves up for retirement.

The S&P/ASX 200 Index (ASX: XJO) closed the session yesterday at 7,362.2 points, down 0.05%.

The post Which stocks does Warren Buffett own (and what can ASX 200 investors learn from this)? appeared first on The Motley Fool Australia.

While market watchers might find day trading tempting, it's rarely a useful wealth-building tool. In fact, research conducted between 2013 and 2015, cited by CNBC, found 97% of persistent day traders lose money.

It's also the opposite approach to that which billionaire investing great Warren Buffett recently touted as the stock market's "secret sauce". That is: time.

Let's dive into the wisdom that helped Buffett build his US$104.6 billion fortune, and that might help me build mine.  

Warren Buffett's 'secret sauce' to wealth building

Buffett's recently released annual letter to Berkshire Hathaway shareholders once again reiterates the billionaire and his partner Charlie Munger are "not stock pickers; we are business pickers".

And on that note, he delved into some of the massive wins he's chalked up over the decades.

The first being Coca-Cola. Buffett's listed holding company snapped up 400 million shares in Coke for US$1.3 billion over the seven years ended 1994. Similarly, Berkshire Hathaway bought US$1.3 billion of American Express stock over the years to 1995.

Today, those respective holdings bring in US$704 million and US$302 million in dividends. Not to mention, they were worth US$25 billion and US$22 billion respectively at the end of 2022.

Such massive wins bring a key lesson to investors, says Buffett:

The weeds wither away in significance as the flowers bloom. Over time, it takes just a few winners to work wonders.

Investing for the long term

Even Buffett admits his investing results are "the product of about a dozen truly good decisions". But, perhaps more importantly, they're decisions he has stuck by.

That means investing for the long-term, rather than a day. It also means he's seen his wealth compound over and over.

Meanwhile, Arizona State University finance professor Hendrik Bessembinder's widely-cited research, later replicated in Australia, found just 4% of US stocks were responsible for all of Wall Street's gains.

Bessembinder advises that building a diverse portfolio of shares is often the best way to build wealth on the stock market.

My takeaway from such advice is to invest in a diverse range of companies you truly believe can outperform when they're trading at a reasonable price, then sit back and watch them do just that – a strategy that is quite the opposite of day trading.

Munger's 2-cents

Buffett's business partner Munger has also weighed in on what he thinks is the key to investing. He said the pair avoid the market's 'froth', continuing:

The world is full of foolish gamblers, and they will not do as well as the patient investor.

Munger also pointed to a quote from Ben Graham, who is widely regarded as the father of value investing. He once said:

Day to day, the stock market is a voting machine; in the long term it's a weighing machine.

In my opinion, the two quotes perfectly encapsulate the difference between day trading and long-term investing.

In the short term, investing is arguably a game of popularity. However, over time the market will typically weigh a company's fundamentals, driving the value of quality businesses higher to the benefit of patient shareholders.

The post Forget day trading! I'd use Warren Buffett's 'secret sauce' to build wealth appeared first on The Motley Fool Australia.

After taking over Berkshire in the mid-1960s, Buffett transformed the textiles company into a diverse powerhouse, owning many businesses outright and with significant investments in many other public companies.

Buffett's love of his investments is also well known. He even likes to remind shareholders of his commitment to the Coca-Cola Co (NYSE: KO) by typically sporting a can or a bottle at Berkshire's annual general meeting every year.

Berkshire Hathaway's massive portfolio

Berkshire owns stakes in more than 50 different publically-traded shares. But it might surprise investors to learn that almost 74% of Berkshire Hathaway's public investing portfolio is concentrated in just five companies. That's according to the company's latest 10Q filing, which is accurate as of 30 September.

Some famous names appear in Berkshire's list. There's Amazon.com Inc (NASDAQ: AMZN), Johnson & Johnson (NYSE: JNJ) and Visa Inc (NYSE: V). Buffett also owns chunks of Activision Blizzard Inc (NASDAQ: ATVI), Chinese electric vehicle manufacturer BYD Co Ltd and the relatively new-to-the-markets Snowflake Inc (NYSE: SNOW).

But none of these companies even come close to Buffett's top five holdings.

They are (from largest):

1. Apple Inc (NASDAQ: AAPL)
2. Bank of America Corp (NYSE: BAC)
3. Chevron Corporation (NYSE: CVX)
4. Coca-Cola Co
5. American Express Inc (NYSE: AXP)

So what can we learn from this?

What can we learn from Warren Buffett?

Well, a few things to point out. Some of these holdings, namely Coca-Cola and AmEx, are old Buffett favourites. Buffett first bought Coca-Cola shares back in the 1980s. His investment in American Express goes back even further to the 1960s.

But others are far newer. Apple is by far Berkshire's largest investment. The company has more than US$128 billion worth of Apple shares, which carves out a whopping 39.7% of Buffett's entire public portfolio. Yet Buffett only began buying Apple shares back in 2016. His Chevron stake is even newer, with Berkshire picking up its first shares in the midst of COVID-ravaged 2020.

So Buffett is clearly an investor that holds onto his favourite shares through thick and thin. American Express is a company that has had many, many ups and downs since Buffett first bought in back in the '60s. Yet Buffett has always stayed the course. Ditto with Coca-Cola.

But he is also an investor who knows how to jump on a trend. Buffett clearly saw the post-COVID collapse in global oil prices as an incredible opportunity.

It only took him two years to build Chevron into Berkshire's third-largest position – one worth US$31.2 billion today. And Apple has gone from absent to Berkshire's largest holding in just a few years as well.

So Warren Buffett is clearly an investor who likes to hold his favourite shares forever. But he is also one that isn't afraid to jump on a trend or a new idea and quickly build it into a sizeable position.

Perhaps above all, Buffett's Berkshire portfolio shows that he is just fine with having 40% of his portfolio in his favourite company: Apple. There are more than a few lessons we mere mortals can take away today.

The post 74% of Warren Buffet's portfolio is in these 5 stocks. Could this help guide which ASX shares to buy? appeared first on The Motley Fool Australia.

A strong bull market for many years may have given some investors the misimpression that everything goes up. For some period of time, that's pretty much what happened, with some growth stocks skyrocketing in price with percent gains in the thousands. It looked easy, because it was. 

Many new investors never experienced a bear market, but many of those early gains have now been completely wiped out. It turns out that it may not be so easy to accumulate wealth overnight or over months.

One consistent voice of reason through decades of ups and downs is guru investor Warren Buffett, who has beaten the market through his value-oriented approach. It's always worthwhile to listen to what he says, but in this kind of market it makes even more sense to make note of what he looks for in a stock. There are several factors that inform his decisions, but there's one that stands out in how he defines a great business.

What is a moat?

Buffett says, "A truly great business must have an enduring 'moat' that protects excellent returns on invested capital." The "moat" he talks about refers to a competitive advantage that makes the business unique and better than others. In a literal sense, a moat protects a castle from oncoming attacks. In the markets, a moat protects a business from challengers.

There are several parts of this formula. One is that the moat has to be enduring. If it's not, it's not really protective. It also has to protect excellent returns on invested capital, which means those need to be there in the first place. If a company seems differentiated but is not performing and posting excellent results, the business will fall apart despite any seeming advantages.

Some excellent examples

Buffett goes on to say:

The dynamics of capitalism guarantee that competitors will repeatedly assault any business "castle" that is earning high returns. Therefore a formidable barrier such as a company's being the low-cost producer...or possessing a powerful worldwide brand...is essential for sustained success. 

He gives several examples. Geico (owned by Buffett's holding company, Berkshire Hathaway) and Costco Wholesale both operate a discount model that is compellingly better than competitors. That's a moat, because they are both hard to challenge.

As for a powerful, global brand, he cites Coca-Cola as an example. Despite years of taste-testing and debates about whether or not Coca-Cola is better than your local off-brand, Coca-Cola can demand high pricing, and loyal customers respond. Coca-Cola remains the largest beverage brand in the world by sales, and its unbeatable brand is a robust sales generator, driving excellent returns on invested capital.

Buffett also mentions American Express as having a moat in its powerful brand. It has a premium image with real perks that attract an affluent clientele. Other credit card companies that cater to a wider mix of customers do not carry the same cachet. 

Stronger moats lead to better stocks

Finding businesses with real moats can lead to higher long-term gains. Buffett made these remarks over 15 years ago, and the examples he mentions have indeed endured. Coca-Cola and American Express remain two of his top holdings, and they have been posting outstanding results in an otherwise slumpy market and volatile economy. Their brands have endured over time and look to carry their companies well into the future. Buffett sold his position in Costco in 2020, but it also remains a top stock. Although only Coca-Cola stock is showing a gain so far this year, all of these stocks are beating the market.

AXP data by YCharts

A strong moat is a mark of a great business. Building one takes an excellent business, a competitive advantage, and the ability to strengthen that advantage over the long term. Shifting your focus to investments that demonstrate these qualities, instead of looking for the next hot growth stock, can lead to more successful long-term investing.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post This is how Warren Buffett defines a great business — and how you should too appeared first on The Motley Fool Australia.

There's a reason so many investors want to own Warren Buffett stocks.

The so-called Oracle of Omaha has trounced the market in his long history an investor. Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) has nearly doubled the annual return of the S&P 500 for nearly 60 years, and thanks to the magic of compounding, that means Berkshire has returned more than 100 times what the S&P 500 has in that time frame.

Luckily, for investors, Warren Buffett's playbook is wide open, and he's made it clear what kinds of stocks he favors. Here are five simple questions to ask to determine if a stock would get the Buffett stamp of approval.

1. Does it have an economic moat?

Buffett's favorite concept in all of investing may be the "economic moat," or what most investors call a sustainable competitive advantage. Buffett once said, "The most important thing [is] trying to find a business with a wide and long-lasting moat around it, protecting a terrific economic castle with an honest lord in charge of the castle."

As he alludes to in that statement, this key attribute protects the company from competitors. Buffett likes stocks with well-known brands such as Coca-Cola or Apple; companies with limited competition and barriers to entry, like the railroad BNSF that he acquired a decade ago; or companies with strong market share and recurring revenue, like GEICO.

If you want to know if it's a Buffett stock, ask yourself if the company can withstand competition over a long period of time.

2. Does it produce cash?

Buffett doesn't generally waste his time with unprofitable growth stocks. He looks for companies that generate cash. 

Buffett likes to own businesses like insurers that produce cash in premiums that come in advance of claims. He refers to this as a "float" that allows him to reinvest that cash in stocks. He also likes sectors such as energy (for example, Chevron stock), which generate high levels of cash flow when oil prices rise. Buffett's a fan of banks and financial companies like Bank of America and American Express that have reliable profit generation from commercial lending, and he's known to invest in utilities and healthcare, which tend to generate steady cash flows.

What you'll find among almost every Buffett stock is that they produce reliable cash flow, and many of them pay a dividend. 

3. Does it have a long track record? 

Warren Buffett doesn't generally chase the latest trends whether they be dot-com stocks in the 1990s or cloud software stocks more recently.

Instead, he prefers to own companies with long track records and operating histories. Often, he's studied these companies for years, or is well-acquainted with their brands. With Coca-Cola, for example, he had seen its success for 50 years before becoming an investor. When Buffett decided to invest in tech, he bought stock in IBM, because he'd followed it for decades and understood the business. While that investment didn't pan out, it nonetheless reflects Buffett's approach of studying a company for a long time.

Similarly, in financials, he prefers legacy banks over fintech, because banks have proven their business models over long periods of time. Not only are they less risky, but they also generate reliable cash flow.

4. Does it outperform in bear markets?

Historically, Berkshire has best demonstrated its fortitude during bear markets. Buffett hoards cash to buy stocks when they're cheap, and he's known for taking advantage of sell-offs like during the financial crisis when he took a high-yielding stake in preferred stock in Bank of America. Berkshire has also outperformed the stock market by a wider margin in bear markets, including this year.

Because many of Buffett's favorite stocks have stood the test of time, they tend to do well in bear markets, and many of his favorite industries -- including consumer staples, insurance, utilities, and healthcare -- are known for being recession-resistant.

Buffett doesn't exclusively buy recession-proof stocks. He owns cyclical stocks in industries like energy, banking, and industrials, but in general, he prefers to buy stocks that can outperform in bear markets or at least have demonstrated an ability to recover from them.

5. Is it a good value?

Finally, Buffett is a classic value investor. He wants to buy stocks that are trading below their intrinsic value, which is typically estimated with a discounted cash flow model.

The quality of the company is more important to the Berkshire chief than the price. He has famously said, "It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

However, if he finds a stock he likes, he'll only buy it if he believes it's a good value at the current price. In the bull market during the 2010s, Buffett often lamented that stocks had become too expensive. With prices now down, it wouldn't be surprising to see Berkshire deploying its cash hoard, which is currently worth more than $100 billion.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Is it a Warren Buffett stock or not? 5 simple questions to ask yourself appeared first on The Motley Fool Australia.

This year has been challenging for investors, with the S&P 500 and the Nasdaq Composite indexes slipping into bear markets. Persistent inflation and rising interest rates have taken center stage, dragging down nearly all asset classes.

A bear market can be a scary time for investors. Nobody likes seeing their portfolio going down. However, at times like this, it helps to think like Berkshire Hathaway Inc. (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett.

Buffett achieved his (and Berkshire's) decades-long success by thinking about the long term and owning companies (or stocks in companies) for years or even decades. you would do well to follow his investing techniques and focus on quality companies, building up your positions slowly rather than trying to time a market bottom. Bear markets offer opportunities to buy stocks at discounted prices, and two Buffett stocks you could invest $1,000 in today that trade at a discount are Visa Inc. (NYSE: V) and Ally Financial (NYSE: ALLY). Let's take a look at why these two Buffett stocks are great long-term investing options.

1. Visa

Visa helps people in more than 200 countries move their money via debit cards, credit cards, and other payment products. Nearly 49% of American adults had a Visa card as of 2020, while about 39% have a Mastercard Incorporated (NYSE: MA) and 15% have an American Express Company (NYSE: AXP). This gives Visa a sizable lead in the payment-processing space: In 2020, the company processed a total volume of $11.4 billion, outpacing Mastercard and American Express, which processed $6.3 billion and $1 billion, respectively.  

The payment company has a sizable lead over the competition because of its widely accepted cards. Not only that, but Visa continues to innovate and expand its offerings to stay ahead of the competition.

Its business model is relatively asset-light, meaning the company doesn't need to invest much of its capital in assets. As a result, Visa has very high profit margins, averaging 44% over the past decade. It's also a money-making machine, generating over $16 billion in free cash flow over the past year. The company can use this cash to make acquisitions, pay dividends, or buy back its stock.

Data by YCharts.

Visa stock has performed well, and in the first nine months of its fiscal year, its net revenue was up 22.6%, and net income grew by 26%. The company keeps performing despite high levels of inflation, which CEO Al Kelly has said, "net-net, historically, inflation has been a positive for us." Because the company earns fees as a percentage of payment volume, rising costs of goods and services increase transaction size, helping Visa rake in more fee income.  

Visa's long-term prospects look bright. According to a study by BlueWeave Consulting, the global digital payment marketplace will grow 12% annually through 2028. However, it does face increasing competition from the likes of PayPal Holdings, Inc. (NYSE: PYPL) and major banks from their money transfer service, Zelle.

To protect its top spot, Visa has acquired fintech partners that enhance its existing business. It looked to break into the open banking space by buying Plaid for $5.3 billion in 2020. However, regulators shot down the deal, and Visa instead acquired Tink for $2.1 billion, an open banking network in Europe.

Open banking could be the future of finance. According to Allied Market Research, the open banking market allows nonbank companies to build financial products and is projected to grow at 22% annually through 2032. By acquiring Tink and staying one step ahead of the competition, Visa is in an excellent position to continue delivering for its investors.

2. Ally Financial

Ally Financial is an all-digital consumer bank that specializes in automotive lending. Warren Buffett increased Berkshire's stake in the bank in the second quarter by buying 21 million shares. Berkshire's $1 billion stake gives Buffett and Berkshire over 9% ownership in the bank. Ally Financial trades at a low valuation, and its price-to-tangible-book-value ratio of just 0.93 is likely one reason Buffett upped Berkshire's stake.

The bank benefited from shortages in used cars in the past couple of years, which increased the costs of used vehicles. In the second quarter, the bank originated $13.3 billion in auto loans, its highest quarter of originations since 2006.  

Ally also benefited from higher interest rates. The Federal Reserve has raised its federal funds rate from near 0% to 2.5% since March, pushing funding costs up for all loans. Ally's net interest margin, the difference between the interest it earns on its loans and the interest it pays on deposits, improved from 3.55% last year to over 4% in the second quarter.  

Ally Bank has benefited from being one of the first all-digital banks, with its deposit customers growing 20% annually since it was founded in 2009. According to Allied Market Research, the digital banking market is forecast to grow at 13.6% annually through 2027. Ally believes its purpose-driven culture will help it continue to grow in the digital banking space. This, coupled with the bank's growing suite of products like Ally Invest, its brokerage product, and Ally Lending, should provide it with multiple avenues of growth in the coming years.

Another thing to like about Ally is how much cash it returns to its shareholders. This year the bank has spent $1.2 billion buying back its stock and paid out another $259 million in dividends. Ally stock trades below book value, giving the stock a good margin for safety, and its dividend yield of 3.56% makes it a solid investment for those looking for passive income.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Got $1,000? 2 top Warren Buffett stocks to buy for the long term appeared first on The Motley Fool Australia.

Perhaps the Warren Buffett way really is better.

That's the conclusion you could draw given the unexpected recent gains in one of Berkshire Hathaway's (NYSE: BRK.A) (NYSE: BRK.B) more uninteresting holdings, anyway. American Express (NYSE: AXP) shares are up almost 30% in the past 12 months, priced within sight of new 52-week highs, while the S&P 500 (SNPINDEX: ^GSPC) is up a more modest 11% in the same timeframe. Better still, American Express is up a hefty 137% for the past five years, surprising nearly everyone with sizable gains from a seemingly stodgy company.

What did Buffett and his acolytes know that lots of other people didn't?

American Express provides real value

American Express is not technically a credit card company. Rather, it provides charge cards, or a means of making purchases without the use of cash with the expectation that the charge will be paid in full at the end of the billing period. The company handles a few billion consumer transactions every year, each one of which generates a few cents' worth of revenue for every dollar spent. American Express collected $25.7 billion of this sort of revenue in 2021.

However, for all intents and purposes American Express is a credit card company, and more importantly, a credit card lender. AmEx generated $8.8 billion worth of interest-based revenue last year, which only cost it $1.3 billion. All told, the company netted $7.7 billion in interest revenue in 2021. 

The numbers, however, still don't answer the question about why the shares of this organization operating in the highly competitive credit card industry are doing so well.

The differentiator is the perks-and-benefits ecosystem American Express has built for cardholders.

Most credit card issuers tack on niceties like cash-back rewards, points toward travel miles, and the like to their service. Few of them do it as well as AmEx does, though. Points are awarded for everyday things like shopping for groceries and eating at restaurants, and cash is given back for purchases made at department stores. Certain cards even offer credit toward ride-hailing services and free checked bags when flying.

And these aren't insignificant rewards. For instance, holders of American Express's Blue Cash Preferred card will get back 6% on as much as $6,000 of their supermarket purchases in the span of one year. The perks are so sweet, in fact, that many consumers are willing to pay sizable annual fees just to use American Express cards. Of AmEx's 2021 revenue of $42.4 billion, $5.2 billion of it came from membership fees alone. That's a high-margin $5.2 billion worth of sales, too. Costs linked to managing its rewards programs, member services, advertising, and marketing are covered by the more typical credit card revenue sources like transaction fees and interest charges.

In simpler terms, American Express is very, very good at adding real value for its cardholders. 

The proverbial proof of the pudding lies in the numbers. Last year's 17% uptick in net revenue isn't just a post-pandemic fluke. At the company's recent Investor Day event, American Express said it's targeting revenue growth of between 18% and 20% this year, and aims to generate annual revenue growth of more than 10% in 2024 and beyond. Earnings growth should roll in somewhere in the mid-teens at that sales growth pace. Given everything we know about the company, those results certainly seem achievable.

And perhaps here's the part Buffett and Berkshire's stock-pickers like best: Past and projected profit growth is supporting similar dividend growth. American Express just upped its 2022 quarterly dividend payment (again) to $0.52 per share, up 20% from last year's quarterly payout, and a return to the rate of increase before the pandemic took hold.

Buffett's patience is paying off

A perfect stock? No, there's no such thing. Every stock has risk, and since people run companies, mistakes happen and inefficiencies exist. Then there are the unexpected hurdles that up-end earnings, like pandemics and recessions. Geopolitical tensions don't help matters either.

American Express, however, is one of those solid stocks that's easily overlooked while hunting for more exciting investment prospects. That's a big mistake...a mistake that Warren Buffett didn't make. He's held a stake in the company for a couple of decades now, and rightly so. You'd do well to follow his lead. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post This unstoppable Warren Buffett stock has proven it's a monster appeared first on The Motley Fool Australia.

Investors are breathing a sigh of relief on Dec. 2 following yesterday's Dow Jones Industrials (DJINDICES: ^DJI) 462-point decline. At 2:11 p.m. ET, the Dow Jones is up 680 points, or 2% higher, as investor worry about the Omicron variant of the coronavirus fades. Today's gains are broad, with 26 of the Dow Jones' 30 component stocks, including Boeing, higher today. 

Today's gains are led by aerospace giant Boeing (NYSE: BA), one of yesterday's worst performers. Shares are up more than 5% on both the reduced fears that Omicron will lead to broad travel bans and news that Chinese regulators are set to recertify the 737 MAX for commercial operation in that country. 

Following on Boeing's heels are payments and credit card giants Visa (NYSE: V) and American Express (NYSE: AXP), with shares up more than 4% on a hopeful outlook about the recovery of global travel and spending. Shares of yesterday's biggest loser, Salesforce.com (NYSE: CRM), are also up almost 3% today following yesterday's double-digit drop after giving underwhelming guidance for its fourth quarter. 

Today's worst-performing Dow stock is Apple (NASDAQ: AAPL), down more than 1% on rumors that demand for the iPhone 13 is falling. 

Boeing investors hopeful on China and continued travel recovery

Word first got out a couple of weeks ago that the Civil Aviation Administration of China (CAAC) was getting closer to letting the company's flagship, narrow-body jet return to commercial service. But a report in The Wall Street Journal on Thursday offered more detail, including what looks like a complete list of changes it requires Boeing to make. That's a serious step toward recertification that would also likely lead to a big jump in orders for Boeing aircraft to service Chinese markets after a multiyear freeze on sales to Chinese operators. 

Boeing's gains, exceeding most stocks today, weren't just a product of good news out of China. Like the other consumer and travel-related companies that gained sharply today, investors are also betting that travel and spending will continue to trend higher, and the initial worries about the Omicron coronavirus variant are probably overdone. 

Omicron bull market?

It seems that many investors believe that to be the case, with most of yesterday's biggest losers and many of the Dow Jones stocks that fell yesterday reporting gains. These include Visa and American Express, which have seen most of their in-country payment volume recover and surge past 2019 levels. However, both have seen cross-border transactions from travel continue to lag pre-COVID numbers. Investors also sent bank stocks up today, with Goldman Sachs (NYSE: GS) and JPMorgan Chase (NYSE: JPM) up more than 2.5% on hopes for continued economic health and the potential that interest rates will move higher sooner rather than later. That's a positive for lenders. 

Shares of Caterpillar (NYSE: CAT) and Walt Disney (NYSE: DIS) also gained more than 2.5% today, on expectations that businesses will continue to buy heavy equipment, and consumers will continue to spend and increasingly travel, ideally to Disney resorts and theme parks. Home Depot (NYSE: HD), one of yesterday's biggest winners, gained another 2% today as investors remain convinced that the home improvement giant will continue to win customers looking to improve their current home or update the home they just bought. Housing demand continues to remain sky-high, a positive indicator for the home improvement giant's prospects. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Omicron what? Dow Jones shakes off fears, surges 680 points appeared first on The Motley Fool Australia.

In morning trade, the buy now pay later (BNPL) provider's shares are up 3% to $1.00.

Why is the Openpay share price pushing higher?

Investors have been bidding the Openpay share price higher today after it announced a new partnership.

According to the release, Openpay has signed an initial 12-month agreement with leading multinational financial services company American Express (NYSE: AXP). This will see Openpay's US business Opy accept American Express as a payment method for plans in the US.

The partnership will initially focus on the Healthcare and Automotive sectors.

Management expects the offering to deliver additional value to American Express merchants by connecting them to Opy's merchant and consumer-friendly solution. Additionally, American Express Card Members will be able to enter into Opy plans in the US and make repayments funding them via their American Express card.

The release notes that the two parties will also explore opportunities to collaborate on product development initiatives that would leverage Opy's B2C and B2B platforms.

"Thrilled"

Opy USA CEO and Openpay Global Chief Strategy Officer, Brian Shniderman, commented: "We're thrilled to be partnering with American Express, a company that helps their merchants and consumers make sound, savvy decisions. We are excited to offer our innovative products to American Express merchants and Card Members alike, particularly for larger, more meaningful life purchases."

American Express' President of Merchant Services US, Colleen Taylor, added: "We are constantly striving to drive additional value to our Card Members and merchants. With Opy, we are pleased to offer another payment option for customers who make and accept larger healthcare, auto repair, and maintenance purchases."

Despite today's gain, the Openpay share price is down 57% in 2021.

The post Openpay (ASX:OPY) share price pushes higher on American Express deal appeared first on The Motley Fool Australia.