2 US stocks Warren Buffett owns that I’d buy

Billionaire investor Warren Buffett has long enjoyed stock picking success through Berkshire Hathaway. I think his example is worth following.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Billionaire investor Warren Buffett’s company Berkshire Hathaway has a market cap of $661bn. It has two classes of shares. A single share of BRK-A is priced over a whopping $435k, meaning it’s really only for institutional investors. BRK-B is for anyone to buy and is priced around $289 today. Buffett has made a hugely successful career out of stock picking and I think it’s worth paying attention to Berkshire Hathaway’s portfolio.

A rising share price

Berkshire has been an incredibly successful business that has grown through the mergers and acquisition process of buying businesses, both partially and outright. The Berkshire Hathaway share price has appreciated over 520% since March 2009 and it’s up 56% in a year.

Its ownership of companies gives it a regular dividend stream. It chooses businesses in which it sees reasons for future growth from which it will profit.

In Berkshire Hathaway’s most recent shareholder letter, Buffett said: “Owning a non-controlling portion of a wonderful business is more profitable, more enjoyable and far less work than struggling with 100% of a marginal enterprise”.

I think this is great advice for anyone deciding which stocks to buy. Choosing dividend stocks ensures shareholders can look forward to recurring income. But there’s also the potential for future capital gains if the company continues to grow and thrive. This can unlock the power of compounding, creating future wealth. I keep all this in mind when looking for stocks to buy and hold for the long term.

Economics and management

When Warren Buffett and his business partner, Charlie Munger, look for companies to invest in, they seek out good economic characteristics and good managers. The economics ensure Berkshire is buying stock at a fair price and a motivated management team ensures the company continues to grow.

It’s hard to judge a management team without understanding exactly how they work. But clues lie in how long they’ve been at the helm, how the company has progressed, and if it has a strategic path ahead. Reading annual returns can also give investors an idea of how the company is run.

Therefore, economics and management are two factors I also look for when considering which stocks to invest in.

Closeup ruffled American flag representing US stocks and shares

Buffett’s Berkshire Hathaway stocks

Two US stocks in Warren Buffett’s Berkshire Hathaway portfolio that I like are Apple and Verizon.

Apple is the biggest shareholding in Berkshire’s portfolio. It needs no introduction being one of the world’s most recognised brands, selling sought-after devices. Apple benefits from recurring revenue through subscriptions as well as product sales.

It has a £2trn market cap, price-to-earnings ratio (P/E) of 28, and 0.7% dividend yield.

Apple has been buying back its shares adding value for shareholders. During the past four quarters it has bought back $77bn worth of stock. I think this shows a management team that has investor interests in mind.

American wireless network operator Verizon is a $233bn company with a P/E of 12 and 4.4% dividend yield. These metrics make it look undervalued. Meanwhile, the rollout of 5G is presenting a growth opportunity to telecommunications companies. Verizon could potentially make a killing introducing 5G fixed wireless connectivity to homes.

Economic uncertainty and regulatory changes pose a risk to owning these US stocks. But overall I’d happily add both Apple and Verizon to my Stocks and Shares ISA today.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kirsteen as no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Apple and Berkshire Hathaway (B shares). The Motley Fool UK has recommended Verizon Communications and recommends the following options: short January 2023 $200 puts on Berkshire Hathaway (B shares), short March 2023 $130 calls on Apple, short June 2021 $240 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, and long January 2023 $200 calls on Berkshire Hathaway (B shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young black colleagues high-fiving each other at work
Investing Articles

Is Legal & General Group one of the FTSE 100’s greatest value shares?

Legal & General shares boast low P/E ratios and massive dividend yields. Could they be one of the London stock…

Read more »

Front view photo of a woman using digital tablet in London
Investing Articles

I’m looking for the best FTSE 100 value stocks to buy now. Have I found them?

Barclays, NatWest, and Imperial Brands shares are recovering strongly. But these FTSE 100 stocks still trade on rock-bottom earnings multiples.

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

Where on earth will Nio stock be in 1 year?

Nio stock has demonstrated extraordinary volatility over the past 12 months, but where will it be in a year's time?…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

6.9% dividend yield! 2 cheap stocks to consider for a £1,380 passive income

Looking for a market-beating passive income? These FTSE 100 and FTSE 250 dividend stocks could provide a healthy second income…

Read more »

Mature black couple enjoying shopping together in UK high street
Investing Articles

Potentially 34% undervalued, should I be watching the boohoo share price?

The boohoo share price has seen a rocky few years, but with signs that the economy is improving, could this…

Read more »

Investing Articles

Is the Amazon share price primed for a drop?

The Amazon share price has been on a tear for the last year, but can this trend continue? Gordon Best…

Read more »

Photo of a man going through financial problems
Investing Articles

Down 15% in a week! What’s gone wrong with the National Grid share price?

The National Grid share price isn't supposed to crash but now it has. Harvey Jones is wondering whether to take…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

Taylor Wimpey just paid me £158.78. I’m aiming to turn that into a £100k yearly second income

Harvey Jones says small, regular dividend payments can turn a few pounds into a mighty second income, if he gives…

Read more »