A Warren Buffett share I’d buy today

Christopher Ruane looks at a share held by legendary investor Warren Buffett and explains why he would add it to his own portfolio.

| More on:

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.

Legendary investor Warren Buffett invests in a range of companies through the company he runs, Berkshire Hathaway. With his well-known prowess for picking shares, Buffett’s moves are closely followed. Right now he holds one share I would consider adding to my portfolio today. Here’s why.

Investing strategy

One reason I think I can learn a lot about share investing from Buffett is that he clearly and consistently explains his approach.

Buffett likes companies with strong brands because that gives them pricing power. By using the power of branding, such companies can build customer loyalty and charge premium prices. That is good for profits.

Buffett also likes fairly simple companies that are easy to understand. Instead of relying on unusual accounting practices or niche markets for their success, he looks for businesses with large potential customer bases that sell products or services with a straightforward business model.

Warren Buffett’s biggest shareholding

Those strategic investing principles help to explain Buffett’s largest position. With an outsized position in the Berkshire Hathaway portfolio, that position is Apple (NASDAQ: AAPL). I’d consider joining Buffett in adding the technology giant to my portfolio.

I think Apple matches Buffett’s investing criteria well. Its strong brand helps give it a sustainable customer franchise and massive pricing power. Last year, the company’s earnings from continuing operations came in at $57bn. In other words, this global giant made over a billion dollars a week in profits. That is an incredible performance. Apple has been paying dividends and buying back shares in recent years, so at least some of those profits find their way to shareholders.

Buffett did sell some of his Apple stake but it remains Berkshire’s biggest holding by far. So I think he has continued faith in the company and simply wanted to reduce the risk of his portfolio being too dominated by a single holding. After all, even with its incredible history of performance, Apple faces risks. Its strong market position could attract regulatory attention. That threatens to cut profits, for example, if Apple’s app store commission is deemed to be excessive.

Why I’d buy Apple today for my portfolio

Apple has had a superb few years. But some investors feel that its innovative days are gone and future returns could be weaker.

I don’t know if that is as big a risk as some Apple bears think. I still see reasons to consider adding it to my portfolio today. Its large installed base means it should be able to keep making large profits for many years to come. Pricing power should help support strong profit margins. Apple’s track record of understanding what customers want to buy suggests the business’s management can adapt to shifting trends in the market.

With a price-to-earnings ratio of 28, I think Apple is more attractively priced than many tech companies. A broad market pullback could cause the price to fall. But I don’t think the current Apple share price is expensive for a company of its quality. Like Warren Buffett, I would consider adding it to my portfolio 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.

Christopher Ruane has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Apple and Berkshire Hathaway (B shares). The Motley Fool UK has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. 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

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »