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2 Warren Buffett-style FTSE 100 stocks I’d buy for my ISA today

Warren Buffett is generally regarded as the greatest stock market investor of all time. Not only has he built up a net worth of around $80bn from stocks, but he has generated a return of around 20% per year for his investors since he took control of Berkshire Hathaway in 1965. That’s over twice the annual return of the US stock market.

Buffett’s secret? He invests in high-quality companies and holds them for the long term while they compound their earnings. With that in mind, here’s a look at two high-quality Warren Buffett-worthy FTSE 100 companies I’d be happy to buy for my ISA today.

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Rightmove

Property website company Rightmove (LSE: RMV) is a classic Warren Buffett-type stock, in my view. Not only is the company the dominant player in its industry (its market share of property search traffic across desktop and mobile was 76% last year), but it is also an extremely profitable business – over the last three years, the group has generated an average return on equity of 1,328%.  In addition, it has a strong balance sheet and an excellent track record of dividend growth, although the stock’s dividend yield is not high, at around 1.3%.

In mid-June, Rightmove shares hit an all-time high of 588p after a strong run early in the year. However, over the last few months, the stock has pulled back to around 530p due to Brexit uncertainty. I view the recent share price weakness as a buying opportunity as I expect the company to continue growing its profits in the years ahead, despite political and economic uncertainty in the UK.

At the current share price, Rightmove trades on a price-to-earnings (P/E) ratio of around 27, which I think is quite reasonable given its track record. I’d be happy to buy the stock for my ISA at that valuation. 

Sage

Another FTSE 100 stock that I see as a Warren Buffett-type company is accounting group Sage (LSE: SGE). Like Rightmove, it’s a highly profitable business, generating an average return on equity of 22% over the last three years, and it also has a competitive advantage – once businesses sign up for Sage’s accounting solutions, they’re unlikely to switch to another provider as that would involve a lot of hassle and costs. This means that recurring revenues are high, which is always a big plus in business. The company also has a fantastic record of dividend growth, having increased its payout every year for the last 10 years.

It’s worth noting that Sage is a favourite of fund manager Nick Train – often referred to as ‘Britain’s own Warren Buffett’ – who holds the stock in his UK Equity fund. In a recent interview, Train pointed out that Sage has risen 200-fold since its flotation in 1991. Interestingly, he said: “I’m hoping that growth story is only just getting started.”

Sage shares have also pulled back recently. Investors are concerned about the group’s transition to cloud-based accounting solutions. Personally, I’m seeing this share price weakness as a buying opportunity and earlier in the week I bought a small parcel of Sage shares for my ISA. On next year’s earnings forecast of 31.9p, the stock trades on a forward-looking P/E ratio of 20.8, which I think is attractive given the company’s track record and high-quality attributes. 

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Edward Sheldon owns shares in Rightmove and Sage. The Motley Fool UK has recommended Rightmove and Sage Group. 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.

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