Warren Buffett is regarded as the greatest stock market investor of all time. So I like to keep a close eye on the billionaire’s portfolio.
Here, I’m going to highlight three Buffett-owned stocks I’d buy for the current bull market. I think all three have the potential to climb higher in the near term (and, importantly, the long term).
One Buffett-owned stock I think looks very interesting right now is Amazon (NASDAQ: AMZN). It’s actually been a bit of a laggard in this bull market. While the S&P 500 has hit new highs recently, Amazon is still about 5% below its all-time high, set in September last year. I see this share price weakness as a buying opportunity.
Since the beginning of last year, Amazon has added 50m new Prime subscribers taking its total number to 200m. That’s an unbelievable rate of growth. Incredibly, 28% of these Prime customers buy something in less than three minutes when they hit the site, while half of all purchases are finished in less than 15 minutes. Given this huge, growing customer base, I think Amazon stock could be a great way to play the global economic rebound.
I’ll point out that the valuation here is quite high, which adds risk to the investment case. Currently, Amazon sports a forward-looking P/E ratio of about 70. If growth slows, the stock could underperform. However, given Amazon’s dominance (in both e-commerce and cloud computing) I’m comfortable with this risk.
Another Buffett stock I’d buy today is Visa (NYSE: V). It’s the world’s largest payments company. For every $1 spent at physical locations globally, about $0.15 goes through Visa’s payments network.
And Visa looks set for strong growth, in my view. In the short term, it should benefit from increased spending (many consumers are cashed up after lockdowns) and the return of travel. Meanwhile, in the long run, it should benefit from the shift away from cash towards electronic payments.
However, Visa isn’t a cheap stock. Currently, it sports a forward-looking P/E ratio of about 41. This adds risk. Another risk to consider is competition from FinTech players such as PayPal and Square. But overall, I think the long-term risk/reward proposition here is attractive.
Finally, I think Coca-Cola (NYSE: KO) – one of Buffett’s favourite stocks of all time – could be worth a closer look right now.
Coca-Cola strikes me as a classic ‘reopening’ stock. Last year, Coke struggled due to the coronavirus. For the year, revenue was down 11% while earnings dipped 13%. The rollout of the vaccine looks to be a game-changer, however. With restaurants and bars now opening, travel resuming, and live events set to start up again in the near future, Coke looks well-placed for a recovery. This year, Wall Street analysts expect revenue growth of about 11%.
Of course, the timing of this potential recovery remains uncertain. It could be a while before the world’s truly back to normal. Coke could continue to face challenges in the near term.
However, with many economists predicting a ‘roaring 20s’-like environment in the years ahead, I think Coke is a good stock to own as part of a diversified portfolio. The current valuation (forward-looking P/E ratio of 25) seems fair, to my mind, given the company’s competitive advantages.
Edward Sheldon owns shares in Amazon and PayPal. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon, PayPal Holdings, Square, and Visa and recommends the following options: long January 2022 $1920 calls on Amazon, short January 2022 $1940 calls on Amazon, and long January 2022 $75 calls on PayPal Holdings. 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.