Billionaire investor Warren Buffett’s largest holding, Apple (NASDAQ: AAPL), has had a great run recently. Over the last year, it’s risen more than 50%. Over the last three years, it’s up more than 200%.
I still think Apple stock is worth buying today however. Here, I’ll explain why. I’ll also highlight another top Buffett stock I’d buy right now.
Why I’d buy Apple stock today
While Apple shares have had a strong run, I think they have the potential to climb higher in the years ahead. In the near term, the company looks set to get a massive boost from the rollout of 5G networks.
This is creating strong demand for new handsets. It’s worth noting that, according to Bloomberg, Apple is asking its suppliers to ramp up production of its next-generation iPhones by 20%.
Meanwhile, in the long term, we can expect to see Apple become a bigger player in a number of industries, including payments and healthcare. Apple CEO Tim Cook is hoping that healthcare will be its biggest contribution to mankind.
As for the stock’s valuation, I don’t think it’s stretched. Currently, Apple sports a forward-looking P/E ratio of 29. I think that’s pretty reasonable when you consider Apple’s track record, its long-term growth potential, its level of profitability, its cash flow, and its balance sheet.
Of course, there are plenty of things that could cause Apple’s share price to fall. Regulatory intervention, for example, could hurt the shares.
I think the overall risk/reward profile here is very attractive however. It’s worth noting that, recently, analysts at JP Morgan raised their target price to $170 from $165.
Another Buffett favourite
Another Buffett stock I’d buy today is credit card company American Express (NYSE: AXP). This is a stock he’s owned for a long time (first investing here in the early 1960s). Currently, it’s his third-largest holding.
Like Apple, I think this stock has both short- and long-term appeal. In the short term, it should benefit as the global economy reopens, economic conditions improve, and consumer spending picks up. It’s worth noting that the group reported a 509% increase in net income in the first quarter of the year as it freed up funds it had set aside to cover credit losses.
In the long run, American Express should benefit as the world moves away from cash. Over the next decade, trillions of transactions are set to shift to credit cards and electronic payments.
I’ll point out that I’m not the only one who likes this Buffett stock. Recently, analysts at Goldman Sachs upgraded the stock to ‘buy’. Their price target for the stock is $225 – 30% above the current share price.
One risk to consider here is further Covid-19 setbacks. These could impact economic conditions and potentially lead to more credit defaults. Competition from other players in the financial industry is another risk to consider.
I’m comfortable with the risks however. I think this is a great stock to buy in the current environment.
