Warren Buffett's decades of investing success has led many investors to try to follow in his footsteps. While there's no way to replicate the growth Berkshire Hathaway's portfolio has achieved under Buffett's longtime tenure as CEO, there are a handful of stocks the company owns that investors should consider buying.
Two no-brainer Buffett investments to buy right now are American Express (NYSE: AXP) and the Vanguard S&P 500 ETF (NYSEMKT: VOO). Here's why.
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1. American Express
Buffett has a long history with American Express, first buying the stock in 1991 for the Berkshire portfolio. It now accounts for 15% of the conglomerate's nearly $300 billion portfolio, Berkshire's second-largest holding after Apple.
Image source: The Motley Fool.
Buffett is fond of financial stocks, and American Express is a well-established player that continues to grow at a healthy pace. Revenue rose 8% in the third quarter (which ended Sept. 30) to $16.6 billion, and the company's diluted earnings per share increased 6% to $3.49.
American Express is benefiting from younger, more affluent customers who are willing to sign up for the company's Gold Card. That's great news for the company, considering it collects recurring annual fees for the card. An impressive 80% of Gold Card signups came from this demographic in the third quarter, contributing to the solid growth of 3.3 million total cardholder additions in the quarter.
American Express' management believes the good times will keep rolling and raised full-year earnings guidance to $13.90 per share, up from the previous $13.55 estimate, both at the midpoint.
Not only is American Express is adding a substantial amount of new cardholders and increasing earnings, but its stock currently trades at a relative discount to the broader market. American Express has a forward price-to-earnings ratio of 19.9 right now, cheaper than the S&P 500's (SNPINDEX: ^GSPC) multiple of 30.7.
2. Vanguard S&P 500 ETF
If you're looking for a specific company to invest in, this suggestion may be a bit of a disappointment to you. The Vanguard S&P 500 ETF is an exchange-traded fund that tracks the growth of the largest 500 publicly traded companies on U.S. stock exchanges. Interestingly, it's one of just two index funds in Buffett's portfolio.
Buying an index fund that follows the S&P 500 can be a great way to build wealth over time and is an easy way to diversify your portfolio. Buffett is a big fan of index funds and said at the 2020 Berkshire annual meeting that "...for most people, the best thing to do is to own the S&P 500 index fund."
One of the benefits of S&P 500 index funds is their low expense ratios. Vanguard's S&P 500 ETF charges just 0.03%, meaning that for every $10,000 invested, you'll pay just $3 in expense ratio fees.
Berkshire Hathaway owns a small position in the Vanguard S&P 500 ETF, with 43,000 shares in the portfolio, as of the latest 13F filing (Sept. 30). Investors would be wise to consider Buffett's endorsement, considering that passively managed index funds are far more likely to perform better than actively managed funds over a decade, according to Morningstar.
Should you invest $1,000 in American Express right now?
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American Express is an advertising partner of Motley Fool Money. Chris Neiger has positions in Apple and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
