Warren Buffett is widely regarded as one of the best investors who ever lived. From 1964 to 2019, Buffett helped Berkshire Hathaway (BRK.A 0.92%) (BRK.B 0.34%) generate an astounding 2,744,062% overall gain on its stock investments. That's more than 100 times the returns of the S&P 500 during that same time.
For these reasons, investors wisely keep an eye on Berkshire Hathaway's portfolio to see which stocks Buffett is investing in. Here are five great companies that have earned Buffett's stamp of approval -- and can help you earn a fortune over the next decade.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
1. Visa and 2. Mastercard
The coronavirus pandemic -- and the social distancing measures enacted to contain it -- are accelerating the shift toward digital payments and away from cash transactions. This is a powerful global trend -- one that Visa (V -1.18%) and Mastercard (MA -0.76%) stand to profit from perhaps more than any other company.
Visa and Mastercard operate the two largest credit and debit card networks in the world. They earn a small fee each time someone makes a transaction, which collectively adds up to billions in profits each year. Visa and Mastercard are so profitable, in fact, that they're able to reward their shareholders with hefty share repurchases and quickly rising dividend payments, even while investing aggressively to expand their digital payment empires.
Buffett loves businesses that consistently widen their competitive moats while throwing off cash to their owners, and Visa and Mastercard certainly fit the bill.
3. Costco
Costco Wholesale (COST -0.86%) is one of Buffett's (and Berkshire Vice-Chairman Charlie Munger's) favorite retailers. It has a terrific business model. Once people buy a Costco membership, they have an incentive to maximize the value of that purchase. They do so by shopping at Costco as often as they can to take advantage of the hefty savings the discount warehouse chain provides.
Costco further incentivizes its members to shop often at its stores by constantly varying its merchandise. This creates a treasure hunt-type shopping experience, which helps to drive strong, repeat traffic to Costco's warehouses.
Importantly, Costco proved capable of handling pandemic-related challenges and was able to help its members stock up on food and other supplies as they prepared to abide by stay-at-home orders. Its members will not forget how Costco helped them get what they needed to endure the crisis, and they will likely continue to frequent its stores throughout the pandemic and in the years that follow.
4. Amazon
Like Costco, Amazon (AMZN -2.42%) has served as a lifeline for its customers during the COVID-19 crisis. The e-commerce giant's services have never been more valuable, and they should only grow in importance as more retail sales shift online in the years ahead.
Unlike Costco, many smaller retail stores were forced to close during the early stages of the pandemic. Amazon was there to help fill the void. Countless people shopped on Amazon.com for the first time during the coronavirus crisis, and now that they've experienced the savings and convenience the online retail colossus provides, many will remain loyal customers.
Moreover, its cloud infrastructure platform, Amazon Web Services, is helping power the shift to remote work and home-based entertainment during the pandemic and thereafter. These powerful trends -- the growth of e-commerce and cloud computing -- should continue to fuel Amazon's expansion in the decade ahead.
5. Apple
A list of Buffett's favorite stocks is incomplete without mention of his largest position: Apple (AAPL -0.22%). Berkshire Hathaway owns a staggering $88 billion worth of Apple's stock, making it Buffett's biggest bet by far.
Buffett has called Apple "probably the best business I know in the world." He values the iPhone's central place in the lives of hundreds of millions of people around the world. He also appreciates the tech titan's enormous cash flow production and, by extension, its ability to buy back huge chunks of its own stock.
Despite Berkshire's already massive position in Apple, Buffett has hinted that he may buy even more. The legendary investor has said that he'd "love to own 100% of it." Though Apple is far too large for Berkshire to acquire outright, that won't stop Buffett from scooping up more of its shares over time. If you trust Buffett's judgment, perhaps you should consider buying some Apple stock along with him.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Apple, Berkshire Hathaway (B shares), Mastercard, and Visa. The Motley Fool recommends Costco Wholesale and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.
