Warren Buffett’s investing track record has earned him legendary status in the financial world. As CEO of Berkshire Hathaway, he’s overseen a portfolio now worth nearly $300 billion. While replicating Buffett’s success is no easy feat, some of the stocks he’s backed remain solid picks for savvy investors.
Let’s take a closer look at two Buffett favorites: American Express and the Vanguard S&P 500 ETF.
1. American Express: A Trusted Powerhouse
Buffett’s relationship with American Express dates back to 1991. Today, it represents 15% of Berkshire Hathaway’s portfolio, making it the conglomerate’s second-largest holding after Apple.
American Express (NYSE: AXP) continues to thrive under Buffett’s endorsement. In the third quarter of 2024, the company reported an 8% revenue increase to $16.6 billion and a 6% rise in diluted earnings per share, reaching $3.49.
One driving force behind American Express’s growth? Younger, affluent customers. These consumers are flocking to the company’s premium Gold Card, lured by its perks and prestige. In Q3, 80% of new Gold Card signups came from this demographic, fueling the addition of 3.3 million new cardholders in the quarter.
Additionally, management has shown optimism, revising their full-year earnings guidance upward to $13.90 per share, from $13.55.
From a valuation perspective, American Express trades at a forward price-to-earnings (P/E) ratio of 19.9, notably lower than the S&P 500’s multiple of 30.7.
2. Vanguard S&P 500 ETF: Simplicity Meets Stability
While individual stocks like American Express can be exciting, Buffett also champions the value of broad market exposure. The Vanguard S&P 500 ETF (NYSE: VOO) is a prime example.
This exchange-traded fund (ETF) tracks the performance of the 500 largest publicly traded U.S. companies, offering investors an easy way to diversify their portfolios. In fact, the Vanguard S&P 500 ETF is one of just two index funds in Berkshire Hathaway’s holdings.
Buffett has long endorsed index funds, famously stating at Berkshire’s 2020 annual meeting:
“…for most people, the best thing to do is to own the S&P 500 index fund.”
A standout feature of this ETF is its low expense ratio, a mere 0.03%. For every $10,000 invested, the fee is just $3—a cost-effective way to build long-term wealth.
Currently, Berkshire holds 43,000 shares of the Vanguard S&P 500 ETF, signaling Buffett’s confidence in its steady performance. Historically, passively managed funds like this have outperformed actively managed ones over longer timeframes, according to Morningstar research.
Why These Picks Matter
Buffett’s investment strategy is rooted in patience and proven fundamentals. American Express combines robust growth with a reasonable valuation, while the Vanguard S&P 500 ETF offers reliable diversification and low costs.
For investors seeking inspiration from Buffett’s portfolio, these two picks stand out as timeless choices for building wealth.
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Ready to Take the Next Step?
Consider following Buffett’s lead by adding American Express or the Vanguard S&P 500 ETF to your portfolio. Whether you’re looking for individual stock performance or diversified exposure, these investments can set you on the path to long-term success.