Lesson learned: Don’t underestimate Amazon. It has incredible momentum right now, and its AI platform is the wave of the future. You can buy the stock right now at close to its cheapest valuation in a long time, and if you hold it through the inevitable short-term ups and downs to come, you should be well rewarded in the long term.

Jeremy Bowman (Ulta Beauty): Earlier this year, Berkshire Hathaway bought shares of cosmetics retailer Ulta Beauty for the first time, and in many ways, it looks like a classic Buffett stock.

Ulta is a clear leader in its niche, with more than 1,400 stores around the country — not including its roughly 800 store-in-store venues at Target locations — rivaling peer Sephora. However, the stock has pulled back this year as the company’s sales growth slowed, offering investors an opportunity to get into this longtime winner at a discount.

While Ulta’s business may be maturing, the stock still has growth potential. Interest rates are predicted to come down, which in turn is expected to improve consumer confidence — and that should help propel a rebound for Ulta and its stock. Additionally, at its recent Investor Day conference, the company revealed that it intended to accelerate the pace of new store openings, with a more ambitious long-term goal of growing its footprint to more than 1,800 stores. It’s also seeing strong adoption of its loyalty program, which it expects to reach 50 million members by 2028.

As a business, Ulta also enjoys a number of competitive advantages. Most of its full-line stores feature hair salons, which gives customers an additional reason to visit them. That’s also a service that e-commerce rivals can’t provide. Moreover, its stores are much larger than other pure-play beauty retailers — essentially, they’re superstores that carry a wide range of products and brands, making Ulta a one-stop shop for beauty shoppers.

Right now, Ulta offers investors an excellent value at a price-to-earnings ratio of 15, and the company plans to aggressively buy back stock under the new $3 billion share repurchase program it announced last month. It’s not a surprise that Berkshire Hathaway took advantage of the stock’s discount to pick up shares.

John Ballard (American Express): American Express has been a staple of Berkshire Hathaway’s portfolio for more than 30 years. Its strong growth this year speaks to why Buffett continues to hold its shares.

American Express has a solid business strategy of using cardholder perks and special offers to attract new customers who, in turn, will regularly use their cards and generate merchant fees. This spending-centric business model should continue to thrive as the economy grows over the long term.

In the third quarter, revenue hit a new high, growing 8% year-over-year, and this top-line growth also fueled strong growth in earnings. Management raised its full-year revenue and earnings guidance, and now expects 2024 earnings per share of between $13.75 to $14.05.

Buffett places a high value on the financial company’s brand. The appeal of American Express is evident from its successes in winning over younger customers. Millennial and Gen Z consumers make up the company’s fastest-growing cohorts, providing 80% of new U.S. accounts it acquired for its gold card last quarter.

American Express shares trade at a price-to-earnings ratio of about 21, which is on the high side for a financial services business, but it’s still within the stock’s historical trading range. If consumer spending picks up, it could light a fire under cardholder spending. With analysts expecting the company’s earnings to grow at an annualized rate of 15% over the next five years, investors who buy the stock now could earn excellent returns.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. American Express is an advertising partner of Motley Fool Money. Jennifer Saibil has positions in American Express. Jeremy Bowman has positions in Amazon and Target. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, Target, and Ulta Beauty. The Motley Fool has a disclosure policy.

The 3 Smartest Buffett Stocks to Buy Right Now was originally published by The Motley Fool