The Ultimate Buffett Stock to Buy With $500 Right Now
Investors follow Warren Buffett’s moves carefully, but he makes surprisingly few moves overall. A typical hedge fund has thousands of stocks that get traded frequently, but Berkshire Hathaway is a holding company with a different approach to its equity portfolio.
Warren Buffett has called himself a business picker, not a stock picker, and looks to maximize gains over the long term by investing in high-quality companies. He concentrates on a small number of stocks, typically around 45, that he has confidence in.
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American Express (NYSE: AXP) is one of Buffett’s longest-held stocks, and it probably illustrates the classic Buffett model more than any other stock. If you’re a Buffett fan, American Express will be right up your alley.
Buffett has owned American Express stock since 1995. Today, Berkshire Hathaway has a 21.5% stake in the company. While that’s not a controlling stake, it demonstrates a strong influence.
American Express stock accounts for 15.4% of the total Berkshire Hathaway portfolio, the second-highest position after Apple. That came about only recently, since Buffett sold some Apple and Bank of America stocks. He grouped American Express with Coca-Cola as two stocks he’d never sell and hasn’t sold a share of either one since purchasing them nearly 30 years ago.
Buffett has mentioned American Express’ global brand as a moat that gives it a durable competitive edge. He said its core business has remained stable, shaped by trends over time and its products “traveled,” because “the need for unquestioned financial trust [is a] timeless essential of our world.””
He has also praised its dividend, which has increased 169% over the past 10 years. Buffett loves dividends because they demonstrate commitment to creating shareholder value, which ultimately means the company is investing in itself. They’re also a signal of a mature and well-established business and provide cash and opportunity.
Buffett said that the dividends Berkshire Hathaway received just from its original $1.3 billion investment in American Express stock has ballooned from $41 million in 1995 to $302 million in 2022 alone. It uses that money for all sorts of functions in its own business, and individual investors can use dividend payments as passive income.
Finally, Buffett loves bank stocks. That’s partially due to the way they provide essential services, as mentioned above, but also because they usually have a lot of cash, which provides stability.
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