The Oracle of Ohama, Warren Buffett, is known for many things. Not the least of these is his long-held strategy of investing in robust, undervalued businesses in resilient industries with strong tailwinds to future growth — and then building upon those positions over the years.
Buffett-led Berkshire Hathway (NYSE: BRK.A) (NYSE: BRK.B) has exhibited the strength of this simple philosophy time and time again. Shares of the conglomerate have delivered a total return of about 200% over the trailing decade, a smidgen behind the S&P 500’s total return of 220% in that same period.
Berkshire Hathaway invests in a wide range of stocks, from financial companies to consumer goods businesses to tech companies. If you’re looking to invest in stocks with the Warren Buffett seal of approval in 2023, here are two notable positions he has now.
Apple (NASDAQ: AAPL) is the single largest holdings in Berkshire Hathaway’s basket of publicly traded companies, comprising approximately 41% of its total portfolio. Although many investors seemed to have soured on the idea of tech stocks over the last year, this is a business that continues to impress on a multitude of fronts, in terms of not only its steady sales growth and profitability but also its continued chokehold on market share in key segments, the growth across its diverse lineup of businesses, and its long habit of consistent dividend payments.
The most recent quarter alone saw Apple deliver $25 billion in dividends to shareholders. Even though the stock itself yields less than 1% right now, the company’s dividend has risen 26% over the past five years alone and driven a total return of 250% in that same time frame.
Amid the evolving spending habits of consumers in a difficult economic environment, people are still continuing to buy the company’s hardware offerings like iPhones, Macs, iPads, and wearables in droves, while Apple’s services segment — now the second-largest driver of its top and bottom lines — is raking in sales from subscription-centric options like Apple Fitness+, Apple TV+, and Apple Music.
The most recent quarter saw Apple reach a record number of devices installed globally — two billion, in fact — while reporting net sales of $117 billion and net income of $30 billion for the three-month stretch. While those net sales and net income figures were down year over year, they represented increases of 28% and 35%, respectively, from the same quarter three years ago.
Smartphone sales still account for the lion’s share of Apple’s sales, and they came in at $66 billion for the three-month period, followed by $21 billion in sales from its services segment. The company’s Mac, iPad, and Wearables/Home/Accessories businesses brought in respective net sales of $7.7 billion, $9.4 billion, and $13.5 billion. Apple also generated $34 billion in operating cash flow during the quarter.
Apple may be a veritable giant in each of the core segments it operates in, but its market footprint means that it’s well-positioned to capitalize on the continued growth of these spaces while raking in cash and profits to launch itself into new markets, from advertising to diabetes care. Income investors seeking a no-brainer stock for a long-term buy-and-hold position may want to consider adding this tech stock to their buy basket.
Mastercard (NYSE: MA) accounts for roughly 0.4% of Berkshire’s portfolio, which still comes to about 4 million shares. The financial services giant accounts for 24% of all credit card transactions performed globally and boasts a market share of 26% in the U.S. alone. Meanwhile, Mastercard’s market dominance means that it is ideally placed to capitalize on the continued growth of the payment processing industry, a space that remains on track to witness considerable growth over the coming years as adoption of the internet and other technologies widens.
Mastercard is another faithful dividend payer with a notable track record of not only paying out but raising its dividend. Although the stock also boasts a below-average yield (approximately 0.7% at the time of this writing), its dividend has risen 850% over the trailing decade alone. And the stock has delivered a total return of 630% to investors in that same stretch of time.
For 2022, Mastercard reported net revenue of $22 billion while net income totaled $10 billion. On a currency-neutral basis, these figures represented respective increases of 23% and 21% from 2021. Operating income hit $12 billion in 2022, up 30% from the prior year.
It’s important to understand that Mastercard isn’t in the business of extending credit; rather, it makes the lion’s share of its revenue and profits based on fees derived from transactions using its branded financial products, like credit cards. So the greater the transaction volume in a given period, the more money Mastercard makes. A recessionary period could indeed pose headwinds for this kind of business.
However, Mastercard has been through its fair share of market storms, and there’s also the reality that difficult economic times tend to see consumers accrue more debt, not less, which could also indirectly benefit the company in that transaction volume could still remain high in such a period.
For investors with a minimum buy-and-hold horizon of three to five years, this steadily growing stock and dividend payer with a foothold in one of the most lucrative industries in the world remains a compelling buy.
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Rachel Warren has positions in Apple. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Mastercard. The Motley Fool recommends the following options: long January 2025 $370 calls on Mastercard, long March 2023 $120 calls on Apple, short January 2025 $380 calls on Mastercard, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.