Title: Boost Your Portfolio with Top Warren Buffett-Inspired Stocks Under $500
Investors often turn to Warren Buffett for stock advice and market insights, hoping to channel some of his decades of success as Berkshire Hathaway's CEO and the manager of a $300 billion portfolio. If you've got a spare $500, you might want to consider putting it into two of Buffett's picks: Amazon (AMZN 0.01%) and American Express (AXP 0.28%). Let me explain why.
1. Amazon
Amazon's stock deserves a spot in just about any portfolio for several reasons. It's a titan in the U.S. e-commerce market, with a staggering 39.6% market share. For comparison's sake, retail giant Walmart only holds around 7.4% of the U.S. e-commerce pie. This impressive dominance gives Amazon an edge as e-commerce continues to surge.
Amazon's strong e-commerce performance is only supplemented by its leadership in cloud computing. Amazon Web Services (AWS) controls 31% of the cloud market, with Microsoft trailing behind at 20%. As artificial intelligence (AI) grows in popularity, cloud companies like AWS are expected to reap the benefits. Analysts at Goldman Sachs predict that cloud computing will generate $2 trillion in revenue by 2030 due to AI. If AI spending increases, it stands to reason that Amazon, already outperforming its competitors in the cloud market, will benefit.
Buffett made his first Amazon investment in 2019 and now owns 10 million shares, accounting for less than 1% of Berkshire Hathaway's portfolio. While that might not sound impressive, it's clear that Buffett sees potential in Amazon – he just admitted he waited too long to jump on the bandwagon.
Currently, Amazon's forward price-to-earnings ratio (P/E) is 36.9, which might seem pricey next to the S&P 500's P/E of 30.9. However, when you consider Amazon's dominance in e-commerce and cloud computing, it's a relatively reasonable price for such a powerful stock.
2. American Express
American Express might seem like a more traditional Buffett pick than Amazon, as Buffett often favors reliable financial companies. That's exactly what American Express is, with stellar earnings and a focus on increasing its elite clientele.
In the third quarter, American Express's sales increased 8% to $16.6 billion, and diluted earnings per share rose a robust 6% to $3.49. A substantial share of this growth came from new high-end customers, who are willing to pay annual fees for American Express's coveted cards.
During the third quarter, American Express added over 3.3 million new cardholders and saw a whopping 80% of new Gold Card sign-ups coming from millennials and Gen Z customers. The company's impressive third-quarter results encouraged managers to bump up their full-year earnings guidance to $13.90 per share.
Buffett has had a long history with American Express, having first invested in the company back in 1991. Today, American Express accounts for over 15% of Berkshire Hathaway's portfolio, underscoring Buffett's confidence in the financial services giant.
Set against the S&P 500's P/E of 30.9, American Express' forward P/E of 20 seems like a bargain. With additional cardholders likely driving revenue and earnings growth, this might be the perfect time to buy into this Buffett favorite.
Considering Buffett's current portfolio, he has significantly invested in American Express, accounting for over 15% of Berkshire Hathaway's holdings. This demonstrates his confidence in the financial services giant's performance and growth potential.
In terms of finance and investing, the allure of American Express lies in its impressive earnings and focus on attracting elite clientele. With double-digit sales growth and a robust increase in high-end cardholders during the third quarter, the company is well-positioned to generate substantial revenue and earnings in the future.