Buffett

Warren Buffett will step down as CEO of Berkshire Hathaway (BRK.A 0.39%) (BRK.B 0.30%) at the end of the year. But before he does, the conglomerate he’s run for nearly 60 years will make at least one more big acquisition.

The Oracle of Omaha and soon-to-be CEO Greg Abel expect to close on a deal to acquire the petrochemicals business OxyChem from Occidental Petroleum (OXY 0.32%) in the fourth quarter. Berkshire will pay $9.7 billion in cash, which will barely make a dent in the $340 billion sitting on the company’s balance sheet. Still, it represents the largest purchase for Berkshire since Allegheny Corp. in 2022.

The deal is an exceptional example of Warren Buffett’s investing style, which relies on being in a good position to act when great opportunities present themselves. Here’s what Berkshire Hathaway is getting in the deal, and why it’s an absolutely genius move.

Image source: The Motley Fool.

What is Berkshire buying?

OxyChem is a leading petrochemical company, one of the largest producers of caustic soda, potash, chlor-alkali, and PVC. It’s a global operation with 23 facilities worldwide, and Greg Abel described the acquisition as “a robust portfolio of operating assets, supported by an accomplished team.”

However, the industry is facing pressure. Weak pricing for caustic soda and PVC led to disappointing pre-tax earnings in the second quarter of just $213 million. Management revised its outlook for the business for full-year pre-tax income low to between $800 million and $900 million for this year.

Occidental’s management expects the supply side pressure on pricing to mitigate next year. In management’s first quarter earnings call, it said it expects to generate “$1 billion in incremental pre-tax cash flow from non-oil and gas source in 2026, with further expansion in 2027.” Part of that improvement is from modernization of OxyChem facilities.

In the meantime, though, Berkshire is swooping in to buy the assets when the entire industry is near a cyclical trough. The $9.7 billion price tag is estimated to be around 8 times OxyChem’s 2025 EBITDA expectations. That’s roughly in line with other chemical stocks like Eastman Chemical and Dow, but the entire industry is seeing lower earnings multiples due to the same headwinds pushing profits lower at OxyChem.

If the industry turns around as Occidental’s management expects, Berkshire could be getting a heck of a bargain. But the way it’s acquired the business makes it an even better deal for Berkshire and its shareholders.

The cherry on top for Berkshire

The big reason Occidental was willing to sell OxyChem despite expectations that it will see significantly improved earnings and cash flow over the next few years is because it needs cash. The oil and gas company took on additional debt to acquire CrownRock in August of 2024.

The increase in debt on Occidental’s balance sheet was always meant to be temporary. When it announced the acquisition, management said it plans to divest assets and use excess cash flow to reduce its debt levels back below $15 billion. While it’s been aggressive in using excess cash to pay down debt, the company still had $24 billion worth of debt on its balance sheet as of the end of the second quarter.

The cash infusion from Berkshire is set to net $8 billion after taxes. Of that, $6.5 billion will go toward paying down debt, with the other $1.5 billion going to Occidental’s coffers. Combined with debt pay down from excess free cash flow, management expects to meet its sub-$15 billion target.

The debt reduction indirectly benefits Berkshire as well. The conglomerate owns a 28% stake in the business. The stronger balance sheet should support projects to maximize its vast resources in the Permian Basin while improving its free cash flow position with reduced debt burden. That should support long-term growth for the business.

One other aspect of the deal provides tremendous benefits to Berkshire and its investors. Instead of using Berkshire’s preferred shares of Occidental to acquire OxyChem, Buffett and Abel managed to convince the company to take cash. That means Berkshire will continue to collect its 8% annual dividend on the $8.5 billion in preferred shares it continues to hold. That’s a much better yield than the company’s getting on its short-term Treasury bills.

Occidental says it plans to start redeeming those preferred shares in August of 2029, giving Berkshire shareholders at least three more years of extra-high yields. That’s just the cherry on top for Berkshire shareholders, who finally saw Buffett put some of Berkshire’s growing cash pile to work.

It has been an up and down year for Warren Buffett’s portfolio. Many of his biggest positions have been trimmed aggressively. But according to recent filings, his holding company, Berkshire Hathaway, is loading up on one of Buffett’s favorite stocks. Last quarter, it boosted its position by more than $500 million.

On paper, this stock has it all. It’s priced at a discount to the market, offers a compelling dividend yield, and could generate impressive growth over the next few years.

This has been one of Warren Buffett’s favorite stocks since 2020

Berkshire Hathaway first took a position in Chevron (CVX 0.94%) back in 2020, not long after the nadir of the COVID-19 flash crash. Buffett’s estimated purchase price was around $80. But over the years, he has managed the position aggressively. In early 2021, for instance, just one year after his initial purchase, Buffett slashed his Chevron stake by more than 50%. Towards the end of 2021, however, he began rebuilding his position. Several more purchases and sales occurred in 2022, including the massive acquisition of 121 million shares in the first quarter.

Notably, Berkshire has been a net seller in recent quarters. In six of the past seven quarters, for example, Berkshire has sold more Chevron stock than it purchased. But that all changed this quarter when Buffett purchased nearly 3.5 million shares worth roughly $520 million. It was one of the biggest stock purchases of the quarter for Buffett, giving Berkshire a 7% stake in the entire business.

Why did Buffett load up on this giant oil stock that he knows so well? The numbers below paint a compelling picture.

Chevron stock looks very attractive for certain investors

After several consecutive winning years, the stock market as a whole isn’t obviously a value right now. The S&P 500, for example, trades at 31 times earnings — well above its long-term average. Chevron stock, meanwhile, trades at just 19 times earnings. Revenue growth is stagnant right now, but free cash flow remains high, helping to support a 4.5% dividend yield.

Part of the challenge with Chevron stock right now isn’t under its direct control. Oil prices slid heavily this year, falling under $60 per barrel. Oil inventories continue to rise, with meaningful surpluses expected in 2026 due to rising production globally. In total, it’s a tough place to be for businesses that sell oil.

As an integrated producer, with interests in refining, chemical production, and even energy generation for artificial intelligence applications, Chevron has long been able to manage industry cyclicality with ease. Chevron’s CEO focuses on cost controls and capital efficiency to ensure profits remain stabilized even with low oil prices. But unless those oil prices move higher, expect so-so results from Chevron — a big reason why shares have traded sideways since 2022.

Here’s the thing: Chevron stock is still a very compelling purchase for certain investors. If you’re finding it difficult to find market values, are worried about a potential bear market, or believe geopolitical tensions are about to rise, allowing oil prices to recover quickly, Chevron shares could be a fit. While shares aren’t a steal, they are arguably fairly valued at 19 times earnings. The dividend yield and free cash flow consistency, meanwhile, can help offset losses during a market downturn. And given ongoing geopolitical disputes, it’s not unreasonable to expect sudden shifts in oil demand and supply.

All in all, this looks like a classic move for Buffett in this market environment. He understands Chevron’s business model well, and with a rising cash hoard, it’s clear that he’s finding it difficult to spot market bargains. Chevron is as close to a value stock in today’s environment as it gets.

Quantum computing stocks have been on an absolute tear recently as their companies announced major contract wins. But that was all topped off by JPMorgan Chase‘s announcement this week that it’s investing $10 billion into strategic tech companies. That includes quantum computing businesses. But for quantum computing stocks to rise around 20% (some more, some less) following that news is troublesome.

No specific investment was announced in any of these companies, and other massive industries were listed in the release — such as supply chain and advanced manufacturing, defense and aerospace, energy technology, and frontier and strategic technologies (where quantum computing was lumped in). This raises concerns about the short-term nature of the quantum computing market. The combined rise of all quantum computing stocks was more than the overall $10 billion investment announced by JPMorgan Chase, so there’s clearly not enough to go around.

Observers have begun to speculate that there may be a quantum computing bubble forming. So is now the time to sell? I think Warren Buffett has some great advice for investors on what they should do.

Image source: Getty Images.

Warren Buffett has seen a bubble or two in his career

Warren Buffett is the legendary CEO of Berkshire Hathaway, a position he has held since he took control of the company in 1965. Over the years, Buffett has given investors several great pieces of wisdom, and I think one quote is applicable right now. He wrote that his goal was to “attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

There are clearly many signs of greed in the quantum computing market. As mentioned above, many of the quantum computing stocks rose by a massive amount in response to a nonspecific announcement that JPMorgan Chase would invest in emerging technologies.

Furthermore, we’re still years away from quantum computing viability. Most competitors point toward 2030 as the likely turning point in quantum computing’s commercial relevance, and that’s still five years away. Five years ago, we were in the beginning stages of the COVID-19 pandemic, and nobody (outside of a handful of companies) had ever heard the term generative AI. It’s impossible to know what will happen in the field over the next five years, or which companies will be the winners.

Most of the investment dollars flowing into the quantum computing space have centered around the pure plays. Still, there are also legacy tech players, like Alphabet, Microsoft, and IBM, which have nearly unlimited resources compared to pure plays like IonQ (IONQ -3.92%) or Rigetti Computing (RGTI -3.01%). It’s still an uphill battle for IonQ and Rigetti, and just because the big tech players aren’t saying anything doesn’t mean they aren’t experiencing success.

Companies like IonQ and Rigetti Computing are still years away from profits, and have to rely on government contracts and stock issuance to continue to fund their operations. As a result, they must issue a news release on any piece of positive news they can to let investors know about their successes. The big tech companies like Alphabet, IBM, and Microsoft can afford to stay silent about any breakthroughs, as they’re internally funding their research.

The big tech players may be far more advanced than the pure plays, even if nobody outside of those companies knows it yet. I think this could be setting up some of the pure-play stocks for failure, and their shareholders should take action.

Taking some profits in an increasingly frothy industry is a smart move

Another Warren Buffett quote is applicable in this situation, too: “The first rule in investment is ‘Don’t lose.’ And the second rule in investment is ‘Don’t forget the first rule.'” Investors have already made a significant amount of money on the quantum computing trade, and while it’s possible these stocks could continue rising, a crash may be around the corner.

If you’ve invested in these stocks at any time this year, it may be time to at least trim some of them, as it’s unlikely that they’ll continue rising forever. By taking some profits now, you can be well positioned to deploy them back into the industry if it returns to earth.

Nobody ever lost money by selling a stock at a profit, although they have lost out on even larger returns. Still, I think the risk is greater than the reward, and it may be a wise time to take some profits off the table.

As many stock market observers know, Warren Buffett‘s Berkshire Hathaway has been a net seller of stocks. The most notable sale has been Apple. That position made up over 40% of the portfolio at one time, but the share has since fallen to around 22%.

What investors need to understand is that the selling does not mean Buffett’s team isn’t buying stocks at all. One notable recent purchase has been Domino’s Pizza (DPZ -0.03%). The stock’s past gains and its value proposition have likely inspired this investment, and such optimism warrants a closer look at the business and the stock to see if it is a suitable choice for average investors.

Image source: Getty Images.

Berkshire Hathaway and Domino’s

Domino’s has returned more than 6,500% in stock gains and dividend payments since it went public in 2004. Most investors, including Berkshire Hathaway, have missed out on most of those gains, but Berkshire’s bets could indicate that significant upside remains.

DPZ Total Return Level data by YCharts

Buffett’s company began buying Domino’s shares in the third quarter of 2024 and has increased its position size in every quarter since that time. Today, it holds just over 2.6 million shares, or about 7.75% of the outstanding shares.

Another possible factor in Berkshire’s investment in Domino’s is that it is the world’s largest pizza chain, boasting 21,750 locations globally as of the end of fiscal Q3. Despite that success, investors may question why an investor would want to get into a business like pizza, which at least in theory, has low barriers to entry.

However, no other pizza business has grown to the same size, and one can find the kinds of competitive advantages that attract investors like Buffett when looking at Domino’s more closely.

One key part of Domino’s is its franchise model. This enables the chain to open a large number of locations with a relatively small amount of capital, leveraging high brand recognition to drive business.

Moreover, it offers a digital-first approach, which makes ordering easier and capitalizes on route planning for faster deliveries. Additionally, an efficient supply chain helps standardize food quality and costs, increasing consistency across locations.

Furthermore, despite a global footprint, Domino’s adapts its menu to suit local tastes, and new offerings such as parmesan-stuffed crust or added customization options keep its customers coming back to Domino’s.

The financial case for Domino’s

Buffett’s team was likely also drawn by its financial metrics. Indeed, with its global footprint, the maturity of the business appears to make it more of a value stock.

In the first nine months of fiscal 2025 (ended Sept. 8), revenue of $3.4 billion rose by 4%. Nonetheless, during that time, its free cash flow of $496 million surged 32% higher over the same timeframe. Gains on assets and lower capital expenditures bolstered that cash position.

Additionally, that free cash flow easily covered the company’s $119 million in dividend costs in the first nine months of the fiscal year. At $6.96 per share, its 1.6% dividend yield is well above the 1.2% average for the S&P 500. Buffett’s team also probably liked its 13-year history of payout hikes, a trend that makes further annual payout hikes likely to continue.

Investors should also take note of the pizza chain’s valuation. Its P/E ratio of 25 is below the company’s five-year average earnings multiple of 30. Also, since its P/E ratio has not fallen significantly below 25 since the early 2010s, one can assume that Domino’s stock sells at a reasonable price.

Should you follow Berkshire Hathaway into Domino’s stock?

Given the state of the company, investors can likely make a prudent move by following Berkshire Hathaway into Domino’s stock.

Indeed, a 6,500% total return over the stock’s history may cause some prospective buyers to shy away, particularly because of the competitive nature of the pizza industry.

However, Domino’s brand recognition and its focus on franchising, operational efficiency, and a robust supply chain give the company a competitive advantage. Moreover, investors can buy the stock at a relatively reasonable price and collect an above-average dividend yield.

In the end, even if Domino’s does not generate excitement, the stock is likely to cook up rising dividends and market-beating returns over time.

Warren Buffett is well known for being perhaps the greatest stock picker of all time, and for good reasons. Berkshire Hathaway (BRK.A -0.88%) (BRK.B -1.03%), the conglomerate Buffett has led since the mid-1960s, has delivered unbelievable returns for investors over the years, and a big reason is Buffett’s success with using Berkshire’s capital to invest in stocks.

What makes Buffett’s investing style so extraordinary is how simple it is. Buffett invests in great businesses (mostly ‘boring’ ones) that he believes trade for significantly less than their intrinsic value and holds them for as long as they remain great businesses.

He doesn’t chase technology stocks or try to get in on the ground floor of the ‘next big thing.’ He doesn’t trade short-term. And he uses fairly basic investment principles, which he often shares with everyday investors. In addition to being the most successful investor, he is also the most quotable.

Image source: Getty Images.

Buffett’s advice to the average investor

Yes, Warren Buffett has an extraordinary track record when it comes to choosing individual stocks to invest in. But it’s also important to know that he spends many hours (usually over 10 per day) researching and reading.

Of course, you don’t need to spend that much time, but the point is that being a successful individual stock investor requires time and knowledge. As Buffett says, “If you like spending six to eight hours per week working on investments, do it. If you don’t, then dollar-cost average into index funds.”

To be perfectly clear, Buffett doesn’t think there’s anything wrong with this option. In fact, he has directed that his own wife’s inheritance be invested in this way after he’s gone.

Buffett has specifically mentioned the S&P 500 as a great way to bet on American business. And he says that “American business — and consequently a basket of stocks — is virtually certain to be worth far more in the years ahead.”

Buffett is a big fan of this S&P 500 ETF

There are several excellent S&P 500 index funds in the market, but one that Buffett has owned in Berkshire Hathaway‘s portfolio is the Vanguard S&P 500 ETF (VOO -1.28%). This fund simply tracks the 500 stocks in the index, in their respective weights, and should mimic the performance of the benchmark index over time.

Buffett is a big fan of Vanguard, which pioneered the low-cost index fund years ago. The Vanguard S&P 500 ETF has a rock-bottom 0.03% expense ratio, which means that you’ll pay just $0.30 in annual investment fees for every $1,000 in assets. To be clear, this isn’t a fee you physically have to pay — it will just be reflected in the fund’s performance over time. But it’s so low that it will barely have any impact on your long-term results.

You might be surprised at the potential

One final Buffett quote I’ll leave you with is “it isn’t necessary to do extraordinary things to get extraordinary results.” And it certainly applies to index fund investing.

Over the long run, the S&P 500 has produced annualized returns of about 10% over long periods of time. Let’s say that you invest just $200 per month in the Vanguard S&P 500 ETF and that you achieve 10% returns going forward.

• In 10 years, you’d have about $38,250.
• In 20 years, you’d have $137,460.
• In 30 years, you’d have nearly $395,000.
• In 40 years, you’d have about $1.06 million.

The key is to invest consistently and hold for a long time. The magic of long-term compounding will do the heavy lifting for you. As you can see, if you’re not comfortable with picking individual stocks, it doesn’t necessarily mean that you can’t use the stock market to build extraordinary wealth over time.

Berkshire Hathaway CEO Warren Buffett helped turn the investment conglomerate into one of the world’s most valuable companies. With a market capitalization of approximately $1.08 trillion as of this writing, Berkshire ranks as the world’s 11th-biggest business (at the time of this writing).

Given Berkshire’s incredible success, it’s little wonder that many investors pay close attention to the company’s stock holdings and strategies. Read on to see why two Motley Fool contributors think that these Berkshire Hathaway portfolio components stand out as great buys right now.

Image source: Getty Images.

One of Buffett’s favorites

Jennifer Saibil (Apple): Warren Buffett has been selling Apple (AAPL 0.28%) stock left and right, so I might be going against the grain to say that Apple is one of his best stocks to buy today. But Buffett himself is a contrarian investor, so I’m only following in his footsteps.

In any case, Apple is still the largest stock in the portfolio, accounting for more than a fifth of the total, so Buffett hasn’t lost confidence in it at all. He has said he would never sell as long as he’s controlling Berkshire Hathaway, but that time is coming to an end, and investors are already speculating as to whether Greg Abel will keep it in the portfolio.

But many of the same reasons Buffett originally bought it still hold today. Apple has a large and differentiated consumer products business with a sticky ecosystem, and loyal fans purchase an assortment of its devices, which easily connect to each other. Although it’s often labeled as a tech business, which isn’t in Buffett’s wheelhouse, it’s at least as much the kind of consumer products business that he loves. The tech part also gives him exposure to artificial intelligence (AI), which may not be the reason he bought it, but is a reason many other investors might find it exciting.

So far, Apple Intelligence has disappointed investors. Apple hasn’t released AI services that stand out, and it doesn’t have a strong timeline for when it will.

Still, the recent debut of its newest iPhone, the iPhone Air, demonstrates why fans love Apple and rush to buy its latest launches. It’s the thinnest smartphone on the market, and the design appeals to style-conscious users who often wear their devices as statement pieces. Apple just debuted several new launches that will go on sale later this month, including the new iPhone17 that ramps up the quality and capabilities users love and pay up for, and new AirPods that use Apple Intelligence to translate language in real time.

In other words, Apple is still on top of its game, and it isn’t likely that its customers are going anywhere else anytime soon. However, Apple stock fell after the new products were announced, and it’s down 10% this year. The market didn’t seem to think its launches had enough innovation, especially with AI. That makes this a great opportunity to buy on the dip for the long-term investor.

Amazon stock still looks like a great long-term play

Keith Noonan (Amazon): Like Apple, Amazon (AMZN -1.34%) stock has been a high-profile tech-sector underperformer in 2025. The e-commerce and cloud computing giant’s share price is up just 2% across this year’s trading. Meanwhile, the S&P 500 index’s level has risen roughly 15%, and the Nasdaq Composite‘s level has surged approximately 18%.

Also like Apple, Amazon is also part of Berkshire Hathaway’s stock portfolio. Coming in at just 0.7% of Berkshire’s public stock holdings, Amazon occupies a relatively small position in the investment conglomerate’s portfolio — but I think the tech leader stands out as a strong long-term investment at today’s prices.

Trading at roughly 33.5 times this year’s expected earnings, Amazon admittedly still has a growth-dependent valuation. On the other hand, the extent to which the stock has underperformed the broader market in recent years points to an opportunity. For reference, the company’s share price has risen just 43% over the last five years. Meanwhile, the S&P 500 and Nasdaq Composite have both more than doubled across that stretch.

There are some good reasons behind the underperformance. For starters, the company’s e-commerce business faced some substantial headwinds from supply chain disruptions and inflationary trends connected to the pandemic. With the majority of the company’s sales still coming from its e-commerce business, Amazon is also facing some pressures from tariffs.

On the other hand, Amazon remains one of the world’s strongest businesses — and it’s likely in the early stages of capitalizing on AI-related tailwinds that power incredible new growth phases. The growth catalysts that AI can present for the company’s cloud-infrastructure services business seem to be acknowledged but still broadly underappreciated. Meanwhile, the market seems to be largely overlooking the transformative impact that AI and robotics will have on margins for its e-commerce business. With Amazon positioned to benefit from powerful tech trends, the stock looks like a smart buy while it’s still a market laggard.

Does Warren Buffett need help selecting stocks? Of course not. He’s done a really good job of doing it all on his own for decades.

Sure, the legendary investor would likely insist that he’s a “business picker” rather than a stock picker. Buffett would also probably point out that he has farmed out some of the decision-making to his two investment managers, Todd Combs and Ted Weschler, for quite a while.

But let’s suppose that Buffett asked me to give him a hand choosing one stock to buy for Berkshire Hathaway‘s (NYSE: BRK.A) (NYSE: BRK.B) portfolio. If that wild scenario happened today, which stock would I recommend? I think I’d go with The Home Depot (HD -0.04%).

Image source: The Home Depot.

Why Home Depot would make a great Buffett stock

I view Home Depot as a great Buffett stock in part because it once was a Buffett stock. He initiated a position in the home improvement giant 20 years ago but eventually sold all of Berkshire’s stake in the second quarter of 2009.

Buffett might wish he had held onto those shares in retrospect. Over the 14 years since he exited Berkshire’s position in Home Depot, the stock has skyrocketed roughly 1,570%. That’s more than double the gain delivered by Berkshire Hathaway itself. The Home Depot’s total return, including reinvesting dividends, since Buffett bailed on the stock in 2009 is around 2,370%.

The Oracle of Omaha would probably like Home Depot’s solid operating margin of 13.1%. I suspect that he would absolutely love the company’s return on invested capital (ROIC) of around 31.2%.

We don’t have to worry about Buffett not liking Home Depot’s business. It’s certainly one that he understands. Buffett has even recently bought stocks that benefit from some of the same trends as Home Depot — homebuilders D.R. Horton (NYSE: DHI) and both share classes of Lennar (NYSE: LEN) (NYSE: LEN.B).

The median age of U.S. homes has increased quite a bit since Buffett last owned Home Depot. It stood at 41 years in 2023, according to the American Community Survey. Aging homes bode well for demand for home improvement products and supplies over the coming years.

The fly in the ointment

Is Home Depot the perfect Buffett stock? I wouldn’t go that far. There is one fly in the ointment.

Like many stocks these days, Home Depot has a relatively high valuation. Its trailing 12-month price-to-earnings (P/E) ratio and its forward P/E are close to 26. Buffett learned from the father of value investing, Benjamin Graham. Would he balk at paying such a premium for Home Depot? Maybe, but maybe not.

Berkshire bought 12 stocks in Q2. Several of them were bargains that you’d expect Buffett to like. However, two had forward earnings multiples that have been consistently higher than Home Depot’s all year: Heico (NYSE: HEI), which currently trades at a sky-high 66.8 times forward earnings estimates, and Pool Corp. (NASDAQ: POOL), which has a forward P/E of 28.7.

HD PE Ratio (Forward) data by YCharts

Perhaps Heico and Pool are part of the portfolio managed by Combs and Wexler. However, Buffett hasn’t been afraid of paying more for quality in the past when he’s been confident about a company’s long-term earnings growth prospects.

Is Home Depot a good pick for every investor?

I selected Home Depot because it was a stock I thought would fit well with Buffett’s investing style. Is this stock a good pick for every investor? Probably not.

I suspect that a purist value investor (which I don’t think describes Buffett, by the way) would prefer to quickly move past Home Depot for the reasons already discussed. The home improvement retailer’s dividend yield of 2.3% might not be juicy enough for some income investors. And growth-oriented investors can certainly find stocks that are more likely to deliver stronger earnings growth than Home Depot.

And even though Home Depot is the stock I’d pick for Buffett, I don’t personally own it. I like the stock, but I like others more. And, unlike Buffett, I’m not sitting atop a cash stockpile of $344 billion.

It’s hard to believe that Warren Buffett’s time as CEO of Berkshire Hathaway is coming to an end. The legendary investor took the holding company from a textile manufacturer in 1965 to become one of the largest companies on the planet today, owning more than 100 businesses and with an equity portfolio worth more than $300 billion.

Berkshire Hathaway stock has wildly outperformed the market over these past few decades, delivering a total gain of 5,502,284% in per-share market value vs. 39,054% for the S&P 500. Today, Berkshire Hathaway has joined the ranks of the $1 trillion market cap club, and investors everywhere follow Buffett’s trades and guidance to become more successful investors.

Most Buffett holdings are the antithesis of the hot growth stock. Buffett is known for his value approach to investing, and he steers clear of high-risk stocks or technology that he’s not familiar with. But at least one stock that the broader investing community and Warren Buffett can agree upon is Amazon (AMZN 0.82%).

The classic moat

There are several features Buffett loves in a great stock, and one of them is a moat. An economic moat ensures that the business has a product or service that stands out and a leg up on the competition. Amazon’s size and name give it a competitive edge, so even though it’s not the classic Buffett stock, it has some clear features that fit the mold.

Its core business is of course e-commerce, and it has almost 40% of the market share in the U.S. That’s a massive amount of market share for any business, and Amazon can do so much to keep its share because it’s so large and has so many resources. It hasn’t reported the number of Prime members it has in a while, but it’s estimated at 220 million to 240 million. These members rely on it for their everyday essentials and more, and the membership model generates loyalty and repeat purchases.

It also drives growth in its advertising business, since advertisers get access to Amazon’s hundreds of millions of Prime members where they’re already shopping and ready to make a purchase. More recently, Amazon has developed a robust video ad business for its Prime streaming platform, and it’s also expanding the business outside of the Amazon platform.

Amazon’s market share lead isn’t quite as big in cloud computing, but it’s still hefty at 30% of the global market, well ahead of Microsoft Azure’s 20%.

Opportunities in AI

Amazon is in constant growth mode to stay on top of its game in all of its categories. Its greatest opportunities today lie in generative artificial intelligence (AI) through its cloud business, Amazon Web Services (AWS). Amazon is investing hundreds of billions of dollars in developing the most competitive generative AI capabilities to meet every kind of demand, from the small business through its large enterprise clients.

Its signature AI service is called Bedrock, which provides access to a plethora of large-language models (LLM) for clients to customize, but it also has tools for developers to build their own LLMs and for small businesses to use ready-made solutions.

The AI business already has a $123 billion run rate, and CEO Andy Jassy pointed out, “How often do you have an opportunity that’s $123 billion of annual revenue run rate where you say it’s still early?”

Indeed, independent sources point to a massive long-term opportunity. According to Grand View Research, the AI market is expected to reach $3.5 trillion by 2033, growing at a compound annual growth rate (CAGR) of 31.5%. What we see today continues to grow at a pace that’s hard to keep up with as generative AI moves from wonky results to near-human content creation.

Amazon and its peers are using enormous loads of data to access new levels of training, inference, and reasoning, reaching new capabilities that could further revolutionize daily life. The way it’s going, AI could eventually take over as Amazon’s larger business and launch its stock into new territory.

A great time to buy

Despite its immense size, Amazon’s revenue is still growing by double digits — 12% in the second quarter. That’s quite a feat, and with the potential for the AI business, it could keep that up for a while. However, there’s some uncertainty in the business due to tariffs and lawsuits, and the market has soured on Amazon stock recently; it’s roughly flat this year, despite the ongoing opportunities.

At the current price, Amazon stock trades at 29 times forward, 1-year earnings, which is an attractive entry point for new investors. If you’ve been on the fence, now could be a fantastic time to take a position in this no-brainer stock.

Warren Buffett has long held Occidental Petroleum (OXY -7.16%) and its CEO, Vicki Hollub, in high regard. His trust in Hollub led Buffett’s company to invest heavily in Occidental. Berkshire Hathaway (BRK.A -0.14%) (BRK.B -0.40%) now owns over $12.6 billion of Occidental’s stock — almost 27% of its outstanding shares — making it Berkshire’s sixth-largest holding at 4.1% of the investment portfolio.

In addition to Occidental’s leadership, Buffett’s company sees unique value in Occidental’s assets. While Buffett has previously stated that acquiring the entire company was not his goal, he clearly sees strategic value in owning a part of the company: OxyChem. Berkshire is paying $9.7 billion for the chemicals company — a move that will significantly reshape Occidental’s business.

Image source: Getty Images.

Drilling down into the OxyChem deal

Berkshire Hathaway is buying OxyChem for $9.7 billion in cash. OxyChem is a global manufacturer of commodity chemicals essential to water treatment, pharmaceuticals, and other key industries. It operates 23 facilities around the world, producing items such as caustic soda (the second-largest merchant seller in the world) and PVC (the third-largest domestic supplier).

OxyChem is consistently profitable despite the ups and downs of the chemicals sector. The company is about to deliver a step-change in profitability, driven by a major investment phase. Occidental was on track to invest over $1.5 billion into several projects through 2026, including the modernization and expansion of the Battleground plant in Texas. These and other projects will add an incremental $325 million in annualized earnings before interest, taxes, depreciation, and amortization (EBITDA) to OxyChem’s total in 2026 and beyond.

The steady cash flows and growing profitability of OxyChem make it an ideal fit for Berkshire Hathaway, which already has experience operating in the chemicals sector. Berkshire also owns specialty chemical company Lubrizol, which it bought for $9.7 billion in 2011.

How this deal will change things for Occidental

The sale of OxyChem will reshape Occidental Petroleum. The oil company plans to use $6.5 billion of the proceeds to immediately repay debt. That would enable the company to achieve its long-standing target of reducing its principal debt below $15 billion. Occidental plans to put the remaining $1.5 billion in after-tax proceeds on its balance sheet, enhancing its financial flexibility.

Debt has been an issue for Occidental Petroleum over the years. The oil giant bought rival Anadarko Petroleum in a cash-heavy $55 billion deal in 2019. Berkshire Hathaway assisted the company with funding for the acquisition by making a $10 billion preferred stock investment in Occidental. That deal turned out to be poorly timed as oil prices crashed early in 2020 when the pandemic hit. Lower crude prices and issues with selling assets significantly impacted the company’s ability to achieve its initial debt reduction targets.

However, Occidental slowly dug out of that hole as oil prices improved. That enabled it to make another debt-heavy deal in late 2023 when it agreed to buy CrownRock for $12 billion. The company set goals at that time to repay at least $4.5 billion of debt within a year of closing the deal and eventually reduce its principal debt to below $15 billion.

Occidental quickly achieved its initial goal by using free cash flow and asset sales. Now it will reach the $15 billion target by selling OxyChem.

Achieving that lower debt level will improve Occidental Petroleum’s credit metrics and financial flexibility. It will also save the oil company over $350 million annually in interest expenses, boosting its free cash flow. The increased financial flexibility will enable Occidental Petroleum to opportunistically repurchase shares and repay additional debt as it matures. The oil company can also continue growing its dividend. Additionally, Occidental plans to resume the redemption of Berkshire’s preferred equity investment, which it anticipates beginning in August 2029 after it builds a bigger cash balance.

In addition to significantly reshaping the company’s financial profile, the deal will sharpen Occidental’s focus on oil and gas production. The company will have greater financial flexibility to invest in unlocking the treasure trove of low-cost oil and gas resources it has around the world. As Hollub put it in the press release unveiling the sale, the transaction will “create this strategic opportunity that will unlock 20+ years of low-cost resource runway and deliver meaningful near and long-term value.”

A financially stronger, more focused oil and gas company

The sale of OxyChem is a transformational event for Occidental Petroleum. The oil company will achieve its long-term debt reduction target, significantly enhancing its financial flexibility while reducing interest expenses. It will also narrow the company’s focus on growing its oil and gas business. As a result, Occidental will become a significantly lower-risk oil company with substantial long-term growth potential as it focuses on developing its vast, low-cost oil and gas resources.

Over 35 years ago, Warren Buffett told investors, “When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.” Since then, he’s bought and sold dozens of stocks for Berkshire Hathaway (BRK.A 0.55%) (BRK.B 1.06%), proving that even the Oracle of Omaha doesn’t have a perfectly clear crystal ball.

Even when Buffett has made extremely successful equity investments, he’s often had reason to sell at least some of Berkshire’s stake — either to maintain a more balanced portfolio, or sell a stock that’s become overvalued, or for any number of other reasons. Those are factors that have come to the fore recently for Buffett and his team of investment managers. Berkshire Hathaway has sold more marketable equities than it bought in each of the last 11 quarters.

Those sales include one stock that Berkshire first bought in 2008 and will go down as one of Buffett’s (and Munger’s) most successful investments of all time.

Image source: The Motley Fool.

Powering massive returns for investors

In late September 2008, as the global stock market was reeling amid the Great Recession, Buffett and Munger took the opportunity to buy a 10% stake in a Chinese auto company called BYD (BYDDY -0.94%) (BYDD.F -1.20%). They gradually increased Berkshire’s stake in the business, reaching about 20% at one point. Today, the company is the largest EV manufacturer in the world, surpassing Tesla.

It was Vice Chairman Charlie Munger who brought the company to Buffett’s attention. He found CEO Wang Chuanfu’s engineering and managerial skills extremely impressive. He had developed one of the largest battery manufacturers in the world before transitioning to the automotive business in the early 2000s. With its battery expertise and other vertically integrated components made through acquisitions, BYD looked poised to do well in the nascent electric vehicle market.

Sure enough, BYD has developed a broad lineup of vehicles sold around the world. Its global sales of fully electric vehicles surpassed Tesla’s in the fourth quarter of 2023 and for the full year of 2024. It’s not just success in its home country, either. BYD’s European sales surpassed Tesla’s in April this year. Management aims to sell half of its cars outside of China by 2030. It’s worth noting BYD has yet to enter the U.S. market due to tariffs and the political environment.

It’s no surprise, then, that BYD’s stock price has soared amid its success. With the acceleration in sales over the last few years, BYD’s stock is up more than eightfold since the start of 2020.

Buffett started decreasing Berkshire’s stake in BYD starting in August 2022, after Berkshire’s initial investment had already climbed about 20-fold. At one point, Berkshire’s shares were worth $9 billion. Based on financial reports from Berkshire Hathaway subsidiary, Berkshire Hathaway Energy, the company gradually sold off shares until completely divesting its stake in the first quarter of this year.

Is the competition too much?

Buffett may have missed the absolute peak of BYD’s stock price, but shares have certainly struggled in the latter half of the year, as Chinese competitors take market share from its domestic business. BYD’s August deliveries were flat year over year, as were July’s. Not only has the intense domestic competition hurt unit sales, but it’s also hurt BYD’s margins.

But the company stands at a distinct advantage over the competition thanks to its significant vertical integration. As mentioned, BYD is one of the leading battery manufacturers in the world. That, in and of itself, is a significant advantage over other EV makers who need to source batteries from third parties. But BYD also makes many other components in its vehicles, including the motors, semiconductors, and practically everything else except the tires and glass.

That allows the business to adapt quickly and maintain better margins than its competitors. With plans for an aggressive international expansion, it’ll have to replicate its manufacturing capabilities all around the world. But management has proven quite adept at building systems and scaling them.

After the pullback in price, investors can buy shares for just 1 times sales and less than 16 times forward earnings expectations. That’s an attractive price for the leader in a growing industry, even if it’s seeing some pressure from the competition weighing on revenue growth and margins. It’s certainly a better valuation than investors could get with Tesla. While Buffett may have sold out of the stock, it might still deserve a spot in your portfolio.

If you’re ever in need of a new stock pick, you can always borrow an idea or two from Berkshire Hathaway‘s (BRK.A 0.55%) (BRK.B 1.06%) portfolio of holdings hand-picked by Warren Buffett himself. And you should. Given enough time, Berkshire shares consistently outperform the broad market largely due to the conglomerate’s investments in publicly traded companies.

Not every Berkshire Hathaway holding is always a great buy, however. Sometimes they’re trading at too steep of a valuation for newcomers, and other times, they’ve just turned into clunkers.

With that as the backdrop, here’s a closer look at two Warren Buffett stocks you can feel good about buying today, but one name you might want to avoid until something big changes for the better.

Image source: The Motley Fool.

Buy: American Express

Many investors don’t realize that — through the attrition of other holdings as well as its own growth — credit card outfit American Express (AXP 0.55%) is now Berkshire Hathaway’s second-biggest stock holding, accounting for 17% of the outfit’s portfolio of publicly traded equities. Underscoring this bullishness is the fact that Berkshire also holds stakes in Visa and Mastercard, but has chosen to only hold much smaller positions in both.

Then again, it’s not difficult to see what the Oracle of Omaha has seen in AmEx since first establishing the position back in the 1990s. It’s not just a payment middleman like the aforementioned Mastercard and Visa. It operates an entire consumerism ecosystem, serving as the card issuer as well as the payment processor, while also managing a perks and rewards program that’s attractive enough for some members to pay up to $900 per year to hold the plastic. These perks include credit toward hotel stays and ride-hailing, cash back on grocery purchases, and discounted entertainment, just to name a few. Although some have tried, no rival has been able to successfully replicate this offering.

Of course, it’s worth pointing out that American Express’s cardholders tend to be a bit more affluent than average, and are therefore mostly unfazed by economic soft patches. As CEO Stephen Squeri pointed out of its Q2 numbers despite the turbulent economic backdrop at the time, “Our second-quarter results continued the strong momentum we have seen in our business over the last several quarters, with revenues growing 9 percent year-over-year to reach a record $17.9 billion, and adjusted EPS rising 17 percent.”

Buy: Kroger

It’s not a major Berkshire holding, and certainly not one that’s talked about much by Buffett (or anyone else, for that matter). But Kroger (KR -0.08%) is quietly one of Berkshire Hathaway’s best-performing stocks.

You know the company. With 2,731 stores producing annual sales on the order of $150 billion, Kroger is one of the country’s biggest grocery chains. Oh, it doesn’t grow very quickly, or produce a ton of profit; this year’s expected top-line growth of around 3% is only likely to lead to operating income of a little less than $5 billion. That’s just the nature of the well-saturated, low-margin food business.

What Kroger lacks in growth firepower, however, it makes up for in surprising consistency.

Although the volatile food business doesn’t exactly lend itself to it, not only has this company not failed to produce a meaningful full-year profit every year for over a decade now, but has roughly doubled its bottom line during this stretch. Making a point of remaining relevant by doing things like entering the e-commerce realm has helped a lot.

More important to would-be investors, although the grocer’s reported growth doesn’t seem all that impressive, the company’s found other ways to create considerable shareholder value. Its quarterly dividend payment has grown by a hefty 250% over the course of the past decade, for example, boosted by stock buybacks that have roughly halved the number of outstanding Kroger shares. In fact, reinvesting Kroger’s dividends in more shares of the increasingly scarce stock over the course of the past 30 years would have consistently outperformed an investment in the S&P 500 during this stretch.

Avoid: UnitedHealth Group

Finally, while Buffett was willing to dive into a small position in beleaguered health insurer UnitedHealth Group (UNH -0.43%) a few weeks back, you might not want to do the same just yet…if ever.

But first things first.

Yes, there’s some drama here. UnitedHealth shares have been beaten down since April, starting with a surprise shortfall of its first-quarter earnings estimates, followed by then-CEO Andrew Witty’s abrupt resignation for “personal reasons” in May. Then in July, the company confirmed that the U.S. Department of Justice was investing its Medicare billing practices. Its second-quarter earnings posted later that same month also missed analysts’ estimates due to the same high reimbursement costs that plagued its first-quarter results. All told, from peak to trough, UNH stock fell 60% in the middle of this year.

As Buffett himself has said, of course, you should be fearful when others are greedy, and greedy when others are fearful. Taking his own advice, he recently plowed into a stake in a long-established company that’s likely to be capable of overcoming all of its current woes. Berkshire now owns 5 million shares of UNH that are currently worth a little less than $2 billion.

Except, maybe this is one of those times you don’t follow Buffett’s lead, recognizing that UnitedHealth Group — along with the entire healthcare industry — seems to be running into these regulatory and pricing headwinds more and more regularly. UnitedHealth’s Medicare business ran into similar legal trouble back in 2017, for instance, while its pharmacy benefits management arm OptumRX was sued by the Federal Trade Commission just last year for artificially inflating insulin prices. It would also be naïve to not notice the federal government is increasingly scrutinizing every aspect of the nation’s healthcare industry, now that care costs have raced beyond reasonable affordability.

And for what it’s worth, although UnitedHealth has managed to continue growing its top line every year for over a decade now, actual operating profits and EBITDA stopped growing early last year, not counting the recent unexpected surges in its medical care costs.

UNH Revenue (TTM) data by YCharts

What gives? The entire healthcare industry may be at a tipping point, so to speak, and not in a good way. Although this wouldn’t necessarily be catastrophic for UnitedHealth, it certainly would undermine its value to investors. If nothing else, you might want to wait on the sidelines for the proverbial dust to settle before following Buffett into this uncertain trade.

Warren Buffett has built a reputation for studying the landscape and spotting financial issues before others realize there’s a problem. Twenty years ago, at a 2005 Berkshire Hathaway meeting, Buffett was blunt: “I basically believe that anything that would take Social Security payments below their present guaranteed level is a mistake.”

Image source: Getty Images.

The problem has been brewing

Based on any retirement planning you’ve done, you’ll probably not be surprised that the Social Security trust is in serious danger of running dry. The program collects payroll taxes under the Federal Insurance Contributions Act (FICA). Both employees and employers contribute 6.2% of the employees’ wages, up to the annual wage base limit of $176,100.

The money collected today goes toward paying Social Security benefits to current beneficiaries. When the Social Security Administration (SSA) collects more than it pays out, the remaining money goes into the Old-Age and Survivors Insurance Trust Fund (OASI) and is invested in Treasury securities. When the SSA collects less in Social Security payroll taxes than it pays out, the SSA must dip into the trust fund for the money it needs to pay the benefits earned.

According to the SSA’s 2024 Trustees Report, the OASI trust fund is projected to become depleted in 2033, unless Congress intervenes to shore up the program. While several factors have played a role in draining the fund, demographics may be the most critical. In 1960, there were 5.1 workers for every Social Security recipient. Today, that number is just 2.8 and expected to continue falling.

The SSA cannot pay full Social Security benefits once the money invested in Treasury securities is gone. At that point, the Trustees say that Social Security benefits would be reduced by 23%.

Buffett’s proposals to get Social Security back on solid ground

Buffett has been consistent about recommending moderate changes to the program, including:

Remove the taxable earnings cap

As of 2025, Social Security taxes only apply to incomes up to $176,100. For example, a person who earns $400,000 annually only pays Social Security taxes on the first $176,100. No Social Security taxes are collected on the remaining $223,900.

Buffett believes that the U.S. should eliminate this cap so that higher earners can contribute more to the program. This approach would boost Social Security revenue significantly and is unlikely to affect the financial stability of wealthier taxpayers.

Slightly increase payroll taxes

No one enjoys a tax hike, which may help explain why politicians have been so hesitant to suggest them. Politicians want to be seen as the people who cut taxes. There’s only one problem with that: Cutting taxes isn’t always good for the long term. For example, President Donald Trump’s “Big, Beautiful Bill“ expanded the standard deduction for seniors and lowered how much can be collected in taxes on benefits.

Add that to the Social Security Fairness Act signed into law by President Joe Biden in early January 2025. The Social Security Fairness Act eliminated the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) rules. These two programs decreased the amount that over 3.2 million people — including teachers, police officers, firefighters, and federal employees — were eligible to receive in Social Security benefits.

While each tax break may have come as welcome news to most, the Committee for a Responsible Federal Budget (CRFB) found that they shaved a full year off the expected solvency timeline, meaning money is being drained from the Social Security trust fund at a faster rate than believed just last year.

Buffett suggests a slight boost in Social Security payroll taxes, saying even a modest hike would generate additional funds over time. In addition, a small tax hike would help secure the program’s financial stability without unfairly burdening workers or employers.

Raise the full retirement age (FRA)

In 1960, American men could expect to live to age 66.6 on average, and American women to age 73.1. Today, American men can expect to live to 77.2 on average, and American women to age 82.1. This increase in life expectancy means more years in retirement, and more Social Security benefits paid out. The SSA could stretch the Social Security trust fund further by raising the FRA.

Reduce Social Security benefits for wealthy retirees

Buffett, who once famously pointed out that his secretary paid a “far higher tax rate“ than Buffett himself, believes that the wealthiest retirees will do fine if their benefits are scaled back. According to Buffett, adjusting payments for high earners allows the SSA to direct more resources to those retirees who depend on their monthly benefits the most.

Given the number of Americans who collect Social Security, it’s fair to assume that many have done everything they can to maximize benefits and don’t want to see their benefits slashed. Warren Buffett has spent the past two decades offering potential fixes to the issue. Now, if Congress can get on board, a solution may be found.

Warren Buffett is a legend in the investing world, known for taking a disciplined approach to allocating capital, favoring durable businesses with strong competitive moats and management teams with high integrity. His success stems from embracing simplicity and resisting market noise, compounding returns over the course of decades.

Buffett’s investing style has yielded extraordinary long-term results, turning Berkshire Hathaway into a trillion-dollar business, and reinforcing the importance of taking a long-term approach to investing. If you’re looking for stocks to add to your diversified portfolio, here are three no-brainer Buffett stocks to buy now.

Image source: The Motley Fool.

Visa

As a global leader in digital payments, Visa (V -0.01%) has had decades to establish a robust payment network worldwide. It benefits from network effects, as each new customer or merchant added strengthens its ecosystem and reinforces Visa’s dominance. In 2023, Visa processed a total of $6.3 trillion in purchase volume, giving it a 32% global market share and a 52% share in the U.S.

The Visa brand is trusted worldwide, and its infrastructure is deeply embedded in commerce. Visa’s growth is tied to secular trends, such as digitalization, e-commerce, and global financial expansion, which are structural tailwinds that should continue to support it in the long term.

Not only that, but Visa doesn’t issue credit or assume consumer risk. Instead, it earns fees from transactions, making its revenue model resilient across economic cycles. As a result, it has a capital-light business structure that enables high margins and robust free cash flow.

Some investors have expressed concern about the potential threat to Visa’s business from stablecoins. Visa’s management sees it differently, believing stablecoins are an opportunity to solve payment problems, particularly in emerging markets and cross-border money movement. The payments company looks to leverage its strengths and integrate stablecoins into its broader payments ecosystem.

Visa’s sound business and strong network provide it with durable competitive advantages, allowing it to grow alongside an expanding economy, making it an excellent Buffett stock to buy today.

Amazon

Amazon (AMZN -0.28%) has been a visionary in the e-commerce market, building up an incredibly strong position during the past few decades. However, Berkshire didn’t invest in the e-commerce giant until 2019, and it was one of Buffett’s investment managers, Todd Combs or Ted Weschler, who initiated the position.

Amazon’s core retail business operates on razor-thin margins as it strives to maintain its position as the lowest-cost retailer in the U.S. Its dominance is rooted in logistical mastery and data-driven innovation. However, it’s Amazon’s smart reinvestment of profits back into the business that has driven its growth.

The company is laser-focused on optimizing its logistics networks to improve efficiency and reduce costs. Key to this was transforming fulfillment into regional hubs, which stock items closer to customers, resulting in faster delivery, fewer packages, and lower costs. The company continues to invest in its fulfillment network, utilizing artificial intelligence (AI) and robotics. It has deployed Deep Fleet, an AI system that serves as a traffic management system to coordinate robots and improve travel efficiency by 10%.

In addition, Amazon Web Services (AWS), the market leader in cloud computing, transformed the company into a cash-generating powerhouse. Last year, Amazon raked in nearly $40 billion in operating income from this business alone. AWS’s high-margin, recurring revenue model provides stability and fuels reinvestment across Amazon’s ecosystem.

Amazon’s consistent growth in free cash flow, combined with its strong position in multiple sectors with solid growth potential, makes it an excellent long-term investment.

Chubb

Chubb (CB 0.85%) operates as one of the world’s largest publicly traded property and casualty insurers and is recognized as the largest commercial lines insurer in the U.S. With operations in 54 countries and territories, Chubb truly has a global reach.

What makes it stand out is its breadth of knowledge combined with its disciplined underwriting and conservative risk management. This broad-based approach diversifies Chubb’s insured risk to various geographies, customers, and product areas, helping support long-term, sustainable growth.

Disciplined underwriting is vital to Chubb’s success across various market cycles. The company stresses disciplined underwriting and will not take any business below what it deems an adequate price. For example, Chief Executive Officer Evan Greenberg noted that the insurer has “begun walking away where necessary” in specific markets where insurers have become more aggressive in their pricing. While this may limit growth, it also shows Chubb’s commitment to steady, profitable growth over time.

Chubb’s ability to price risk accurately and maintain underwriting discipline across market cycles has resulted in industry-leading combined ratios. This translates to steady underwriting profits, even in volatile environments, and is also a big reason Chubb has raised its dividend payout for 32 consecutive years. For investors seeking steady growth over time, Chubb is another excellent Buffett stock to consider today.

It’s probably safe to say that the world hasn’t seen a better capital allocator than Warren Buffett. His incredibly long track record running Berkshire Hathaway speaks for itself, as his investment prowess transformed the company into a $1 trillion conglomerate.

Average investors are right to listen to Buffett’s advice. And one of his recommendations is extremely simple. The Oracle of Omaha says to buy this Vanguard exchange-traded fund (ETF). It could turn a monthly $1,000 investment into $264,000 in a decade.

Image source: Getty Images.

Simple is best

Every investor wants to be like Buffett, picking individual businesses based on expert financial analysis skills. However, this is obviously not something everyone can do. Even professional money managers struggle to find success, with many funds lagging the overall market.

Buffett believes that most retail investors are better off taking a simpler approach. This means buying a low-cost ETF that tracks the performance of the S&P 500, such as the Vanguard S&P 500 ETF (VOO -0.56%). It carries an extremely low expense ratio of 0.03%, which is probably why Buffett is so supportive of it.

What’s more, investors are buying an ETF offered by a leading firm in the asset management industry that has been around since 1975. Vanguard had $11 trillion in total assets under management as of July 31, highlighting its tremendous scale and the amount of capital it’s trusted to handle.

The Vanguard S&P 500 ETF tracks the performance of the S&P 500. Investors in the fund get exposure to 500 large and profitable companies, with tech behemoths like Nvidia, Microsoft, and Apple having big weights. However, there is still broad diversification, as all sectors of the economy are represented.

Owning this ETF essentially means that investors are betting on the ongoing growth and ingenuity of the U.S. economy. That doesn’t mean there isn’t international exposure. Many of the companies in the S&P 500 generate revenues from overseas markets. This can be beneficial as other countries potentially register more growth than the U.S. in the long run.

Stellar performance

In the past decade, the S&P 500 has generated a total return of 304% (as of Sept. 19). On an annualized basis, this translates to a gain of 15%. It’s hard to complain with this performance, which has been driven by historically low interest rates, lots of passive capital flowing into the stock market, and the rise of massive tech companies.

If trailing-10-year returns (from August 2015 to August 2025) repeated over the next decade, investing $1,000 monthly into the Vanguard S&P 500 ETF would turn into $264,000 by September 2035. This proves that even small sums of money can result in huge returns over the long term.

This approach is considered dollar-cost averaging, and it works so well because investors are building a consistent habit of allocating capital to their portfolios. Plus, it lessens the importance of trying to correctly time the market, which is a losing proposition.

But to be clear, past returns provide no guarantee of future results. Looking out over the next decade, the Vanguard S&P 500 ETF could generate worse performance than it did since 2015. This is entirely in the realm of possibilities. One area of concern is the historically expensive valuation of the S&P 500, which might be one of the main reasons Buffett and Berkshire have been net sellers of stocks in recent years.

It’s best to have realistic expectations. While the returns could be great, it’s also possible that the S&P reverts back to its long-run average of 10% yearly gains. Either way, buying the Vanguard S&P 500 ETF on a monthly basis is perhaps one of the best things investors can do, at least in Buffett’s opinion.

Do you like low-cost stocks? If so, you’re not alone. So does legendary stock-picker and Berkshire Hathaway (BRK.A 0.20%) (BRK.B 0.24%) CEO Warren Buffett. His company is currently holding about four dozen value stocks, which collectively account for one-third of the conglomerate’s total market cap.

One of these names is absurdly cheap right now, and could make you measurably richer at some point in the foreseeable future. That stock? The Kraft Heinz Company (KHC -0.15%).

Surprised? Just hear me out.

Yes, that Kraft Heinz

Anyone keeping tabs on Kraft Heinz for the past few years might be more than a little shocked at the suggestion. While hopes were high for the merger of then-separate Kraft and Heinz that Warren Buffett helped orchestrate back in 2015, by 2017 it was clear the pairing was a bust. Buffett eventually conceded in 2019 that “we [Berkshire Hathaway] overpaid for Kraft,” although the assessment still understated the ultimate problem. Delivering that ugly truth is the fact that KHC stock — including Berkshire’s 325.6 million shares — continued to fall well after that confession, recently hitting a multiyear low that’s more than 70% below 2017’s peak.

What went wrong? A handful of things. Chief among them is that these two companies should have never been combined in the first place.

Corporate culture is a real thing. That’s arguably even more the case for older, bigger, and more complex companies like Heinz as well as Kraft, each of which also managed in-house departments like advertising and product development. Although Heinz’s then-CEO Bernardo Hees thought he had the right plan in place to successfully meld the two companies into one when he took the helm in 2015, in retrospect he clearly didn’t.

Hees was replaced by Miguel Patricio in 2019, who was replaced by Carlos Abrams-Rivera in 2023, neither of whom was able to rekindle the magic of either iconic brand. (That being said, in their defense it’s worth pointing out that both companies were struggling with relevancy and marketability prior to the merger. It may have been a lost cause no matter who was in charge.)

Fast-forward to today… or, at least earlier this month. After 10 torturous years, Kraft Heinz announced in early September that it would be splitting back into two separate publicly traded entities in an effort to unwind the disastrous merger.

It’s not quite a reversion back to pre-merger Kraft and Heinz. One of the companies will own Heinz, Philadelphia cream cheese, and Kraft macaroni and cheese. The other will own Oscar Mayer, Kraft singles cheese slices, and Lunchables. But this divvying up allows for at least a bit more focus than is currently possible. That can only help.

Shrinking its way to success

Not everyone agrees this is what the struggling combined company needs at this time. In fact, given the stock’s stumble following the announcement, most interested parties aren’t enthusiastic about the split. Buffett is reportedly disappointed as well, implying he thinks what’s not working can still be fixed without breaking the company up. Or if nothing else, as independent food industry analyst Nicholas Fereday noted, “The very fact they’re splitting up doesn’t change any of it and explain how they’re going to inject energy, excitement and clarity.”

And maybe these criticisms are fair.

Consider this, however: After more than five (and really, seven) years of poor performance, what could have been fixed arguably should have been and would have been fixed by now. If nothing else, separating the complex food behemoth into two better-focused players certainly can’t make matters any worse — once the disruption stemming from the split is in the rearview mirror anyway.

Image source: Motley Fool.

That’s the crux of the argument for stepping into a position of this beaten-down stock while its forward-looking dividend yield stands at 6.2% and the stock is priced at only about 10 times this year’s and next year’s projected per-share earnings. Most of any risk is already reflected here, leaving only upside even if that upside is modest for now.

Bolstering this bullish thesis is what’s likely to happen once Kraft Heinz becomes two companies and two stocks. Although it’s only speculation at this point, Mizuho Securities’ managing director John Baumgartner writes: “Asset sales (notably Oscar Mayer) could prune material underperformers and enhance portfolio growth prospects. We believe strategic acquirers exist, and that asset sales can prove accretive for shareholders.”

That being said, it’s worth adding that the sweeping bearishness surrounding this ticker now also makes it something of a contrarian prospect. That won’t keep it moving higher forever, but it could get it moving in that direction.

Not your typical buy-and-hold investment

It’s admittedly unusual to tout the breakup of a food giant as a means of unlocking value. Technology and industrial companies? Yes. But consumer staples? Not so much. It’s an industry that’s historically benefited from scale rather than been crimped by it.

The marketplace is changing, though. So are consumers. People are generally eating more pre-prepared and processed food these days, or eating more restaurant-prepared meals; the made-at-home meal space that Kraft Heinz operates in is a shrinking no-man’s land. And to the extent the company’s products are still relevant, technology and consumers’ interest in exploring brands other than the ones they grew up with are making it possible for smaller players to compete with giants like Kraft Heinz.

So, perhaps a breakup followed by the sale of some of both new companies’ brands to smaller, nimbler food companies is what’s needed to unlock the value that’s buried deep within Kraft Heinz.

Just don’t lose perspective on the kind of trade you’d be taking on. The Kraft Heinz Company is anything but a foundational holding for anyone’s portfolio. There’s no certainty here, but there’s sure to be plenty of volatility as long as splits, sales, and spinoffs are being considered.

Say what you want about his boring buy-and-hold approach to picking stocks. Just don’t deny Warren Buffett’s market-beating results. Shares of his company — conglomerate Berkshire Hathaway — have reliably outperformed the S&P 500 (^GSPC 0.49%) since he took the helm back in 1970. Investors only needed to remain patient enough to let time do the bulk of the genius investor’s work.

The thing is, he’s as good at his job today as he’s ever been. That’s why you’d be wise to poach a few of his picks while you still can before Buffett steps down as Berkshire’s CEO at the end of this year.

With that as the backdrop, here’s a closer look at three of Berkshire Hathaway’s holdings that would be great additions to almost anyone’s portfolio right now.

Image source: Motley Fool.

Apple

Anyone keeping tabs on Apple (AAPL 3.25%) of late almost certainly knows it’s been a challenging year for the company. What was supposed to be a solid 2025 fueled by demand for its AI-capable iPhones and its custom-built artificial intelligence (AI) solutions has been anything but solid. As it turns out, not only were Apple’s suite of AI tools a disappointment, consumers aren’t exactly clamoring for handheld access to such technology anyway. That’s a big reason this stock’s still down from its late-December peak even with its bounceback from April’s low.

It’s also worth noting that Berkshire has been paring back its stake in Apple since early last year, and by quite a bit, from more than 900 million shares then to only 280,000 now. Although it’s not clear if Buffett and his lieutenants culled the bulk of their Apple position specifically because of Apple’s AI headwinds, it is clear Berkshire’s chiefs no longer felt comfortable holding such a big stake in the company.

Well, good news for faithful Apple shareholders is on the horizon. Wedbush Securities analyst Daniel Ives recently noted, “We believe that iPhone 17 [the newest iteration of the smartphone] preorders will be up 5%-10% vs. last year as we estimate that roughly 20% of the 1.5 billion users worldwide have not upgraded their phones over the past four years.”

This jibes with similar optimism from JPMorgan (JPM 0.51%) analyst Samik Chatterjee as well as analysts with Morgan Stanley (MS 0.29%). This suggested demand also indirectly indicates faith in Apple’s top-down overhaul of its AI-powered digital assistant — which flopped last year — will be ready when it’s re-released early in the coming year.

It’s also possible that consumers just weren’t ready to embrace first-generation AI technology and were simply waiting to see what it was and how it worked. Even Apple’s die-hard fans could have been looking to sidestep the bumps in the road that any new tech tends to run into.

Whatever the case, after a tough year, Apple appears to be getting back to its old impressive self.

For what it’s worth, despite all the recent selling, Apple is still Berkshire Hathaway’s biggest stock holding, occupying more than 20% of its portfolio of publicly traded companies.

Kroger

Kroger (KR -0.48%) will never be a high-growth name, for the record. The grocery industry is just too mature and too competitive.

Not every investment has to be a growth stock, though. You could still do well with a dividend-paying value name like this one.

Kroger is, of course, one of the nation’s biggest grocery chains, operating 2,731 stores that serve more than 11 million customers every day. Last year, it turned in a net operating profit of more than $3.8 billion and net income of nearly $2.7 billion, which is huge by grocery store standards.

But still — groceries? Don’t dismiss the way this company is modernizing (and even digitizing) this old brick-and-mortar business. For instance, while its same-store sales grew 3.4% year over year during the second quarter of 2025, its online sales improved by 16%. That’s business which could have easily been lost to rival Walmart or in some instances even lost to Amazon. Indeed, e-commerce now accounts for about one-tenth of Kroger’s revenue.

In the meantime, Kroger is monetizing its online presence in an even more creative way — through advertising. National brands can now pay the grocer for more prominent promotion at Kroger.com.

Perhaps the most meaningful way Kroger builds long-term value for shareholders, however, is with its dividend paired with stock buybacks. The forward-looking yield of 2% isn’t exactly thrilling, but it’s based on a dividend payment that’s now been raised for 19 consecutive years at an average annualized growth rate of 13%. At the same time, persistent stock repurchases have whittled down the number of outstanding shares of Kroger from roughly 1.6 billion as of 2000 to less than 700 million now, with another $2.5 billion just waiting to be spent on buybacks before the end of this year.

This might help put things in perspective: Between the buybacks, reinvested dividends, and the stock’s simple price appreciation, over the course of the past 20 years, an investment in Kroger stock would have outperformed the same-sized investment in an S&P 500 index fund.

BYD Company

Finally, add BYD Company (BYDDY 0.28%) to your list of Buffett stock picks that just might belong in your portfolio as well.

You may think you’ve never heard of it, but you’re probably more familiar with it than you realize. Remember the electric vehicle (EV) company that became bigger than Tesla (as measured by unit sales) early this year? That’s BYD. You’ve just heard little about it because the Chinese company primarily serves the Chinese market.

That’s changing, though. While you still can’t purchase a BYD-made EV in the United States, registrations of BYD vehicles in Europe soared more than 200% to 13,503 in July of this year, extending a growth streak that’s most definitely taking a toll on Tesla’s share in the EV-receptive market.

In fact, the company’s so confident of this continued growth that it’s committed to manufacturing all of its EVs intended for European drivers within Europe by 2028. Indeed, BYD is aiming to sell half of its cars outside of China by 2030. With a fleet of seven massive cargo ships that can each carry thousands of vehicles, it could do it regardless of where these cars end up being manufactured.

Although U.S. consumer interest in EVs is only lukewarm (at best), the International Energy Agency predicts the worldwide number of EVs will quadruple between the end of last year and 2030.

It’s admittedly not Buffett’s usual kind of stock pick. He’s frequently touted the value of America’s capitalistic economy and the ingenuity it inspires, and tends to limit his holdings to U.S. stocks. For the record, it’s not as if Berkshire owns a massive number of BYD shares. Its 162.6 million shares are only worth about $2.3 billion at this time or less than 1% of Berkshire Hathaway’s stock portfolio.

The fact that Buffett made the unusual trade in the first place back in 2008 and has since stuck with most of the position this whole time, however, speaks volumes about its potential.

September is here, and it looks like the Federal Reserve‘s Federal Open Market Committee just might lower its benchmark interest rate again when it meets next week. Many stocks, especially those of companies that are particularly sensitive to interest rates, are already climbing in anticipation.

As a bank and credit card network, American Express (AXP -0.28%) is very sensitive to interest rates. It was a standout stock last year, gaining 58%, and its gains so far this year are roughly in line with the S&P 500. If the federal funds rate gets the expected cut, Amex could benefit in a big way, and its stock could start to outperform again.

Standing out in finance

American Express is known for its credit and charge cards, but the company has become a lot more than that. It has a large banking segment that works together with its card network to create a closed-loop model, but each segment adds its own unique value to the whole.

American Express targets an upscale clientele that prizes its card rewards programs, which offer travel perks and points, as well as discounts at premium shopping locations and restaurants. The company charges annual fees to cardholders for these privileges, and the fee income is a major part of its model. As a bank, American Express targets small businesses and offers a more boutique experience than many larger institutions.

Image source: Getty Images.

The bank also provides the credit to people using its cards, so it doesn’t need to work with partner institutions. This also makes American Express a business that can perform well in different economic environments. When interest rates are higher, it makes more net interest income on its deposits. When the economy is doing well and customers are spending, it thrives. However, it usually demonstrates resilience when the economy is under pressure since its core customers have more money to spend, and since it collects its annual fees regardless of the macro conditions. That important recurring revenue stream keeps its profits coming in smoothly.

Gaining momentum

This all played out perfectly in 2025’s second quarter. American Express’s revenue increased 9% year over year (currency neutral) despite continued macroeconomic pressure, and adjusted earnings per share were up 17%. Card fees increased by 20% and accounted for almost 14% of the total.

There was record cardmember spending in the quarter and high demand for premium products. The company frequently “refreshes” its card offerings and perks to stay relevant and attract new members, and it said it’s going to launch a “major upgrade” to its U.S. business and personal platinum cards in the fall. If that coincides with greater access to money due to lower interest rates, it could be a recipe for robust growth.

It’s also focusing more on appealing to younger people, and that’s paying off. While there was 7% increase year over year in cardmember spending in the second quarter, there was a 39% in Gen Z spending, and a 10% increase in millennial spending. Gen X still accounted for the most total spending of any age category at 36%, but the higher growth in younger categories bodes well for the bank’s future.

A longtime Buffett favorite

Warren Buffett has praised American Express’ global brand and the fact that it doesn’t have to spend a lot of money to make a lot of money. He also loves to invest in companies that pay dividends and give back to shareholders through stock repurchase programs. American Express’ dividend yields 0.9% at the current price. That’s not a high yield, but its payouts are reliable, management has a long track record of maintaining or hiking them, and it repurchased $1.4 billion in stock in the second quarter. American Express is the paradigm of the Buffett stock, and he frequently references it as an example of a great business.

If the Fed cuts interest rates as expected this month, American Express stock should jump. More importantly, higher economic activity should boost its business.

It’s the end of an era on Wall Street. In less than four months, Berkshire Hathaway‘s (BRK.A -1.26%) (BRK.B -1.40%) Warren Buffett will retire from the CEO role he’s held for six decades. During his 60 years at the helm, he’s overseen a roughly 6,140,000% cumulative gain in his company’s Class A shares (BRK.A), which compares quite favorably to the roughly 43,300% total return, including dividends, delivered by the benchmark S&P 500 (^GSPC -0.32%) over the same timeline.

The Oracle of Omaha’s outperformance has made him the most-followed money manager on Wall Street, with some investors riding his coattails to substantial long-term gains.

Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.

But the other factor — aside from market-crushing returns — investors have come to appreciate about Buffett is his willingness to share his thoughts and the company traits he looks for when taking stakes in wonderful businesses. Whether it’s Berkshire’s annual shareholder letter or the company’s yearly meeting, Buffett is no stranger to offering up nuggets of wisdom.

While books have been written about Warren Buffett’s investment ideals, four ominous words from Berkshire’s latest shareholder letter perfectly encapsulate why he’s such a phenomenal investor, and explain why his recent investment activity sends a clear warning to Wall Street.

Warren Buffett sends a $344 billion warning to Wall Street using just four words

Investors are likely aware of some of the Oracle of Omaha’s core principles. For example, Buffett prefers to buy stakes in companies with sustainable competitive advantages, strong management teams, and hearty capital return programs. He also looks at investments as multiyear or multidecade commitments, with eight stocks in Berkshire’s portfolio currently considered “indefinite” holdings.

But possibly the best investment advice Buffett has ever offered, which perfectly encapsulates the promise and peril of the stock market, was penned in Berkshire Hathaway’s latest annual shareholder letter. While discussing where his company has money allocated, Buffett proclaimed, “Often, nothing looks compelling.”

At his core, Berkshire’s billionaire boss is an unwavering value investor. Though there are some unwritten “Buffett rules” that sometimes get broken, such as investing for the short-term via an arbitrage opportunity, Berkshire’s head honcho isn’t willing to buy a stock if its valuation doesn’t make sense.

Warren Buffett Indicator hits 215%, the most expensive stock market valuation in history 👀 pic.twitter.com/kjnbGN67be

— Barchart (@Barchart) August 29, 2025

At the moment, stock valuations are historically expensive. Keeping in mind that valuation is subjective, the affably dubbed “Buffett Indicator” recently hit an all-time high. This valuation measure adds up the cumulative market cap of all public companies in the U.S. and divides this figure by U.S. gross domestic product (GDP).

The market cap-to-GDP ratio, which has averaged closer to 85% of U.S. GDP when back-tested to 1970, surpassed 214% in late August. In other words, finding value has been exceedingly difficult for Buffett and his team.

Beginning in October 2022, the Oracle of Omaha began selling more stock than he was purchasing. This net-selling activity has been ongoing for 11 consecutive quarters (Oct. 1, 2022 – June 30, 2025), totaling $177.4 billion in net stock sales. All the while, Berkshire Hathaway’s cash pile, which includes cash, cash equivalents, and U.S. Treasuries, has ballooned to a near-record $344.1 billion.

Despite sitting on $344 billion in capital, Buffett prefers to be a net-seller of stocks, and isn’t even buying shares of his own company any longer. It’s as direct a warning as Wall Street will get from Berkshire’s billionaire chief.

Image source: Getty Images.

Patience pays off handsomely in the stock market

Though Buffett’s ominous advice – “often, nothing looks compelling” — perfectly explains why he’s been more of a seller than a buyer amid a historically pricey stock market, it also provides a backdrop of how Berkshire’s boss has been able to deliver outsized returns spanning six decades.

Fundamentally, Warren Buffett is well aware that the U.S. economy and stock market have both expanded over the long run. Even though recessions and stock market corrections are normal and inevitable aspects of respective economic and stock market cycles, optimism prevails over long periods. This means being patient and waiting for price dislocations to become apparent is a winning and time-tested strategy — in case the nearly 6,140,000% aggregate return for Berkshire’s Class A shares didn’t give it away.

In August 2011, shortly after the worst of the financial crisis, the Oracle of Omaha engineered a $5 billion stake in Bank of America (BAC -1.29%) preferred stock. While Bank of America wasn’t desperate for cash, it wasn’t going to turn down the opportunity to shore up its balance sheet amid ongoing litigation and a still-uncertain loan portfolio.

When Buffett initially made this investment, Bank of America’s common stock was trading at a 62% discount to its book value. But in the summer of 2017, Berkshire exercised its warrants to purchase 700 million shares of BofA stock at $7.14 per share. This August 2011 price dislocation instantly netted Berkshire a $12 billion (unrealized) profit, which has since grown even larger.

Berkshire’s billionaire CEO recognized a price dislocation with Apple (AAPL -0.16%), as well, in early 2016. The maker of the beloved iPhone was trading at just 10 to 15 times forward-year earnings nine years ago, which is an inexpensive valuation for a company that had been consistently growing by high single digits to low double digits annually. Apple stock has jumped approximately tenfold since Buffett first entered the position, with artificial intelligence euphoria and the company’s rapidly growing services segment doing a lot of the heavy lifting.

Although it can be frustrating waiting for Warren Buffett and his top advisors to deploy Berkshire Hathaway’s treasure chest, being patient has paid off handsomely for decades. When price dislocations do become apparent in the future, Buffett or his successor Greg Abel will be ready to pounce.

Warren Buffett turned Berkshire Hathaway (BRK.A 0.66%) (BRK.B 0.63%) into a trillion-dollar company primarily by investing in stocks. “That preference won’t change,” Buffett wrote in his most recent letter to shareholders.

But Buffett has been challenged by the current market to find great value in equities. He’s sold more stocks from Berkshire’s publicly traded portfolio than he bought every quarter for nearly three straight years. As valuations continue to climb higher, there’s more reason to sell Berkshire’s biggest holdings, and fewer reasons to buy new positions with the proceeds and the company’s operating cash flow. As a result, Buffett’s seen his company’s cash position balloon to $344 billion as of the end of June.

Despite the difficult market, Buffett did find a few opportunities last quarter. Berkshire bought $3.9 billion worth of equities, including 10 publicly traded stocks disclosed in its quarterly 13F filing with the Securities and Exchange Commission (SEC). Here are all 10 of Buffett’s recent buys, including the one that looks like the best opportunity for investors right now.

Image source: The Motley Fool.

Buffett’s buy list

Berkshire Hathaway filed form 13F with the SEC on Aug. 14, revealing all of the moves Buffett and his fellow portfolio managers made during the second quarter. The filing also included an amendment to the company’s first-quarter 13F, which detailed previously undisclosed purchases.

All told, Berkshire established or added to 10 of its positions last quarter:

• UnitedHealth (UNH 2.48%)
• Nucor (NUE -0.71%)
• Lennar (LEN 0.01%) (LEN.B)
• Constellation Brands (STZ 1.79%)
• Pool Corp
• Lamar Advertising
• Allegion
• Heico
• Chevron
• Dominos Pizza

The amended filing also disclosed that Berkshire established a new position in homebuilder D.R. Horton (NYSE: DHI) in the first quarter, but trimmed back shares slightly in the second quarter.

There are a lot of great investment candidates among the new purchases in Berkshire Hathaway’s portfolio.

The new position in UnitedHealth comes at a time when the stock has been beaten down by a series of poor financial results and declining consumer sentiment. It’s facing an investigation into potential Medicare Advantage fraud, which could result in billions in revenue clawbacks and penalties. At the same time, medical costs and utilization have increased, weighing on its profitability. The stock looks like a classic “be greedy when others are fearful” purchase from Buffett.

Nucor is another interesting investment, as many see it as a stealth artificial intelligence stock. As a leading U.S. steel supplier, the company is well-positioned to capitalize on new data center construction across the country. And with President Donald Trump imposing a 50% tariff on steel imports, it could benefit Nucor’s pricing. Costs have weighed on Nucor recently, but less competition from foreign suppliers could open the door for bigger profits going forward, especially as demand increases with data center buildouts.

Homebuilders Lennar and D.R. Horton have been pressured by the current market. High home prices combined with high interest rates have led to a drop in buying activity, forcing them to offer incentives to buyers like buying down their mortgage rates. That’s weighed on both revenue and profit margins, which in turn has weighed on their stock prices. But the housing shortage isn’t going away, and that could make right now an opportunity to buy one of the homebuilders.

But another stock on Buffett’s buy list looks like an even better value than the rest, and it’s no wonder he’s been buying shares for three straight quarters.

The best of the bunch

Warren Buffett loves a company with a wide moat. And one of the companies with extremely strong competitive advantages on Buffett’s buy list is Constellation Brands.

The company owns the exclusive distribution rights to many of the most popular Mexican beer brands, including Modelo and Corona. It’s worked to expand its portfolio and build strong distribution relations that have led it to gain market share over the last decade. It’s now the second biggest beer vendor in the United States, dominating the premium import category.

Despite headwinds for the beer industry, Constellation continued to gain market share last quarter. Management said the beer business captured 0.6 points of dollar sales share. That growth was supported by expanding distribution and continuing to spend on strategic marketing to expand its customer base to more non-Hispanic drinkers. That positions it well to capitalize when consumer spending turns around.

Constellation’s wine and spirits business has been a drag on its results, though. To that end, management divested its low-end brands in the segment in June, and it now operates a leaner portfolio of premium brands. Still, management expects the segment to weigh on profits for some time as it resizes the operations.

Importantly, Constellation generates significant free cash flow, with expectations for $1.5 billion to $1.6 billion this year. It should be able to consistently generate that level of cash flow every year with steady sales growth and minimal capital expenditure needs. That supports its share repurchase program and quarterly dividend. Management bought back $306 million worth of shares last quarter while returning an additional $182 million through its dividend.

The stock price has dropped since Buffett’s initial purchase at the end of last year. With the pressure on the beer industry, the stock price has remained low, and shares now trade for less than 13 times forward earnings estimates. Despite the slow growth of the business, it’s well-positioned to continue making steady gains and outperforming its peers. Combined with share repurchases, it should be able to generate respectable earnings-per-share growth. That makes its current valuation very attractive, especially for investors who like to follow Buffett’s value investing style.

It’s no secret that The Motley Fool admires, respects, esteems, and appreciates Warren Buffett and what he’s done for investors. Buffett started investing before he was a teenager and is now worth an estimated $150 billion. He’s generous with his investing advice — and his fortune — and it’s easy to see why Fools love him.

Buffett turns 95 today! That’s a birthday worth celebrating, and below we’ve done just that with Motley Fool contributing analysts and other employees chiming in. Happy Birthday, Mr. Buffett, and Fool on!

Image source: The Motley Fool.

Royston Yang: Buffett was an inspiration in changing how I thought about investing and its process. Previously I was running around the stock market like a headless chicken, not knowing why I was buying a certain stock. He taught me to view stocks as being part of a business and that its share price will increase in line with improvements in the business. It was like a light bulb turned on for me and I embraced value investing there and then, and I have not looked back. Happy Birthday to the Oracle of Omaha and thank you for being such an inspiration and for helping me to achieve success in my personal investments.

Adam Spatacco: One of my college professors quoted Buffett in class with the whole “be greedy when others are fearful, and fearful when others are greedy” mantra. That always stuck with me, totally changed how I viewed approaching stocks — especially when there’s a lot of hype behind certain names or themes. It’s definitely a tool I’ve used over the years when building high-conviction positions or trimming exposure to certain stocks, regardless of what everyone else is doing/whatever the consensus idea is.

Scott Levine: In a society that often celebrates excess, Warren Buffett’s lifestyle is a valuable lesson in the wisdom of living within our means. One of the most successful investors who has amassed a considerable fortune, Buffett lives in the same modest house that he’s occupied for decades and drives an unassuming car. Complement this with his dedication to philanthropy and it’s clear that Warren Buffett is someone people should admire for more than his investing prowess.

Stefon Walters: In the beginning of my investing journey, I looked for any “secrets” that could make me a good investor. Warren Buffett showed me that there’s no secret sauce to being a good investor, it takes patience and understanding the true power of compound interest. His timeless advice continues to guide my investing approach to the day.

Dan Caplinger: Berkshire Hathaway was one of the first stocks I bought in my portfolio, and it is now by far my largest position. It’s the only company whose annual shareholder meeting I have attended in person. It’s by far the company most aligned with my values as an investor. In an age when companies increasingly act against the best interests of ordinary shareholders, Warren Buffett has built a shining counterexample in Berkshire. That will be his biggest legacy long after he shuffles off this mortal coil.

Will Healy: Aside from Warren Buffett’s investing knowledge, his focus on integrity really stuck with me, particularly when I heard him speak about that at a Berkshire Hathaway shareholder meeting. His lesson that reputations take 20 years to build and five minutes to ruin should be something we all keep in mind in investing and in life. Happy Birthday, Warren, and thank you for all you have done!

Anders Bylund: From his timeless investment principles to his incredible philanthropic commitments, Warren Buffett keeps proving that true wealth isn’t just about money — it’s about the positive impact you leave on the world. Much like his friend, the late John Bogle, Buffett’s greatest legacy might just be the way he empowered several generations of everyday investors. It’s a story of wisdom shared with integrity and patience. Time in the market is the surest road to success, and I learned that from Buffett. You can reach the very top of the financial world while always keeping the interests of the average person front and center. What an amazing concept!

Keith Speights: I remember reading Warren Buffett’s op-ed in The New York Times titled “Buy American. I Am.” during the market meltdown in 2008. Buffett’s take was spot-on, and it didn’t take long for him to be proven right. Buffett has been right about a lot of things during his legendary career and has inspired millions of investors — including me. Happy 95th birthday, Mr. Buffett! I hope you celebrate many more.

Kris Eddy: While Buffett is a super-talented stock picker, he also backs owning a low-cost fund tracking the S&P 500 as the best path for many investors. If I ever start to feel bad about not wading into the deep end of picking stocks, I pull myself back to optimism by remembering I am still on a Buffett-approved path of wealth-building action.

Adria Cimino: Warren Buffett not only is a great investor, but he’s also a great writer. His wonderful stories and quotes stick in my mind and guide me as I invest –and as I write about investing! I especially like his comparison of investors paying excessively high valuations to “Cinderella at the ball.”

Joel O’Leary: Buffett helped shape the way I donate my time, money and resources to help others in need. He’s a true leader in generosity, and modeling his attitude has made me richer not just financially, but more importantly, in life. Happy Birthday Mr. Buffett!

Patrick Sanders: Warren Buffett is my investing inspiration. I started off chasing hot, flashy stocks, moving in and out of positions and trying to time the market like a crazy person. Obviously it didn’t work! But then I started learning about Buffett and Berkshire and it resonated. I started looking for value in well-run companies and I gained a lot of appreciation for index funds. Now I’m a much better investor, in large part due to his example. Happy birthday, Mr. Buffett, and thank you!

Image source: Getty Images.

Christine Ferrara Dellamonaca: I love the way Warren Buffett makes investing seem like something that’s for everyone. And his longevity with Berkshire Hathaway and in the investing world at large is just an inspiration. Happy birthday, Mr. Buffett!

Reuben Gregg Brewer: I hate putting any investor on a pedestal, including the Oracle of Omaha. His biggest addition to the world of Wall Street, in my opinion, is probably his assertion that you don’t need anything more than average intelligence to be a good investor. It’s your temperament that will be the bigger determinant of your success. In other words, thank you Mr. Buffett for letting me and the world know that investing isn’t some esoteric science.

Lou Whiteman: Warren Buffett is best known as an investor, and rightfully so. His leadership by example over the past half-century has made myself and countless others wealthier and wiser both by owning Berkshire stock and applying his teachings to our own portfolio. But I am as grateful for Warren Buffett the patriot, a leader who has not been afraid to step into the chaos when needed to support markets and key financial institutions as well as his long-running support of public health. Buffett’s legacy will endure long after the stocks he picked are gone from the Berkshire portfolio thanks to the generations he educated and the lasting reach of the Buffett Foundation. Happy birthday, Mr. Buffett! Here’s to many many more.

Adam Levy: What sets Warren Buffett apart isn’t just how often he’s been right, but how often he’s been wrong and happily told anyone willing to listen. He shares his mistakes in his own folksy manner, often injecting humor into the story. Then he sums up the lessons in a single sentence or two that’s practically impossible to forget. To be as successful as Buffett you need to be willing to make mistakes, but, more importantly, you need to recognize when you’ve made a mistake and why. It doesn’t hurt to start investing at 11 and live until 95 (and beyond) either.

Cory Renauer: In a world obsessed with quick gains, Warren Buffett displays an unwavering commitment to creating value for his shareholders by ignoring market noise and identifying terrific businesses. He could easily get away with claiming his success is due to a superior mind. Instead, he reminds us at every turn that patience and common sense are the only tools we need to generate unlimited wealth with stocks.

Brett Schafer: Warren Buffett will be a timeless member of the investing world not just because of his incredible track record, but due to his humble teaching methods. Simplifying investing and focusing on buying and holding good businesses for the long-term has brought immeasurable value to myself and millions of investors around the world. We can aim to live up to this Buffett mentality and pass on our knowledge to investors of the next generation. Happy birthday to Mr. Buffett!

Selena Maranjian: Warren Buffett has long been one of my heroes, and the more I’ve learned about him, the more I admire him. Having attended many of his annual meetings, I’ve always been impressed with the great respect with which he treats his shareholders — such as by answering dozens of questions for hours. It’s also evident in the care he takes each year to write a very lengthy letter to shareholders that explains all kinds of things — in very down-to-earth language. I recommend Roger Lowenstein’s Buffett, the Making of an American Capitalist to anyone who wants to learn more about Buffett. Long live Warren Buffett — here’s hoping he gets another 95 years!

John Bromels: What I love most about Buffett’s wisdom is its simplicity: Don’t buy an investment you don’t understand. Don’t let emotions rule your decision-making. Buy “wonderful companies at fair prices” rather than “fair companies at wonderful prices.” Very simple advice, but just because it’s simple doesn’t mean that it’s easy! Which is why, more and more each day, I appreciate his willingness to admit his mistakes and encourage others to learn from them. Happy 95th to a true living legend!

Bram Berkowitz: What makes Warren Buffett and Berkshire Hathaway so interesting, in my opinion, is the stocks they buy. Often, they purchase stocks unloved by Wall Street that are truly beaten down. It helps investors like me truly understand what differentiates a value play from a value trap. Additionally, I am impressed by how Buffett is never afraid to buy a stock in a new burgeoning sector, regardless of how old he gets.

Neha Chamaria: Unknown to Warren Buffett, over 8,000 miles away from Omaha, a young girl learned some of her most valuable lessons in investing from the Oracle of Omaha. That girl is me. To pick businesses and not stocks, and invest in only what you understand, are two Buffett principles that have hugely resonated with me and influence every stock I put my money into. Beyond his investing wisdom, Buffett’s simplicity, humility, and modesty of thoughts and lifestyle have truly stayed with me as I believe a true legend’s legacy is shaped as much by modesty as by mastery. Thank you, and happy birthday, Mr. Buffett!

Beth McKenna: I remember hearing or reading about Warren Buffett saying he was a voracious reader. He attributed this attribute as one main element of his investing success. Such great advice — and anyone can increase their reading. Beyond contributing to investing success, being well-read can also enrich one’s life in general. Happy birthday, Mr. Buffett!

Lee Samaha: Warren Buffett doesn’t do position sizing; he doesn’t construct portfolios based on market weighting. He doesn’t employ complex hedging strategies, doesn’t place much value in the capital asset pricing model, and doesn’t invest in the market’s latest hot stock. In fact, he almost lives in a parallel universe to professional money managers, only that in his universe, he consistently outperforms all of them. He truly is the inspiration and a source of confidence for ordinary investors forging their own financial future, and for that, we should all be grateful.