It’s a smart idea to consider what stocks billionaire investors are buying (or selling), and there’s no better investor to follow in this regard than Warren Buffett, who has built a mountain of wealth for Berkshire Hathaway shareholders.
Three Motley Fool contributors recently combed through Berkshire’s holdings to find three stocks that are screaming buys right now. Let’s see why they selected Mastercard (NYSE: MA), Louisiana-Pacific (NYSE: LPX), and Coca-Cola (NYSE: KO).
A reliable growth stock
John Ballard (Mastercard): Berkshire Hathaway held a stake worth $1.7 billion in Mastercard at the end of 2023. That mid-sized position for Berkshire’s equity portfolio suggests it might have been selected by one of Buffett’s investing lieutenants, but it has the hallmarks of what Buffett generally looks for in a long-term investment.
Mastercard benefits as one of only a few major credit card brands. These companies generate high margins on revenue. Unlike another Berkshire holding, American Express, Mastercard doesn’t issue cards and take on credit risk. Instead, it focuses on the far more lucrative business of processing payments.
The stock has climbed 85% over the last five years due to its consistent double-digit growth in revenue and earnings. The reason it’s a screaming buy boils down to a basic understanding of the key drivers of Mastercard’s business.
As a leading credit card brand, Mastercard will continue to grow along with the global economy. The economy has its ups and downs, but over multiple decades the trend is in an upward direction. In the near term, Mastercard could be well-positioned to benefit if wages and salaries continue to grow faster than the rate of inflation, encouraging consumers to spend more.
A favorable climate for continued growth in consumer spending explains why Wall Street is bullish on the company’s prospects, with the consensus estimate calling for earnings to grow about 16% per year.
Meanwhile, the stock still trades within its historical average price-to-earnings (P/E) valuation range. Assuming the stock is still trading at its current…
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