Warren Buffett, a man who appears to have stumbled upon the secret of turning money into more money (a trick still eluding most of us, incidentally), has demonstrated that acquiring excellent businesses and then, crucially, not selling them can be a surprisingly effective wealth-building strategy. Through Berkshire Hathaway, he’s consistently favored companies with durable competitive advantages, strong cash flows, and leadership that thinks beyond the next quarterly earnings call – a concept so revolutionary it’s almost unbelievable. (It’s like discovering that water is, in fact, wet. Though some argue it’s merely a strongly held belief.)
Following Buffett’s investment philosophy—which, let’s be honest, is a bit like trying to decipher the instructions for assembling a particularly complex flat-pack furniture item—can often illuminate companies with robust fundamentals. He amassed his wealth by focusing on value and avoiding the siren song of speculative trends. This framework guided him to a few long-term picks, and we’ve taken a look at three stocks in the Berkshire portfolio that, barring unforeseen cosmological events, should continue to gain market share for years to come.
Amazon: Everything, Delivered. Eventually.
Some of the best companies to invest in are those names you recognize, like Amazon (AMZN 0.87%). It began as an online bookstore—a quaint notion now, like sending messages by carrier pigeon—and has expanded to sell almost everything under the sun. But its online marketplace is merely one facet of its growth engine. (It’s a bit like realizing your toaster isn’t just for toast. It can also, theoretically, warm up socks. Though we don’t recommend it.)
The company boasts multiple business segments in high-margin industries. Amazon Web Services, its cloud computing unit, has seen growth reaccelerate in recent quarters thanks to the artificial intelligence (AI) boom. (AI, of course, is the attempt to build machines that are almost as frustratingly illogical as humans.) Amazon’s online advertising business has also enjoyed double-digit growth for years. These ads have high margins, and they’re showing up in Amazon’s financials. The company’s gross margin has been steadily climbing for years, recently exceeding 50%.
Amazon has several established business models driving profits while generating billions in quarterly sales. But it also has newer ventures, like its Trainium AI chips, which have already become a multi-billion dollar component of the corporate umbrella. (It’s a bit like discovering your pet goldfish is secretly a highly trained accountant.)
Amazon’s AI chips could become significant profit drivers in the future. While it’s a speculative part of the business—a bit like betting on a snail race—it doesn’t have to work perfectly for Amazon’s stock to continue its upward trajectory. The online marketplace, advertising, and Amazon Web Services are proven businesses with compelling long-term potential.
Alphabet: Knowing Everything (and Monetizing It)
Buffett doesn’t chase speculative picks, but he appreciates companies with strong “moats”—those defensive barriers that protect a business from competitors. Alphabet (GOOG 0.58) (GOOGL 0.42) practically owns the entire search engine market with Google, and YouTube is the leading video platform. These two assets generate substantial revenue with high margins. (It’s a bit like having a monopoly on oxygen. Surprisingly lucrative.)
Some of that capital goes toward “moonshot” opportunities—ambitious, speculative projects. While these are, by definition, speculative—a bit like trying to build a ladder to the moon—they’re backed by a top-tier business loaded with cash. It took Google Cloud more than a decade to record its first profitable quarter, but all those investments were, eventually, worth it. Google Cloud is now the third-largest cloud provider and a meaningful profit engine with exceptional top-line growth.
Rewarding Consumption (and Profit)
Buffett first bought American Express (AXP 0.57%) in 1962, capitalizing on the Salad Oil Scandal, which put the company at risk of bankruptcy. During the scandal, American Express and other backers were duped into financing fraudulent assets. Investors were nervous at the time, but holding American Express proved to be the smart move. (A cautionary tale about the dangers of trusting anyone who offers you a free salad.)
That scandal is now firmly in the history books, but today you’ll find a vibrant company with rising profit margins. The major credit card issuer targets affluent customers and has multiple income streams revolving around how much people spend. As consumer spending increases, American Express cards are used in more transactions, resulting in additional merchant fees. American Express also collects interest on outstanding balances.
That setup was enough to produce 10% year-over-year revenue growth throughout 2023, with fees and interest playing key roles. Higher consumer spending was another major catalyst.
American Express doesn’t have much competition at the top. While it will have to battle for market share with Visa and Mastercard, it’s difficult for new competitors to penetrate the industry. American Express has built an impressive lineup of competitive credit cards with enticing reward programs that make the company hard to beat. (It’s a bit like offering people free money. They tend to respond favorably.)
Finances aren’t a problem for the company, based on its 16% year-over-year dividend hike. A rising dividend indicates the company has plenty of extra capital to distribute to investors, and it’s one of the few numbers a company can’t easily fake. A 16% dividend hike means American Express must grow its net income by at least 16% year over year to end up ahead after the dividend boost. Luckily, net income growth has accelerated in recent quarters, and the company is sitting on a $47.8 billion cash position.
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2026-03-15 15:52