It’s a good idea to think about what stocks billionaire investors are buying (or selling), and there’s no better investor to follow in this regard than Warren Buffettwho built a mountain of wealth for Berkshire Hathaway shareholders.
Three Motley Fool contributors recently combed Berkshire’s holdings to find three stocks that scream buy right now. Let’s see why they chose 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. This medium-sized position for Berkshire’s stock portfolio suggests it could have been selected by one of the Buffett’s investing lieutenants, but it has the characteristics of what Buffett typically looks for in a long-term investment.
Mastercard is one of the few major credit card brands. These companies generate high revenue margins. Unlike another Berkshire holding company, American Express, Mastercard does not issue cards and does not assume credit risk. Instead, it focuses on the far more lucrative business of payment processing.
The stock has soared 85% over the past five years due to its consistent double-digit revenue and profit growth. Why this is a screaming buy comes down to a basic understanding of the key drivers of Mastercard’s business.
As a leading credit card brand, Mastercard will continue to grow alongside the global economy. The economy has its ups and downs, but over several decades the trend has been upward. In the short term, Mastercard could be well-positioned to benefit if wages continue to grow faster than the rate of inflation, thereby encouraging consumers to spend more.
A favorable climate for continued growth in consumer spending explains why Wall Street is optimistic about the company’s prospects, with the consensus estimate calling for earnings growth of around 16% annually.
Meanwhile, the stock is still trading within its historical average price-to-earnings (P/E) valuation range. Assuming the stock still trades at its current price/earnings, its value could potentially double over the next five years.
This housing stock continues to grow
Jeremy Bowman (Louisiana-Pacific): Buffett’s Berkshire Hathway bought several housing-related stocks last year, surprising market watchers. And one of them has been going strong ever since. This is Louisiana-Pacific, the world’s largest producer of oriented strand board (OSB), a plywood-like material that is a key component in home construction.
Shares of Louisiana-Pacific just hit a new all-time high after the company released its earnings report last week, and the numbers help explain why. OSB sales jumped 65% to $313 million, driving total sales up 24% to $724 million, which was well above the consensus of $688.9 million.
Its margins also increased thanks to rapid revenue growth, adjusted earnings before interest, taxes, depreciation and amortization…
