Simple Investment Opportunities Endorsed by Warren Buffet, Currently Available
Many investors aim to mimic Warren Buffett's investing success, having seen the impressive growth of his company, Berkshire Hathaway, under his long-term leadership. Although replicating Berkshire Hathaway's portfolio growth is impossible, two investments that Buffett himself holds and you could consider are American Express (AXP -0.18%) and the Vanguard S&P 500 ETF (VOO -0.40%).
Two reliable Buffett picks to invest in today include American Express and the Vanguard S&P 500 ETF. Here's why:
1. American Express
Buffett has a long-standing history with American Express, initially purchasing the stock for Berkshire's portfolio back in 1991. It now makes up 15% of Berkshire's substantial $300 billion portfolio, ranking second only to Apple in terms of holdings.
Buffett has a penchant for financial stocks, and American Express is a well-established player that continues to thrive. In the third quarter, which ended on September 30, revenue rose by 8% to $16.6 billion, while diluted earnings per share increased 6% to $3.49.
American Express benefits from a growing number of younger, affluent customers willing to buy its Gold Card, which generates recurring annual fees for the company. In the third quarter, 80% of Gold Card signups came from this influential demographic, contributing to the impressive 3.3 million total cardholder additions during the quarter.
American Express's management is optimistic about continued growth and recently raised its full-year earnings guidance to $13.90 per share, up from the previous $13.55 estimate, both at the midpoint.
Another exciting factor is that American Express' stock currently trades at a lower-than-average price-to-earnings ratio (P/E ratio) of 19.9, compared to the S&P 500's multiple of 30.7.
2. Vanguard S&P 500 ETF
If you're searching for a specific company to invest in, this suggestion might be less thrilling. The Vanguard S&P 500 ETF is an exchange-traded fund (ETF) that tracks the growth of the largest 500 publicly traded companies on U.S. stock exchanges. Remarkably, it's one of the two index funds in Buffett's portfolio.
Paying for an index fund that follows the S&P 500 can be a great way to accumulate wealth slowly but surely and is an effortless way to diversify your investment portfolio. Buffett is a strong advocate for index funds and stated at the 2020 Berkshire annual meeting that "...for most people, the best thing to do is to own the S&P 500 index fund."
One of the advantages of S&P 500 index funds is their minimal expense ratios. Vanguard's S&P 500 ETF charges only 0.03%, amounting to a fee of just $3 on every $10,000 invested.
Berkshire Hathaway holds a small stake in the Vanguard S&P 500 ETF, with 43,000 shares in its portfolio as of the latest 13F filing (September 30). Considering Buffett's endorsement, it's sensible for investors to consider investing in passively managed index funds, which are statistically more likely to outperform actively managed funds over a decade, based on research from Morningstar.
Investing in American Express aligns with Warren Buffett's fondness for financial stocks, as he currently holds a significant 15% of Berkshire Hathaway's portfolio in this company. American Express's revenue and earnings per share have shown steady growth, with impressive cardholder additions and a lower-than-average price-to-earnings ratio, making it an attractive investment option.
Buffett also recommends the Vanguard S&P 500 ETF as an investment, as he holds a small stake in it and advocates for index funds as a reliable and low-cost way to build wealth and diversify an investment portfolio. With a minimal expense ratio and a history of outperforming actively managed funds over a decade, the Vanguard S&P 500 ETF is a solid choice for investors seeking a passive investment strategy.
