Investing in strong consumer brands with excellent earnings growth prospects is a tried-and-true strategy of building wealth in the stock market. Warren Buffett has patiently held shares of growing businesses to build tremendous wealth for Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) shareholders, and this approach can work for you, too.
Here are two Berkshire-held stocks that could double your money within five years.
1. Amazon
Berkshire held 10 million shares of Amazon(NASDAQ: AMZN) in the second quarter, and it has held a position in the e-commerce leader since 2019. Amazon seems to fit right in with other leading consumer brands that Buffett favors, including Berkshire's large stakes in Apple and Coca-Cola. Amazon has a legion of over 200 million Prime members, and a growing fulfillment and data center infrastructure that give the company a major advantage over competitors.
Amazon may never match the likes of Costco or Walmart in physical retail, but those retailers have a long way to go to match Amazon's lead in building out a same-day delivery network for online shoppers. Amazon ended 2023 with an impressive 627 million square feet of fulfillment centers, data centers, and other facilities.
Amazon has increased its square footage by over 224 million square feet since 2020. The company has a major infrastructure lead over competitors, which has allowed it to command a market share of U.S. e-commerce in 2023 that was six times the share of its next closest competitor, according to Statista.
Amazon is reportedly investing in more industrial properties to build out its infrastructure. Of course, the company is not only investing to expand its retail delivery network, but also to support its cloud computing business. Amazon Web Services (AWS) has experienced accelerating growth this year as companies continue migrating their data systems to the cloud. AWS generated most of Amazon's $14.7 billion in operating income in Q2.
It's an incredibly strong business that continues to invest in strengthening its competitive advantage. Analysts expect Amazon to grow earnings at an annualized rate of 22%, and the stock continues to trade within its historical valuation ranges on a price-to-sales or price-to-earnings basis. Overall, Amazon investors are looking at excellent return prospects in the coming years.
2. American Express
American Express(NYSE: AXP) is one of four stock holdings for Berkshire that had a value of at least $25 billion in the second quarter. It has held a stake in American Express for over 30 years. It's another example of the kind of top brand well-entrenched in its market that Buffett tends to favor.
The stock has surged to new highs this year, supported by solid growth in the business. Total card member spending was up 6% year over year in the third quarter, helping drive an 8% increase in net revenue. The company reported 3.3 million new card acquisitions last quarter, following the recent launch of new products, including the new Gold card in the U.S.
American Express has a good case to be labeled the strongest of the major credit card brands. People are willing to pay a fee to use an American Express card because of the benefits that come with card membership, including special lounge access at airports, discounts with select retail brands, and excellent customer service. These perks help grow card member spending and encourage merchants to pay fees to accept the brand at checkout -- a key revenue driver for the company.
Moreover, American Express continues to gain traction with millennials and Gen Z, which is a great sign for its long-term growth prospects. These younger customers comprised 80% of new accounts acquired for the new U.S. Gold card last quarter and remain the fastest-growing group for the company.
The stock continues to trade at a reasonable valuation that can support new highs in 2025 and beyond. Wall Street analysts expect earnings to grow at an annualized rate of 15%, which is enough growth to potentially double the stock price within five years. It's no wonder Buffett continues to hold shares of American Express in Berkshire's portfolio.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
- Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $21,154!*
- Apple: if you invested $1,000 when we doubled down in 2008, you’d have $43,777!*
- Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $406,992!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of October 28, 2024
American Express is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway, Costco Wholesale, and Walmart. The Motley Fool has a disclosure policy.
