Warren Buffett says these are the absolute best stocks to own — check out 3 choice picks from his collection
At a time when investors are overloaded with information and opinions, it can be hard to sift through the noise and pin down which stocks are worth owning.
Thankfully, legendary investor Warren Buffett once provided a pretty simple rule to follow: “[T]he best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates of return.”
Remember, at the most basic level, companies are designed to take capital from investors and earn a return on it.
With that in mind, here are three companies from Berkshire Hathaway’s portfolio with returns on invested capital in the double-digits — plus a few exotic assets that also have the potential for solid returns.
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Kicking things off is Berkshire’s largest holding, which certainly fits Buffett’s description: Apple has achieved a five-year average return on invested capital of 27.6%.
Berkshire owned 907.6 million shares of the tech giant as of Sept. 30, worth over $161 billion at the current price. In fact, Apple now accounts for well over 40% of Berkshire’s publicly traded equities portfolio by market value.
One of the reasons behind that concentration is the sheer increase in the company’s stock price. Over the past five years, Apple shares have surged more than 500%.
Earlier this year, management revealed the company’s active installed base of hardware has surpassed 1.65 billion devices. But Apple does more than just making smartphones and computers; it has built an integrated ecosystem that encourages customers to get more and more invested.
As a result, business has been growing at a commendable pace. In the September quarter, revenue surged 29% year-over-year to $83.4 billion.
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Next up, we have credit card giant Mastercard, which boasts a five-year average return on invested capital of 46.2%.
Buffett trimmed his position in the company by about 6% in Q3. Even so, with 4.29…