3 Warren Buffett Stocks to Buy Hand Over Fist and 1 to Avoid

Key Points

• Apple is poised for big revenue growth with its new lineup of iPhones.

• Amazon will continue to grow along with e-commerce and cloud computing.

• Mastercard's international operations should drive its continued best-in-class growth.

• 10 stocks we like better than Apple ›

Warren Buffett, the "Oracle of Omaha," is one of the savviest investors in history, using commonsense investing principles to boost Berkshire Hathaway (NYSE: BRK.B) into a trillion-dollar behemoth.

Here are three Buffett stocks that are worth snapping up today and one that most investors will want to avoid.

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Buffett's biggest

Although Buffett recently sold shares of Apple (NASDAQ: AAPL), it's still Berkshire's largest holding by far. Since Buffett made his initial investment in 2016, Apple has returned more than 750%, not including dividends. Until Buffett sold a portion of the stake earlier this year, it was more than 25% of Berkshire's portfolio.

Apple's stock dipped briefly following its iPhone 17 launch, which featured only incremental product improvements as opposed to the major innovations that some investors have been clamoring for. However, it did introduce the new iPhone Air, which at 5.6 mm thick is 29% thinner than the iPhone 17 and at 2.3 ounces is 1.2 ounces lighter than the iPhone 16 Pro.

With the iPhone looking overdue for an upgrade cycle -- nearly one-third of iPhones in use today are iPhone 13s or older -- Apple may be poised for a major revenue boost. And with the stock even paying a small dividend, it's a Buffett stock that will fit well in most portfolios.

High growth at a reasonable price

Buffett has always said that "it's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

Of the 10 trillion-dollar-plus U.S. companies, Berkshire Hathaway has the lowest valuation of just 16.9x trailing earnings and just 11.9x trailing sales. However, the valuation of Berkshire holding Amazon (NASDAQ: AMZN) -- once the most expensive of these stocks -- has come down the most over the last three years, from over 110x trailing earnings to just 35.2x today. It now fits the bill of a "wonderful company at a fair price."

Amazon's business is constantly growing and is likely to keep doing so. Its e-commerce business dominates both in the U.S. and overseas, but overall e-commerce makes up just 16.3% of U.S. retail sales. Amazon's leading cloud computing platform, Amazon Web Services (AWS), also saw impressive year-over-year revenue growth of 17% in the second quarter. Not only was AWS the fastest-growing segment of the company (which grew revenue at a solid 13% overall), it boasts the highest operating margins at 33%.

Global growth

Mastercard (NYSE: MA) is more than just a credit card. It's an international payment-processing powerhouse.

There are 1.1 billion Mastercard credit cards in circulation, which represent 32% of all credit cards in the world. Those credit cards were responsible for $4 trillion in global purchase volume in 2023, of which only $1.4 trillion occurred in the U.S. That big, international presence is key to the company's growth potential, considering how saturated the U.S. credit card market is, with 82% of U.S. adults already owning at least one.

Speaking of growth, while Mastercard is second to fellow Buffett holding Visa (NYSE: V) in terms of purchase volume and number of cards issued, its share price and revenue growth over the past 10 years have handily outstripped its larger rival. As global wealth increases and digital infrastructure continues to spread around the world, Mastercard should continue to grow as well.

A longtime laggard

Buffett's multidecade investment in Coca-Cola (NYSE: KO) has paid off handsomely for him. Berkshire Hathaway now rakes in $816 million in annual dividend payments from his initial investments in Coca-Cola stock for which he paid $1.3 billion between 1988 and 1994. Unfortunately, anyone who's followed Buffett's lead in recent years hasn't done anywhere near as well.

Although it's still increasing its dividend each year, Coke's growth has stalled. Even on a total return basis, which includes the power of reinvested dividends, Coca-Cola shares are losing badly to the overall market:

While the company still pays a robust dividend that's currently yielding 3%, unless you're an investor exclusively focused on stable dividend income, Coca-Cola is one Buffett stock to avoid. But Apple, Amazon, and Mastercard all look like excellent Buffett stocks to buy today.

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John Bromels has positions in Amazon, Apple, Berkshire Hathaway, Coca-Cola, and Mastercard. The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway, Mastercard, and Visa. The Motley Fool has a disclosure policy.