When it comes to stock picking, perhaps no investor has consistently done better than Warren Buffett's Berkshire Hathaway over such a long period. Between 1965 and 2023, the conglomerate's portfolio earned average annual returns of 20%, well above the 10% average return of the S&P 500 .
The makeup of that portfolio has changed over the years, but it generally focused on companies outside of the tech sector. But after avoiding tech-related stocks for decades, Buffett finally saw the value of the industry over the past decade or so and pivoted heavily into the sector. While Berkshire recently scaled back on its massive Apple position, tech remains a critical part of the portfolio.
If you are considering following Buffett's lead, these three Berkshire-owned tech stocks happen to be great buys for today's investors.
1. T-Mobile
Telecom giant T-Mobile US (NASDAQ: TMUS) has delivered market-beating returns over the last few years. T-Mobile came into being in 1994 as a U.S. spinoff of Deutsche Telecom , focused on cellular communications. As such. it avoided some of the legacy costs (related to landlines) that have hampered its main competitors, AT&T and Verizon Communications . Growth investors have seen this as a reason to consider its stock.
As a discount wireless provider, T-Mobile grew its market share by offering lower prices. That approach changed somewhat in 2020 when the company acquired Sprint and its massive spectrum portfolio. Also, this was when T-Mobile and its peers launched 5G service, and the addition of more spectrum made it more competitive on quality.
T-Mobile has grown to the point where it can now match its peers and offer a dividend (started in December 2023). It increased the dividend by 35% recently so it now totals $3.52 per share annually. That increase gives T-Mobile a dividend yield of 1.7%. While that does not match its peers, it makes up for it by having a stock that is up by over 45% in the past year, bringing investors considerable returns.
Finally, new investors can still buy this stock at a P/E ratio of 25. Considering its growth relative to that valuation, this is one Buffett stock that can still drive significant returns for new investors.
2. Nu Holdings
NuBank parent Nu Holdings (NYSE: NU) is one of the less familiar Buffett stocks. Even though it is the largest digital bank outside of Asia, the fact that it operates in Brazil, Mexico, and Colombia makes it easy for U.S. investors to miss. Moreover, Latin American banking was, until the past few years, dominated by a few large banks in each country that catered to larger clients, leaving much of the lower-income population unserved. NuBank changed this by offering millions of consumers in those countries their first credit card.
So successful is this approach that 56% of adult Brazilians hold at least one NuBank account. Now, it seeks to repeat this success in Mexico and Colombia, and this approach is succeeding by all early indications.
As of the end of the second quarter of 2024, its customer count had reached 105 million with all but 9 million of its customers banking in Brazil. The overall customer count grew by 21 million over the previous year. Given that increase, it shouldn't be surprising that its stock is up close to 120% over the last year.
At a P/E ratio of 47, Nu's earnings multiple may not fully reflect its growth rate. Considering its potential for further expansion, this fintech stock should continue enriching its shareholders for some time to come.
3. Amazon
Buffett once remarked that he was "too dumb" to envision the potential of Amazon (NASDAQ: AMZN) . However, Berkshire finally bought a stake in the stock in 2019 as the potential of the e-commerce and cloud computing conglomerate became too lucrative to ignore. Since then Amazon stock has increased in value by more than 140%.
New investors can still benefit from its growth potential despite its sizable $2 trillion market cap . Even though its online sales arm could be a loss leader, it supports digital ad, subscription, and third-party seller services that are quite profitable.
Image source: Statista.
Moreover, it earns the majority of its operating income from Amazon Web Services (AWS), its market-leading cloud computing arm. Workloads continue to move to the cloud, and with the rise of artificial intelligence (AI), AWS has become all the more critical to the IT industry. Such businesses should fuel faster growth than one might expect from such a large company.
Amid the AI-fueled growth, its stock has risen 50% over the last year. Also, despite those gains, the stock sells at a P/E ratio of 46. That is near multiyear lows for Amazon and significantly less than retail rival Costco Wholesale 's 56 earnings multiple. More importantly, such a valuation is an excellent opportunity to add shares. It is not too late to profit from this growth story.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Will Healy has positions in Berkshire Hathaway and Nu Holdings. The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway, and Costco Wholesale. The Motley Fool recommends Nu Holdings, T-Mobile US, and Verizon Communications. The Motley Fool has a disclosure policy .
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