Investor Warren Buffett is well-known his share-picking prowess. I fairly often follow his investment principles when choosing shares for my own portfolio. There are a couple of past and present Warren Buffett shares that I would be happy buying for my own portfolio.
Warren Buffett shares: Apple
The first is the tech giant Apple (NASDAQ: AAPL).
Apple is currently the largest shareholding of Buffett’s company, Berkshire Hathaway, by far. Although he trimmed the position last year, it remains huge. At the time of this year’s annual report, the Apple position was valued at $120bn. That is a 300% return on the cost price of $30bn, all bought over the last five years. It’s little surprise that Buffett is such a fan of this investment.
He holds 5.4% of all of Apple’s shares. That amount could go up even if Buffett doesn’t buy any more Apple shares, due to the company’s stock repurchase programme. In his annual shareholders’ letter for this year, Buffett explained that the repurchase programme is increasing his company’s percentage ownership of Apple over time without him needing to spend any more funds on Apple shares.
I think the most compelling reason for me to buy Apple shares for my own portfolio is the company’s business model. Its powerful brand, entrenched customer base, well-established ecosystem, and pricing power give it the competitive advantage Buffett calls a ”moat”. I reckon that means that Apple can keep generating massive cash flows even if its future product and service portfolio does not live up to past successes. If future launches are as good, that could be even better for the Apple share price.
That said, the shares do carry some risks. A broad tech pullback could pull the Apple share price lower. Longer-term, the lack of breakthrough new launches could also reduce customer loyalty, which could be bad for profits.
Former Warren Buffett shares: Tesco
The next Warren Buffett shares I would consider for my portfolio are ones Buffett used to own and sold some years ago. An accounting scandal hit Tesco (LSE: TSCO) after Buffett had bought into the company and he sold at a loss.
Looking back, though, I think what initially attracted Buffett to Tesco still holds true. The company is a dominant force in UK retailing. Its online and offline presence can help it counter the threat of sales moving online. Like Apple, the company benefits from a well-established brand, large customer base, and entrenched consumer habits. Its economies of scale can also help its profit margins compared to smaller competitors. As seen with the recent Asda and Morrisons takeovers, some investors currently see compelling value in the UK supermarket sector.
The retail sector is hotly competitive, and that remains an ongoing threat to profit margins. But with its accounting scandal now in the past, what attracted Buffett to Tesco all those years ago remains attractive to me as an investor today. I would consider adding some Tesco shares to my shopping list.
Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple and Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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