9 stocks that the Oracle of Omaha would Love
9 stocks that I think Warren Buffett would love, at a fair price.
Warren Buffett didn't become one of the world's richest people by accident. Over six decades, the Oracle of Omaha has built his fortune on surprisingly simple principles that anyone can understand, though few have the patience to follow. Before we dive into the stocks that would make Buffett's eyes light up, let's walk through the exact playbook he uses to separate the wheat from the chaff.
What Makes Buffett Tick: His Investment Playbook
Business and Moat
Durable Competitive Advantage
"In business, I look for economic castles protected by unbreachable moats."
-1995 Annual Meeting
Understandable Business Model
"Never invest in a business you cannot understand."
-1996 Annual Meeting
Predictable Industry "
We don't get into businesses where we think technology will make a difference."
-1999 Annual Meeting
Financial Strength
High Return on Equity (ROE)
"A truly great business must have an enduring 'moat' that protects excellent returns on invested capital."
-2007 Shareholder Letter
Low Debt
"We never want to count on the kindness of strangers in order to meet tomorrow's obligations."
-2008 Annual Meeting
Strong Free Cash Flow
"Businesses that need lots of capital to grow are not good businesses to be in."
-1985 Shareholder Letter
Earnings Quality
Consistent Profitability
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
-1989 Shareholder Letter
Resilience in Downturns
"Only when the tide goes out do you discover who's been swimming naked."
-2001 Annual Meeting
Management
Integrity
"You can't make a good deal with a bad person."
-Charlie Rose Interview, 2006
Capital Allocation Skill
"The best managers in our kind of businesses are those who can allocate capital most intelligently."
-1987 Shareholder Letter
Shareholder Alignment "
When you find a manager with a reputation for brilliance and a business with poor fundamental economics, it is the reputation of the business that remains intact."
-1985 Annual Meeting
Valuation
Buy at a Fair Price
"Price is what you pay. Value is what you get."
-2008 Annual Meeting
Margin of Safety
"The three most important words in investing are margin of safety."
-paraphrased from Graham, repeated in multiple letters
Time Horizon
Long-Term Compounding
"Our favorite holding period is forever."
-1988 Shareholder Letter
Patience & Discipline
"The stock market is designed to transfer money from the Active to the Patient."
11985 Shareholder Letter
9 Buffett Worthy Stocks
Based on these criteria, here are 9 stocks that embody Warren Buffett's investment philosophy:
1. Coca Cola ($KO) - The Ultimate Consumer Moat
2. Microsoft ($MSFT) - The Software Moat Master
3. Johnson & Johnson ($JNJ) - Healthcare's Defensive Champion
4. Procter & Gamble ($PG) - Consumer Staples Powerhouse
5. Visa ($V) - The Payment Processing Giant
6. McDonald's ($MCD) - The Global Real Estate Empire
7. Costco ($COST) - The Membership Moat Model
8. Home Depot ($HD) - The Home Improvement Fortress
9. Berkshire Hathaway ($BRK.B) - Buffett's Own Masterpiece
Detailed Analysis
1. Coca-Cola ($KO) - The Ultimate Consumer Moat
"In business, I look for economic castles protected by unbreachable moats."
Think of Coca-Cola as the gold standard for what Buffett looks for in a stock. This isn't just about fizzy drinks, it's about owning a piece of the world's consciousness. When you can walk into a village in rural Asia or a café in Paris and find the same red logo, you know you're dealing with something special.
Why Buffett Would Love It:
Durable Competitive Advantage: The Coca-Cola brand is worth an estimated $80+ billion
Predictable Cash Flows: Consistent demand regardless of economic cycles
Global Diversification: Revenue streams from developed and emerging markets
Strong ROE: Historically maintains ROE above 20%
Shareholder Friendly Management: Consistent dividend increases for 62 consecutive years
2. Microsoft ($MSFT) - The Software Moat Master
Remember when everyone thought Microsoft's best days were behind it? That was before Satya Nadella took the helm and transformed this sleeping giant into a cloud computing powerhouse. Today's Microsoft isn't your father's Windows company, it's a subscription based empire that businesses literally cannot live without.
Buffett-Worthy Attributes:
High Switching Costs: Enterprise customers find it expensive to change software ecosystems
Recurring Revenue Model: Subscription-based services provide predictable cash flows
Strong Balance Sheet: Minimal debt with substantial cash reserves
Consistent Profitability: Growing earnings for over a decade
Capital-Light Growth: Software scales without proportional capital investment
3. Johnson & Johnson ($JNJ) - Healthcare's Defensive Champion
Here's a company that quite literally keeps the world healthy. While tech stocks grab headlines, J&J quietly goes about the business of making products people need regardless of whether the economy is booming or busting. Band-Aids, Tylenol, hip replacements, cancer drugs, this is recession proof investing at its finest.
Defensive Qualities:
Essential Products: Healthcare needs persist regardless of economic conditions
Patent Protection: Pharmaceutical products enjoy regulatory moats
Diversified Revenue: Multiple business segments reduce risk
Strong Cash Generation: Consistent free cash flow supports dividend growth
AAA Credit Rating: Among the few companies with the highest credit rating
4. Procter & Gamble ($PG) - Consumer Staples Powerhouse
P&G is like that reliable friend who's been there through thick and thin. For 68 years straight, this company has increased its dividend, surviving world wars, financial crises, and countless economic ups and downs. When you own brands like Tide, Crest, and Gillette, you're not just selling products, you're selling daily habits that are nearly impossible to break.
Consumer Staples Advantages:
Brand Portfolio: Owns 65 brands, many with billion dollar+ revenue
Recession Resistant: People continue buying toothpaste and soap during downturns
Global Reach: Operates in approximately 180 countries
Innovation Pipeline: Consistent R&D investment maintains competitive edge
Dividend Aristocrat: 68 consecutive years of dividend increases
5. McDonald's ($MCD) - The Global Real Estate Empire
Here's a secret about McDonald's that many investors miss: it's actually one of the world's largest real estate companies disguised as a burger joint. The company owns prime real estate in thousands of locations worldwide, then collects rent from franchisees. While other restaurants worry about food costs and labor issues, McDonald's just counts the rent checks.
Real Estate Moat:
Prime Locations: Controls high traffic real estate in major markets
Franchise Model: Generates steady rental income with lower operational risk
Global Brand: Recognized in virtually every country worldwide
Consistent Cash Flow: Rental payments provide predictable revenue
Capital-Light Growth: Franchisees fund expansion with minimal corporate investment
6. Costco ($COST) - The Membership Moat Model
Costco has cracked the code on customer loyalty in a way that would make dating apps jealous. People actually pay $120 a year just for the privilege of shopping there, and then they shop there religiously to justify that annual fee. It's a brilliant psychological trap wrapped in bulk toilet paper and $1.99 pizza slices.
Membership Advantages:
Recurring Revenue: Annual membership fees provide predictable income
Customer Loyalty: Members shop more frequently to justify membership costs
Bulk Purchasing Power: Scale enables better supplier negotiations
Limited SKUs: Focused inventory reduces complexity and costs
High Renewal Rates: Over 90% membership renewal rate demonstrates satisfaction
7. Home Depot ($HD) - The Home Improvement Fortress
Home Depot is the ultimate beneficiary of two unstoppable forces: homeowners' eternal desire to improve their living spaces, and their inevitable realization that they have no idea what they're doing. Whether the economy is good (people renovate) or bad (people fix things instead of replacing them), Home Depot wins.
Market Leadership:
Scale Advantages: Largest home improvement retailer enables better supplier terms
Professional Customers: Contractors and builders provide consistent demand
Market Share: Commands significant share in a fragmented market
Omnichannel Strategy: Successful integration of online and in-store shopping
Housing Trends: Benefits from home improvement spending and housing market activity
8. Berkshire Hathaway (BRK.B) - Buffett's Own Masterpiece
Buying Berkshire Hathaway is like getting Warren Buffett as your personal money manager, except he charges no fees and you get to ride along on his six decade track record. It's Buffett's greatest hits album in corporate form, owning everything from insurance companies to railroads to See's Candies.
Conglomerate Strengths:
Diversification: Owns businesses across insurance, energy, transportation, and manufacturing
Capital Allocation: Buffett's track record of intelligent capital deployment
Insurance Float: Generates low cost capital for investments
Permanent Capital: No forced selling during market downturns
Proven Management: Buffett and Munger's combined century of experience
The Bottom Line: Patience Pays
Here's the thing about Buffett style investing, it's not glamorous. You won't get rich overnight, and you certainly won't have exciting stories to share at cocktail parties. But what you will get is the kind of steady, compounding returns that have made the Oracle of Omaha one of the richest people on Earth.
These nine companies aren't just stocks, they're pieces of businesses that have figured out how to make money year after year, decade after decade. They're the tortoise in a world full of hares, and as Buffett has proven time and again, slow and steady doesn't just win the race, it builds generational wealth.
Remember Buffett's golden rule: "Price is what you pay. Value is what you get." These companies offer tremendous value, but only when you can buy them at the right price. And that, as any Buffett disciple will tell you, requires the one thing most investors lack: patience.
"It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
-Warren Buffett
IIRC, Buffett doesn't hold MSFT. Is that because he thinks it's too pricey? Since #12, fair price, is an important component of Buffett's model, shouldn't an analysis based on his principles include a fair price (at least a range)? What would that be for MSFT based on last quarter?
Great summary of Buffett’s approach. Always a good reminder that consistency, discipline, and buying at the right price still beat chasing the next big thing.