Warren Buffett has been outperforming the stock market for many decades. He’s shared many insights along his journey that have captivated investors as they try to pinpoint corporations with the potential to outpace the market.
While investors can do their research and predict which stocks will outperform, they can also look at Warren Buffett’s portfolio for some answers. The famed investor has done well for many years, and knowing what’s in his portfolio may help you beat the stock market. These are some of the most undervalued Warren Buffett stocks worth considering.
American Express (AXP)
American Express (NYSE:AXP) is a top-tier credit and debit card issuer that trades at a 19 P/E ratio and offers a 1.2% yield. Buffett has been investing in AXP stock for decades. He’s been rewarded with a 25% year-to-date gain on his position and a 5-year gain of 92%.
The fintech firm is attracting younger generations. More than 60% of the new account openings in Q1 2024 came from Millennials and Gen Z consumers. American Express also reported 11% year-over-year (YOY) revenue growth and 34% YOY net income growth in the quarter.
American Express has maintained an impressive annualized dividend growth rate of 10.51% over the past decade. Rising profit margins support additional dividend hikes and can make the stock’s valuation even more attractive for long-term investors.
Investors should be excited about the company’s multi-year growth plans. Leadership plans to achieve revenue growth of 9% to 11% beyond 2026 while having an EPS growth rate in the mid-teens.
Amazon (AMZN)
Warren Buffett doesn’t have many tech stocks, which is jarring for someone who has outperformed the stock market for so long, but he has plenty of Amazon (NASDAQ:AMZN) shares. This member of the Magnificent Seven is up 22% year-to-date and has doubled over the past five years.
The company posted solid top and bottom line results to start 2024. Q1 2024 net income more than tripled YOY while net sales were up 13% YOY. Domestic and international sales both maintained double-digit growth rates while Amazon Web Services’ growth accelerated.
Amazon’s cloud computing segment should exhibit more growth moving forward as corporations rush to use artificial intelligence. The company’s streaming, advertising and grocery segments also propelled the stock higher.
Even though Amazon is expanding across numerous verticals, online marketplace sales remain the company’s dominant revenue source. Amazon has masterfully reinvested its capital into other areas and has rewarded shareholders as a result.
Moody’s (MCO)
Moody’s (NYSE:MCO) is another fintech company that made it to the list of undervalued Warren Buffett stocks. The Oracle of Omaha’s portfolio is filled with finance companies that have generated long-term returns for its investors.
Moody’s is a risk assessment firm that offers software for various businesses. The firm has delivered a meager 5% year-to-date return but has more than doubled over the past five years. Shares trade at a 44 P/E ratio and offer a 0.84% yield. Moody’s has maintained an annualized dividend growth rate of 12.42% over the past decade.
The company’s profit margin was once again above 30% in the latest quarter. Moody’s reported 21% YOY revenue growth in Q1 2024. Diluted EPS increased 16% YOY to reach $3.15. The firm projects diluted EPS to range from $9.55 to $10.15 per share in fiscal 2024. Moody’s Investors Service revenue was one of the bright spots that grew by 35% YOY.
On this date of publication, Marc Guberti held a long position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
