Although Wall Street has a lot of phenomenal investors, none tend to garner quite as much attention as Berkshire Hathaway CEO Warren Buffett. The reason for this is that Buffett’s investment strategy is simple and can be duplicated by anyone. He typically seeks out brand-name businesses that offer sustainable competitive advantages and are guided by rock-solid management teams.

Since taking over as CEO in the mid-1960s, the “Oracle of Omaha,” as Buffett has come to be known, has overseen a greater-than-5,000,000% aggregate return in his company’s Class A shares (BRK.A), as of the closing bell on February 23.

The interesting thing about the 45 stock, $371 billion investment portfolio Buffett and his team oversee at Berkshire is that plain-as-day values can still be found — even with the Dow Jones Industrial Average and S&P 500 claiming new record highs. The following three Warren Buffett stocks are all screaming buys in March, and they’re fully capable of delivering for shareholders for years to come.

Visa
The first Warren Buffett stock that’s begging to be bought by opportunistic long-term-minded investors as we barrel into March is none other than world-leading payment facilitator Visa (V).

The biggest concern for Visa shareholders is that financial stocks are cyclical. This is to say that they ebb and flow with the health of the U.S. and global economy.

If the U.S. economy were to dip into a recession, the expectation would be for consumer and enterprise spending to decline. That’s not good news for a company like Visa that relies on growth in spending and aggregate transactions to drive its sales and profits higher.

However, the difference between recessions and periods of growth for the U.S. economy is night and day. Even though recessions are a perfectly normal and unavoidable aspect of the economic cycle, they don’t stick around for very long. Out of the 12 recessions since the end of World War II in September 1945, nine failed to reach the one-year mark and none of the remaining three surpassed 18 months.

Comparatively, most periods of expansion last multiple years, with two surpassing the 10-year mark since World War II. Patience has been a moneymaking trait for investors in payment processors like Visa.

Something else to consider is just how vast the growth runway is that sits in front of Visa. Despite dominating credit card network purchase volume in the U.S., Visa has hardly scratched the surface in underbanked regions like the Middle East, Africa, and Southeastern Asia. The company has more-than-enough capital to organically expand its payment infrastructure or can make the occasional acquisition to rapidly broaden its reach.

As I’ve pointed out numerous times before, Visa’s avoidance of lending is another reason it’s such a successful business. Though I don’t doubt Visa could make a seamless transition to lending, becoming a lender would expose the company to loan losses and credit delinquencies during recessions.

Since it’s strictly focused on payment facilitation, Visa doesn’t have to set aside capital to cover loan losses. Not being financially constrained during periods of weakness and uncertainty helps Visa bounce back more quickly than other financial stocks from downturns, as well as keeps its profit margin north of 50%.

Lastly, the valuation remains enticing. Visa’s forward-year price-to-earnings ratio of 25 is 13% lower than its average forward-year earnings multiple over the trailing-five-year period.

Sirius XM Holdings
A second Warren Buffett stock that represents a screaming buy in March and likely well beyond is satellite-radio operator Sirius XM Holdings (SIRI).

For radio operators, the health of the advertising market is often what takes precedence. If the U.S. economy were to dip into a recession, the expectation would be for businesses to pare down their ad spending. With quite a few money-based metrics and predictive indicators suggesting a downturn in the U.S. economy in 2024, it could be a challenging year for radio operators.

However, Sirius XM isn’t a run-of-the-mill radio company. It brings three distinct competitive advantages to the table.

To start with, it’s the only licensed satellite-radio operator. While it still competes for listeners with terrestrial and online-radio operators, being the only licensed satellite-radio operator provides the company with phenomenal subscription pricing power.

Secondly, Sirius XM’s revenue breakdown is markedly different than terrestrial and online radio providers. Whereas the latter are heavily reliant on advertising revenue to keep the lights on, Sirius XM generates only 20% of its revenue from advertising. Approximately 77% of Sirius XM’s sales derive from subscriptions.

Subscribers are far less likely to cancel their service than advertisers are to pull back their spending. This should allow Sirius XM to navigate inevitable downturns in the economy better than its peers.

The third competitive edge is that some aspects of its cost structure are highly predictable. While royalty and talent acquisition costs will vary from one quarter to the next, transmission and equipment costs are relatively fixed. Sirius XM can continue to add subscribers and not owe any extra expenses from these line items.

The icing on the cake is that Sirius XM stock is historically cheap. Shares can be purchased right now for around 14 times Wall Street’s consensus earnings per share (EPS) for the company in 2025. That’s a 27% discount to Sirius XM’s forward-year earnings multiple over the trailing-five-year span.

Amazon
The third Warren Buffett stock that’s a screaming buy in March and well beyond is e-commerce leader Amazon (AMZN).

Not to sound like a broken record, but the clearest headwind for all three companies I’m highlighting is a U.S. recession. Most people are familiar with Amazon because it operates the world’s top online marketplace. In 2023, Amazon brought in roughly $0.38 of every $1 that was spent in U.S. online retail sales. If the U.S. economy weakens, there’s a pretty good chance we’d see e-commerce sales slow down or shift into reverse.

But what’s critical for investors to note is that e-commerce accounts for very little of the operating income and cash flow Amazon generates. The lion’s share of Amazon’s profits and cash flow are derived from an assortment of ancillary segments — and these segments are still firing on all cylinders.

Nothing is more important to Amazon than its cloud infrastructure segment, Amazon Web Services (AWS). As of the end of September, AWS had gobbled up close to a third of worldwide cloud infrastructure service share, based on estimates from tech-analysis firm Canalys.

With enterprise cloud spending still in its relatively early stages, AWS shouldn’t have any trouble sustaining a double-digit growth rate through the remainder of the decade. Even though AWS accounts for a sixth of Amazon’s net sales, it’s often responsible for between 50% and 100% of the company’s operating income.

Advertising services and subscription services are no slouches, either. Amazon is one of the most-visited sites on a monthly basis, with well over 2 billion unique visitors, which assists with its ad-pricing power. Likewise, it’s signed up in excess of 200 million people worldwide to a Prime subscription.

Even if the U.S. economy were to dip into a recession, it’s unlikely that Amazon’s operating cash flow would suffer much, if at all. It’s this robust growth in the company’s cash flow that allows Amazon to aggressively reinvest in its ever-growing logistics network, as well as higher-growth initiatives, like artificial intelligence (AI).

To round things out, Amazon remains inexpensive. Over the trailing-five-year period, Amazon has commanded a multiple of nearly 23 times its cash flow. However, opportunistic investors can scoop up shares of this industry leader right now for less than 13 times Wall Street’s forecast cash flow for the company in 2025.

— Sean Williams

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Source: The Motley Fool