Stocks Warren Buffett Would Love to Buy

Warren Buffett has earned a well-deserved reputation as the world’s greatest living investor. He parlayed a stake in Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B), at the time a struggling textile manufacturer, into a multibillion dollar insurance and investing powerhouse through his shrewd financial acumen. Buffett’s primary strategy is straightforward: Look for strong businesses with long-term focuses that reward their owners well and then buy them at reasonable prices.

We asked three of our contributors to put themselves in his shoes and pick a business that Buffett would love. They picked… (NASDAQ:AMZN)Waste Management (NYSE:WM), and McDonald’s (NYSE:MCD). Read on to find out why they think these stocks just might belong in Buffett’s portfolio.

We know he loves it, because he owns it

Rich Smith ( My pick today is kind of a gimme — a stock we know Warren Buffett not only would love but actually does love and in fact already owns through Berkshire Hathaway.

Last month, at long last, Berkshire Hathaway added Amazon to its portfolio. And Berkshire didn’t just nibble, either. Its 483,300-share investment in Amazon is worth roughly $840 million at today’s prices. So why did he buy it? Why does Buffett love Amazon, and why should you?

I’ve spoken many times in the past about Buffett’s fascination for tollbooth businesses, where a company builds a business off of collecting money from customers who really have little choice but to use its services. And Amazon increasingly fits that definition.

Consider: 100 million customers subscribe to Amazon Prime. Having shelled out $120 for their membership, these shoppers are naturally more inclined to do a disproportionate amount of their shopping on Amazon’s platform. Moreover, to get access to these customers, third-party merchants pretty much have to partner with Amazon, too.

Result: 7.7% of all retail sales in the U.S. now flow through a single company:

Granted, buying into such a successful company doesn’t come cheap. Amazon stock now sells for 41.4 times trailing free cash flow. Still, given the company’s record of past success and analyst predictions of future growth — 36.1% annualized earnings growth is the current consensus on Wall Street — Amazon is arguably worth the premium price.

And it’s not just me saying so. It’s also Warren Buffett.

Turning trash into treasure

Keith Noonan (Waste Management): Rather than chasing explosive growth in speculative tech businesses or taking a flier on the latest potential sensations to hit the consumer goods space, Buffett has built a reputation for pursuing and sticking with businesses that might rightly be described as “boring.” This has caused Berkshire Hathaway to miss out on some exciting growth stories in recent years, but the results of this strategy over the long term are undeniable. Waste Management stock is boring in a way that Buffett might love, and it’s not hard to imagine the company putting up solid performance down the line.

The simple fact is that the waste-removal industry is unlikely to see…

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