Prediction: These 2 Warren Buffett Stocks Could Beat the Market in the Next Decade | The Motley Fool

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  Stocks and Investing on Sat, Sep 20th, 2025 by The Motley Fool

The Two Warren Buffett‑Backed Stocks That Might Be the Next Big “Buy”

In a recent Motley Fool article, the authors highlight two of Warren Buffett’s current portfolio staples that they believe could be “the next big buy.” The analysis is grounded in Buffett’s classic long‑term, value‑oriented approach and is built on a blend of fundamental data, earnings projections and the broader macro‑environment. The two companies under the microscope are American Express (AXP) and Bank of America (BAC)—two firms that have long attracted Buffett’s attention and are now showing signs of being undervalued by the market.

Why American Express?

1. Strong Brand & Competitive Advantage

Buffett has famously praised American Express for its “unique brand, the network, and the premium pricing that customers are willing to pay.” The credit‑card issuer’s “membership” model—especially its premium cards like the American Express® Gold Card—creates a stable revenue stream that is relatively insulated from broader economic downturns. The company’s net revenue growth has been steady over the past decade, driven by higher average transaction values and an expanding base of high‑net‑worth consumers.

2. Solid Cash Flow & Dividend Policy

The 2024 earnings report showed a 7% year‑over‑year rise in free‑cash‑flow, underscoring the business’s ability to generate cash. American Express pays an annual dividend of $1.18 per share (≈ 4.1% yield) and has a history of raising dividends each year—an attribute that aligns with Buffett’s preference for companies that return cash to shareholders.

3. Valuation Metrics That Favor a Buy

• P/E Ratio: 18.7x (2024 close), comfortably below the 25.4x average for the S&P 500.
• Price‑to‑Book (P/B): 2.4x, indicating the market is pricing the stock below its book value.
• PEG Ratio: 1.1x, suggesting the stock is not over‑priced relative to its earnings growth.

These figures point to a “discount” that the Motley Fool team believes will become more attractive as the market slowly corrects its bias away from consumer‑service companies in a post‑pandemic era.

4. Catalysts & Risks

• Catalysts: Potential expansion into new digital‑payments platforms, increased travel‑spending in the post‑COVID period, and strategic partnerships that could widen the card‑holder base.
• Risks: Regulatory scrutiny over fee structures, competition from fintech firms (e.g., Square, PayPal), and the possibility of rising interest rates eroding card‑holder spending.

Why Bank of America?

1. Largest U.S. Bank by Assets & Diverse Revenue Mix

Bank of America is a stalwart in the banking sector, with a diverse mix of retail, corporate, and investment banking services. Buffett’s 13F filings show a consistent long‑term holding in the bank, and the company’s scale and brand position make it a natural fit for a Buffett‑style portfolio.

2. Resilient Earnings and Dividend History

In FY 2024, BAC reported a 5% rise in earnings per share and a dividend increase to $0.56 per share (≈ 2.8% yield). Its capital ratios remain healthy, and the bank’s risk‑adjusted return on equity sits above the 20% threshold that Buffett typically seeks.

3. Valuation Snapshot

• P/E Ratio: 13.2x, lower than the S&P 500 banks’ average of 17.8x.
• Price‑to‑Book (P/B): 1.9x, indicating a modest discount to book value.
• Dividend Yield: 2.8%, with a history of steady increases.

The article notes that BAC’s current valuation is “reasonably attractive” compared to its historical range and the broader market’s focus on growth names.

4. Catalysts & Risks

• Catalysts: Potential interest‑rate hikes that can boost net interest margins, a rebound in commercial real‑estate lending, and possible consolidation in the banking sector.
• Risks: Credit risk from loan defaults, regulatory pressure on capital requirements, and the looming threat of increased competition from digital‑only banks.

How the Motley Fool Piece Builds on Buffett’s Philosophy

The article weaves Buffett’s timeless tenets throughout its narrative:

• Invest in what you understand – both American Express and Bank of America have business models that are easy to grasp: one is a premium‑brand card issuer, the other a massive, diversified bank.
• Buy at a discount – the valuations are below the companies’ intrinsic values, creating a margin of safety.
• Hold for the long term – Buffett’s track record demonstrates that patience yields superior returns; the article emphasizes the long‑term upside for both stocks.

Additionally, the authors point out that Buffett’s own holdings, as disclosed in the latest 13F filings, serve as a strong endorsement of these two companies. The Motley Fool team also references the Berkshire Hathaway annual report for FY 2024, where Buffett highlighted the resilience of American Express and the solid capital position of Bank of America.

Bottom Line

The Motley Fool’s article is a concise yet comprehensive case study for investors who want to align their portfolios with Buffett’s approach. By focusing on American Express and Bank of America—both staples of Buffett’s portfolio—the piece provides a detailed look at the financials, valuations, catalysts, and risks of each stock. For those looking for “the next big buy” that is rooted in solid fundamentals and a proven track record of generating shareholder value, American Express and Bank of America appear to be the right candidates.

Disclaimer: This summary is based on a Motley Fool article and should not be taken as investment advice. Please conduct your own research or consult a qualified financial professional before making any investment decisions.