The best Buffett stocks to invest $500 in right now

Warren Buffett is very selective about the companies he invests in. That’s why investors should take note when holding an investment for decades, even after the company grows enormously in value. Right now, one of Buffett’s best stock picks is on sale. And so far, Buffett is not selling a single share.

This is the perfect Buffett business

Buffett considers a wide variety of factors when deciding whether to invest in a particular business. One of the most important is what economists call an economic moat. An economic moat is a type of competitive advantage that can last for years, if not decades at a time.

When it comes to strong economic moats, few companies can match the power Visa (V -1.49%). Take a look at its market share numbers. By most estimates, Visa controls at least half of the US credit card market. Only three companies – Discover Financial Services, MasterCardand American Express — controls the rest. Suffice it to say that this is a highly consolidated market, controlled by a handful of strong competitors, Visa being by far the largest.

Merchants want to accept forms of payment that consumers can pay with. And consumers just want to have forms of payment around that merchants will accept. It’s this dynamic that has helped strengthen the US payments industry — a dynamic that only grows over time. This is because Visa’s dominant market share provides two key benefits.

First, its network generates more data than its competitors combined, given that more than half of credit transactions occur on its network. Second, Visa’s business model is easy to use, leading to higher levels of profitability the further it expands. As the biggest competitor, Visa can generate profits that the competition cannot compete with. Over the past decade, Visa has dominated the competition when it comes to profitability, posting profit margins of nearly 55% in the most recent quarter.

With a strong market position backed by natural industry consolidation and economies of scale, Visa has amassed an economic moat that most companies can only dream of.

V profit margin data by YCharts

Is it too late to buy Visa stock?

Buffett first bought Visa stock in 2011 at a price of about $40 per share. More than a decade later, the stock is trading above the $270 mark. Is it too late to get involved? Absolutely not. The stock trades at just 29 times earnings — about S&P 500 the index as a whole is trading at. In short, you can buy a long-term Buffett stock with incredible economic moat and levels of profitability for zero premium over the general market.

Know that not everything is roses. Last month, the US Department of Justice announced an investigation into the company for anti-competitive practices. According to Politico, “The department accused Visa of a broad scheme stretching back to 2012 that it said artificially inflated the prices the payments company charged merchants and cut off competition from newer financial technology companies.” .

This is not the first time Visa has been targeted by regulators. In recent decades, several lawsuits have been filed, but none have succeeded in bringing him down, although fines have temporarily hurt financial results. So far, Buffett seems unperturbed, with no change in his position since the news broke. There are macro risks to this stock, but at 29 times earnings, it’s hard not to follow Buffett in this proven winner.