2 Warren Buffett Stocks That Are Loud Buys Right Now

There are about four dozen stocks in the massive portfolio of Berkshire Hathaway (BRK.A -2.34%) (BRK.B -2.31%)and to be fair, there is a solid investment case for most of them. However, one of Berkshire’s bank stocks and one of its megacap tech holdings look particularly attractive at their current prices. Which of these two stocks owned by the Warren Buffett-led conglomerate is a better fit for you?

A very profitable bank with a bright future

Capital One Financial (COF -3.02%) is one of Berkshire’s smallest bank stocks, with a 2.6 percent stake in the bank worth “just” $1.6 billion. But for long-term investors, Capital One looks like a tremendous value and has some exciting growth opportunities going forward.

Capital One is best known for its credit card business, and for good reason. Credit cards make up more than half of Capital One’s total loan portfolio, and due to the high-interest nature of the credit card industry, this allows Capital One to produce a net interest margin of 6.7%, more more than double that of most other large. US banks usually report. There is plenty of cash in reserves to cover expected losses, and while Capital One’s net charge-off ratio has risen significantly over the past year, it has stabilized over the past two quarters and is at a reasonable level.

There are two other big reasons I’m bullish on Capital One. First, lower interest rates could be a major catalyst, as they would significantly reduce Capital One’s deposit costs. Capital One is one of the few banks with branches that offer online interest rates on deposit accounts, so this could be a big tailwind.

There is also the pending purchase of Discover Financial Services (DFS -3.70%)which would not only dramatically increase the size of Capital One’s credit card business, but would give Capital One its own payment network, creating all sorts of interesting long-term possibilities.

After a recent pullback, Capital One is trading about 12% below its recent high and more than 10% below its book value. To be fair, there are some legitimate risks involved in such a credit card banking business. But the risk-reward dynamic looks very attractive now, especially if the bank can successfully complete the Discover merger.

Strong growth and an attractive price

Amazon.com (AMZN -0.89%) retreated more than 10% from its recent highs despite strong growth momentum and improved profitability across the business.

In the second quarter of 2024, Amazon reported net sales growth of 11% year over year. But thanks to CEO Andy Jassy’s focus on efficiency, operating income rose 91%. Net income doubled year over year, and there was significant improvement in all three of Amazon’s business segments (US sales, international sales, and Amazon Web Services, or AWS).

Don’t make the mistake of thinking that Amazon doesn’t have tons of room left to grow. The industry-leading AWS business should have a long-term growth opportunity as the cloud-computing industry is expected to triple by 2032. In fact, with sales growth of 19% year-over-year , is the fastest-growing part of Amazon’s business, and it is, too away more profitable than the e-commerce side.

International growth is another area of ​​great potential growth, as Amazon.com lacks the dominant presence it has in the US in many of its key international markets.

Which Buffett Stock Is Right For You?

Both stocks look attractive at their current valuations, and both have interesting long-term growth opportunities. Both certainly have their risk factors, and while I don’t think investors will go wrong with either, Capital One looks like a value investor’s dream right now, while Amazon is a growth stock with rapidly growing profitability.