Warren Buffett owns a Vanguard ETF that could rise 163%, according to a top Wall Street analyst

Warren Buffett, CEO of Berkshire Hathawayoversees a portfolio of 45 publicly traded stocks and securities worth $315 billion, in addition to a cash pile of $277 billion and numerous private, wholly-owned businesses.

Buffett has a remarkable track record. His investment choices have propelled Berkshire shares to a 19.8% compounded annual return since he took over in 1965, crushing the 10.2% average annual gain of S&P 500 (^GSPC 0.28%) index in the same period.

Buffett knows that average investors would struggle to replicate their returns by picking individual stocks, so he often recommends they buy exchange-traded funds (ETFs). And Berkshire has two in its portfolio: the Vanguard S&P 500 ETF (VOO 0.25%)and SPDR S&P 500 ETF Trust.

Both are designed to track the performance of the S&P by holding the same stocks and maintaining similar weightings, but the Vanguard ETF is cheaper to own (which I’ll discuss further in a moment), so let’s focus on that one.

If a certain Wall Street analyst is right, it could be poised to grow 163% by 2030!

Image source: The Motley Fool.

Why the Vanguard S&P 500 ETF is a great choice for investors

The S&P 500 has strict entry criteria. Companies must have a market capitalization of at least $18 billion and be profitable. Even then, admission is at the discretion of a committee, which rebalances the index once a quarter.

As a result, investors can be sure they are buying exposure to the highest quality companies when they invest money in the Vanguard S&P 500 ETF. And it has an expense ratio of 0.03% (the proportion of the fund deducted each year to cover costs), making it much cheaper to own than the SPDR ETF, which has an expense ratio of 0.09%.

The ETF consists of 11 different sectors. Technology is the largest at 31.1%, followed by the financial sector at 13.2% and healthcare at 12.2%. The technology industry is likely to drive the S&P higher for years because it is home to the world’s most valuable companies and the index is weighted by market capitalization.

The top five holdings in the Vanguard S&P 500 ETF have a combined market capitalization of $12.9 trillion, representing just over 25% of the total value of its entire 500-company portfolio:

Data source: Vanguard. Portfolio weights are accurate as of August 31 and are subject to change.

Apple has just launched its new iPhone 16 Pro. It is equipped with the latest A18 Pro chip, which is designed to process artificial intelligence (AI) workloads on the device, so it is ready for the release of Apple Intelligence software later this year. It was developed in partnership with OpenAI and will provide users with powerful new writing tools and transform the voice assistant Siri with new capabilities based on ChatGPT.

Microsoft and Amazon have developed their own AI chatbots and virtual assistants. Companies can also access the latest large language models (LLM) and the computing power needed to develop AI applications through the Microsoft Azure and Amazon Web Services cloud platforms.

None of the above would be possible without Nvidia, which provides the world’s most powerful data center chips for AI development. Right now, the company can’t keep up with demand from tech giants including Microsoft, Amazon, Meta, OpenAI, adze, Oracleand others, fighting for AI supremacy.

The Vanguard ETF could be up 163% through 2030

Wall Street analysts don’t always get it right, but Fundstrat Global Advisors managing partner Tom Lee has made some very accurate S&P 500 forecasts over the past two years:

• He said the S&P would hit 4,750 in 2023 and ended the year at 4,769.
• He entered 2024 with a target of 5,200, which was exceeded in the first three months.
• Then he said the index would hit 5,500 in June, and it did.

Lee’s latest year-end forecast is 5,700 on the S&P. Given that it closed at 5,702 on September 20th, it looks like it will add that to its list of successful calls.

Earlier this year, he also issued a long-term forecast suggesting the index could top 15,000 by 2030. That implies a 163% upside from here, which is the return investors could expect from to the Vanguard S&P 500 ETF if he’s right.

Lee says AI will be a key driver behind the move. He estimates that the global workforce will have 80 million workers by the end of this decade, which will drive more investment in AI technologies to automate more jobs.

He also says a huge demographic tailwind is coming, with millennials and Gen Zers entering the prime of their lives (30s to 50s). That’s when people make the most money and make important life decisions like investments.

Of course, there are risks. A global recession could add years to Lee’s 15,000 target, and if AI fails to live up to the hype, some of the world’s biggest stocks we highlighted earlier could suffer a prolonged by underperformance.

That said, even if the S&P 500 doesn’t hit 15,000 until 2030, history suggests it’s likely to get there eventually, so investors should definitely take Buffett’s advice and buy the ETF Vanguard S&P 500.