If you have $1,000 at your disposal, three stocks suggested by investing legend Warren Buffet could potentially surpass the S&P 500's performance in 2025.
It's no easy feat for a stock investor to outperform the S&P 500 annually, let alone consistently. Even legendary investor Warren Buffett, who's known for routing the market over the decades, has struggled to maintain his edge year in, year out. Yet, he's had an impressive run – from taking charge of Berkshire Hathaway to the end of 2023, the S&P 500 climbed an astounding 31,223%, while Berkshire Hathaway's worth rose an even more impressive 4,384,748%.
Despite the market's relentless rise, choosing your own stock portfolio instead of just buying index funds gives you a chance to outstrip the market. And if you're on the hunt for top-performing stocks, taking inspiration from Buffett's picks is a great place to start.
Three of Buffett's favorites for 2025 are American Express (AXP), Visa (V), and Amazon (AMZN). Here's why these stocks could outperform the S&P 500 this year.
American Express: A Fortress of Loyalty
American Express enjoys Berkshire Hathaway's second-largest stock position following the recent sale of its Bank of America shares. Its closed-loop credit card network differentiates it from competitors by acting as its own bank. This approach has built a financial powerhouse with a targeted, affluent clientele, a wide product assortment, and all-encompassing banking services – making it more than just a credit card company.
Its robust rewards programs and perks motivate users to cover the higher-than-average annual fees for its cards. Countless users find the value of these perks outweighs the charges, while the company reaps loyalty from its membership base.
In the first nine months of 2024, American Express reported a 9% revenue increase and a 28% EPS gain. Its sturdy earnings stem from fees related to its cards and interest income on deposits, both of which contribute to the multifaceted income it generates – something Buffett has pointed out as a desirable trait in a potential investment.
American Express stock experienced a 58% surge in 2024, with a dividend payout to boot. The moderated inflation should boost credit card business in 2025, while reduced interest rates could prove advantageous to its banking division.
Visa: The Global Money Mover
Buffett owns a small share in Visa, but its strengths appeal to his investment style. As the world's largest credit card network, it plays a significant role in the global economy. Unlike American Express, Visa functions as an intermediary, partnering with financial institutions to provide its transaction infrastructure.
Its expansive, capital-light operations and well-established infrastructure allow for high profit margins, preserving its long-term staying power. Revenue increased 10%, and EPS grew 17% in FY2024.
Visa is constantly innovating, developing new partnerships, and launching services to ensure its relevance and growth in the evolving financial landscape. Despite modestly outperforming the market in 2024, its growth potential should increase as inflation eases and people respond by boosting spending.
Amazon: The AI-Powered E-commerce Giant
Buffett first invested in Amazon in 2019. Its dominance in e-commerce and cloud computing services, as well as generating AI revenues, have all contributed to its meteoric rise since then.
Amazon has become the number one e-commerce player in the US and the primary force in cloud computing infrastructure worldwide. However, its significant growth potential truly lies in its adoption and exploitation of generative artificial intelligence (AI).
Amazon's stock price soared 44% in 2024, exceeding the S&P 500's gain of 97%. With a strong e-commerce background, growing AI capabilities, and a strong AWS segment, the odds are in favor of the stock outperforming the S&P 500 again in 2025.
In the realm of finance and investing, carefully selected stocks, like American Express, Visa, and Amazon, can provide opportunities to surpass the market's performance. Warren Buffett, known for his investment prowess, has included American Express in his top picks for 2025, citing its robust rewards programs, affluent clientele, and diverse income streams as potential growth drivers.
Investing in Visa, another of Buffett's picks, could yield returns due to its position as a global credit card network, high profit margins, and innovative approach to the ever-changing financial landscape. With inflation easing and consumer spending increasing, Visa's growth potential is expected to boost further in the upcoming year.
