2 Warren Buffett Stocks That Are Screaming Buys Right Now

There are roughly four dozen stocks in the massive portfolio of Berkshire Hathaway (BRK.A -1.86%) (BRK.B -1.98%), and to be fair, there’s a solid investment case to be made for most of them. However, one of Berkshire’s bank stocks and one of its megacap tech holdings look especially attractive at their current prices. Which of these two stocks owned by the Warren Buffett-led conglomerate is the better fit for you?

A highly profitable bank with a bright future

Capital One Financial (COF -1.96%) is one of Berkshire’s smaller bank stock holdings, with a stake of 2.6% of the bank worth “only” $1.6 billion. But for long-term investors, Capital One looks like a tremendous value and has some interesting growth opportunities in the future.

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 because of the high-interest nature of the credit card industry, this allows Capital One to produce a 6.7% net-interest margin, more than double what most other large U.S. banks typically report. There is plenty of cash in reserves to cover expected losses, and while Capital One’s net charge-off rate has increased significantly over the past year, it has stabilized over the past couple of quarters and is at a reasonable level.

There are two other big reasons why 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 branch-based banks that offers online-like interest rates on deposit accounts, so this could be a big tailwind.

There’s also the pending acquisition of Discover Financial Services (DFS -2.31%), 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 trades for about 12% below its recent high and for more than 10% below its book value. To be fair, there are some legitimate risks involved with such a credit card-heavy banking business. But the risk-reward dynamics look very attractive right now, especially if the bank can successfully complete the Discover merger.

Strong growth and an attractive price

Amazon.com (AMZN -0.70%) has pulled back by more than 10% from its recent highs despite strong growth momentum and improving profitability throughout its business.

In the second quarter of 2024, Amazon reported net-sales growth of 11% year over year. But due to CEO Andy Jassy’s focus on efficiency, operating income soared by a staggering 91%. Net income doubled year over year, and there was a big improvement in all three of Amazon’s business segments (U.S. sales, international sales, and Amazon Web Services, or AWS).

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

International growth is another big potential growth area, as Amazon.com doesn’t have nearly the dominant presence it has in the U.S. 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 exciting 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 increasing bottom-line profitability.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Matt Frankel has positions in Amazon and Berkshire Hathaway. The Motley Fool has positions in and recommends Amazon and Berkshire Hathaway. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.