2 Warren Buffett Stocks to Buy Hand Over Fist and 1 to Avoid

Warren Buffett's value-oriented, buy-and-hold approach isn't everyone's preferred stock-picking style. The fact is, it works. Over the course of the past three decades, Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) has more than doubled the performance of the S&P 500, and it is still widening the gap. That's why you'd be wise to poach a few of Buffett's picks for yourself. Just remember that not every name Buffett has picked to be part of Berkshire's portfolio has panned out as initially hoped.

To this end, here's a rundown of two Warren Buffett stocks to buy hand over fist sooner rather than later, and one Buffett stock you may not want to touch with a 10-foot pole.

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Buy American Express

Through steady growth and the sheer attrition of its other stock selections, American Express (NYSE: AXP) has quietly become Berkshire Hathaway's second-biggest holding. As of the most recent look, Berkshire is sitting on 151.6 million shares of AmEx, collectively worth $45.6 billion. That's 16% of Berkshire's overall stock portfolio, and 21.6% of American Express itself.

American Express is, of course, a credit card company, in the same vein as Mastercard and Visa. Except the comparison isn't a great one. Visa and Mastercard operate card-based payment networks meant to serve card issuers like banks or merchants. American Express is a payment middleman as well as the issuer.

And yet, that description still doesn't do the company justice. AmEx's core business is actually managing a perks and rewards program built around a credit card platform that encourages the revenue-bearing usage of its plastic. Indeed, some cardholders will pay as much as $700 per year in exchange for hotel discounts, credit toward entertainment and ride-hailing, access to airport lounges, and more. While the upfront annual fee is steep, for more affluent spenders who don't worry too much about the economy, it's an investment that pays for itself in almost any environment.

In this vein, despite the current economic headwinds, AmEx grew its top and bottom lines by 6% year over year during the first quarter of 2025. The analyst community expects both to accelerate later this year and beyond.

Be warned that American Express stock isn't exactly cheap right now. Shares trade at about 20 times this year's expected earnings and a tad above the analysts' consensus price target of $294.46.

Don't sweat that too much, though. As Buffett himself has often explained, "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." Quality usually ends up more than paying for itself.

Buy Domino's Pizza

Plenty of investors are still a bit surprised Berkshire Hathaway started building a position in Domino's Pizza (NASDAQ: DPZ) late last year. While not a bad company, it's not quite Warren Buffett's usual kind of pick. And perhaps someone besides Buffett made the call.

Whatever the backstory is behind this trade, it's more Buffett-esque than it may seem.

Chief among the qualities that the Oracle of Omaha likes to see in any investment is the durable profitability of the pizza business itself. There's not a lot of overhead involved here, since most Domino's Pizza locales are small-footprint carry-out or delivery stores that can be run with a minimal amount of staff. The ingredients needed to make a pizza are also relatively cheap, while the pizza-making process itself is relatively simple. Pizza pricing is also fairly elastic, if greater input costs force price increases.

Of course, pizza is consistently marketable as well.

There's good reason, however, Berkshire specifically chose Domino's. It's not only the biggest name in the business with over 21,300 stores, but it's also one of the best-run pizza chains. The company hasn't failed to turn a quarterly profit in over a couple of decades, and not counting the period after the COVID-19 pandemic's peak -- when food delivery finally slowed down -- Domino's has produced reliable profit growth too. It's clearly doing something right.

Data by YCharts.

Berkshire's stake in Domino's Pizza isn't huge, at least not yet. It's only got about 2.6 million shares of the pizza chain worth roughly $1.2 billion. For perspective, that's less than 1% of the value of all of Berkshire Hathaway's stock holdings combined.

But the fact that Buffett and his lieutenants are interested in owning even a relatively tiny stake in Domino's still speaks volumes about what they see for its future.

Avoid Kraft Heinz

Kudos to Warren Buffett and his team for being patient with Berkshire's position in Kraft Heinz (NASDAQ: KHC). Its 326 million shares are currently trading down more than 70% from their 2017 peak, and are knocking on the door of 2020's multi-year low thanks to four years of subpar performance from the company itself. Berkshire isn't giving up, though, even though most other investors are.

And perhaps Buffett and his team will eventually be vindicated. There's certainly no denying Kraft Heinz has some of the best brand names in the food business to work with, after all.

Things have been so bad for so long here, however, that interested investors might be better served by not jumping into a name Berkshire Hathaway likely wishes it had dumped a while back. Now it can't -- at least not without facing some serious credibility fallout.

Not only would an exit lock in a sizable loss, but such a sale would put the spotlight back on the fact that Buffett largely helped orchestrate the 2015 merger of Heinz and Kraft that was supposed to create an unstoppable food powerhouse. It never happened, though, proving that even the Oracle of Omaha doesn't get things right every single time.

So what went wrong?

At the time, the premise of a pairing made enough superficial sense. Several high-profile mergers and acquisitions in the early 2000s had panned out nicely, like ExxonMobil, Facebook's purchase of Instagram, and Google's 2006 acquisition of YouTube. Moreover, the food business itself is a simple one that tends to see higher margins with greater scale.

There was corporate-culture friction for Kraft Heinz from the get-go, however, and perhaps worse, not enough of the right people were focusing on the actual underlying motivation for doing the deal in the first place. That motivation was slowing sales growth for the entire (and highly saturated) food production industry, which was finally allowing smaller players to chip away at the titans' dominance of the business. At the same time, consumers themselves were changing. Most of them became far more interested in more narrowly focused options and brands, making Kraft Heinz's now-bigger size even more of a liability.

This would have been a tough shift for anyone to see at the time, including Warren Buffett.

Yes, this stock's forward-looking dividend yield of 6% is compelling. Just keep in mind the quarterly dividend payment hasn't budged since being dialed back to $0.40 per share in 2019. It's not clear when -- or even if -- the company might be in a safe enough position to start raising it again.

Should you invest $1,000 in American Express right now?

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American Express is an advertising partner of Motley Fool Money. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Berkshire Hathaway, Domino's Pizza, Mastercard, Meta Platforms, and Visa. The Motley Fool recommends Kraft Heinz. The Motley Fool has a disclosure policy.