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Russian (RU) Leo Sun, The Motley Fool
Mon, Apr 14, 2025, 2:41 AM 5 min read
In This Article:
Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) owns one of the world's most closely watched portfolios. It holds 44 stocks in a portfolio worth $262.7 billion, or 23% of Berkshire's market cap of $1.13 trillion.
Many investors use Berkshire's sprawling portfolio as a shopping list for fresh investment ideas. After all, those stocks have a stamp of approval from the Oracle of Omaha himself -- so they probably have a decent shot at beating the S&P 500.
But if you have only $3,000 to put in this volatile market, it might be smart to spread that cash out across three of Berkshire's most stable financial stocks: Ally Financial (NYSE: ALLY), Moody's (NYSE: MCO), and Visa (NYSE: V). All three of these reliable stocks are insulated from the near-term headwinds and have plenty of long-term growth potential.
Berkshire started to buy shares of Ally Financial, one of the largest digital banks and car finance companies in America, in early 2022. Its 9.4% stake in Ally is now worth $922 million, and it hasn't sold any of those shares since 2023.
Over the past 10 years, Ally's stock rallied 45%, delivered a total return of 84% after reinvesting its dividends, and repurchased 36% of its shares. It pays a high forward yield of 3.8%, which is easily supported by its low payout ratio of 67%.
Ally generated plenty of cash for its buybacks and dividends as it expanded its auto lending business and digital-only bank, which grew much faster than its brick-and-mortar peers. From 2014 to 2024, its year-end cash and equivalents increased from $5.6 billion to $9.6 billion, while its retail deposits tripled from $48 billion to $143.4 billion. It also recently sold its credit card portfolio and stopped originating mortgages to streamline its business and reduce its overall credit risk.
From 2024 to 2027, analysts expect Ally's earnings per share (EPS) to grow at a compound annual growth rate (CAGR) of 51%. That's an impressive growth trajectory for a stock that trades at just 10 times forward earnings. Declining rates might reduce its near-term net interest margins, but it could offset that pressure as auto sales warm up again in a lower interest rate environment.
Berkshire gained a stake in Moody's, one of the largest financial data and analytics companies in America, after it was spun off from Dun & Bradstreet in 2000. That 13.7% stake is now worth $10.6 billion, and it hasn't sold any shares since 2013.
Moody's, like its main competitor, S&P Global (NYSE: SPGI), provides a broad range of financial data, credit rating, and analytics services. Many companies and institutional investors rely on its data to issue more debt and make key financial decisions, so it's often considered an evergreen investment that flourishes during bull and bear markets.
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