Warren Buffett’s longtime business partner Charlie Munger isn’t a fan of Robinhood. The Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) vice-chairman stated in February that inexperienced investors are being “lured in by new types of brokerage operations like Robinhood and I think all of this activity is regrettable.”
What are Buffett’s views about Robinhood? He hasn’t publicly weighed in with his opinion. However, the Oracle of Omaha and investors on the trading platform see eye to eye, in some ways. Here are three popular Robinhood stocks that Buffett owns — and you should consider, too.
Amazon.com (NASDAQ:AMZN) ranks No. 10 among the most widely held stocks owned by Robinhood investors. Buffett thinks pretty highly of the stock, as well: Berkshire Hathaway’s position in the internet giant totals close to $1.8 billion.
My view is that Amazon is a stock that should be a core component of most investors’ portfolios. The company possesses the two most important things that a stock should have — a strong moat and optionality (multiple ways to grow).
Amazon’s moat is pretty obvious, and no other rival comes close to dominating e-commerce like it does. The company’s multiple ways to grow are easy to spot, as well. Just in the last couple of years, Amazon has entered into the online pharmacy market and is now gearing up to jump into the telehealth arena.
The company is also successfully monetizing its ecosystem by selling ads. Its 10.3% market share in digital advertising gives Amazon the No. 3 position in that market. Look for this ad business to be a key growth driver for Amazon for years to come.
Apple (NASDAQ:AAPL) is currently the second most-popular stock among Robinhood investors. It’s also Buffett’s second-favorite stock behind only Berkshire Hathaway itself, based on the size of Berkshire’s stake in the technology leader.
Why should you consider owning Apple, too? For the same reasons why buying Amazon makes sense. Both Apple and Amazon rank in the top three biggest companies in the world (No. 1 and No. 3, respectively), in large part because of their moats and multiple paths to deliver growth.
The iPhone, of course, stands at the center of Apple’s universe. The latest version, iPhone 12, is absolutely dominating the 5G smartphone market. The more consumers buy apps and subscribe to services such as Apple Music, the less likely they are to switch to another phone. That’s a classic example of a strong moat.
Those services stand out as one major growth driver for Apple. However, the company has plenty of other growth opportunities — notably including selling ancillary products such as AirPods, and developing new products focused on augmented reality.
3. Vanguard S&P 500 ETF
Sure, Vanguard S&P 500 ETF (NYSEMKT:VOO) technically isn’t a stock — it’s an exchange-traded fund (ETF). However, this ETF ranks among the 100 most popular holdings for Robinhood investors. And it’s one of Berkshire’s holdings. as well.
Buffett has been a longtime champion of low-cost index funds. He stated last year, “In my view, for most people, the best thing is to do is owning the S&P 500 index fund.” He even specified in his will that the trustee of his estate is to invest 90% of the money inherited by his family into an S&P 500 fund.
Berkshire actually owns two S&P 500 funds in its portfolio — VOO and the SPDR S&P 500 ETF (NYSEMKT:SPY). You won’t go wrong with either of these S&P 500 ETFs. However, Vanguard’s VOO has a lower expense ratio of 0.03% compared to 0.09% for SPY.
Buying VOO gives you an easy and inexpensive way to track the performance of the 500 biggest companies traded on U.S. stock exchanges. You won’t beat the market with this ETF, but you’re not going to underperform the market, either.