At 90-years-old, Warren Buffett has very many decades of investing experience. As chairman and CEO of Berkshire Hathaway he’s widely considered one of the most successful investors in the world. So I’d listen to his words of wisdom to help find the best shares to buy now.
Every year, Warren Buffett writes a letter to Berkshire Hathaway shareholders. These letters are famous and provide plenty of well-observed, often wonderful, nuggets about investing.
Best shares to buy now
From the letters, we can see that Warren Buffett likes companies that sell goods and services that will be in constant and growing demand. They should have an upward trend in earnings. A suitable business should also have a sustainable competitive advantage. It should be easy to understand, have capable management, and be reasonably priced.
Should you invest £1,000 in Hargreaves Lansdown right now?
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The UK is home to several companies that fit these criteria. Here at what I see as some of the best shares to buy now that I also think Warren Buffett might approve of.
Quality investment model
Screening for ‘Buffettesque’ stocks, I find Hargreaves Lansdown (LSE:HL). I’d say it ticks all the boxes listed above. It’s the largest direct-to-consumer investment platform in the UK. It has an easy-to-understand business model, generating the majority of its income from platform fees and asset management charges.
It has a consistent track record of earnings growth and high levels of profitability. With a profit margin of 67% and a return on capital of 76%, it is a stock that is filled with quality characteristics.
Of course, Hargreaves Lansdown, like any fund platform is reliant on attracting new investors and keeping existing ones. Any deep recession or stock market correction could be a risk to earnings. That said, Warren Buffett is fond of long-term investing, and I’d still consider it as one of the best shares to buy now.
On the move
Another easy-to-understand business that shows remarkably similar characteristics is Rightmove (LSE:RMV). It operates as a property portal and marketplace. Simply put, it makes money from charging its customers for using its platform. Its customers comprise estate agents, letting agents, and developers advertising properties for sale or rent.
Rightmove has a strong brand and is one of the main places people turn to when looking for a property to buy or rent. I reckon this gives it a durable competitive advantage that allows it to offer a significantly high return on capital of almost 100%. I also like its capital-light model, near 66% profit margin, and strong balance sheet.
Almost all of its business is from the UK though. Any downturn in the UK property market could affect its earnings, particularly if it leads to a reduction in the number of agency branches or new home sales. In addition, failing to innovate could lead to new competitive threats as it operates in a fast-moving online marketplace.
But overall, when looking for the best shares to buy now, both Hargreaves and Rightmove tick many boxes. I could happily own both as long-term investments in my Stocks and Shares ISA.
