3 Sensational Warren Buffett Stocks That Are Sure-To-Buys in September

Few investors are more respected on Wall Street than the aptly named “Oracle of Omaha.” Since Warren Buffett became CEO Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) In the mid-1960s, he oversaw a total return on his company’s Class A shares (BRK.A) of more than 5.7 million percent and led Berkshire to become only the ninth public company to reach a market capitalization of $1 trillion.

When you outperform Wall Street’s major indexes by as much as Buffett has over nearly six decades, you’ve earned yourself a sizable audience. Investors regularly wait on the edge of their seats to find out which stocks he and his investment team have been buying and selling.

Berkshire Hathaway CEO Warren Buffett. Photo credit: The Motley Fool.

Right now, Buffett and his top aides oversee a portfolio of 45 stocks worth $318 billion. But the outlook for those holdings differs significantly.

As we approach September, three Warren Buffett sensational stocks stand out for a number of reasons and are sure-fire buys.

Amazon

The first standout Buffett stock that long-term investors can confidently add to their portfolios in September is the e-commerce leader Amazon (NASDAQ: AMZN).

The biggest downside you’ll find with Amazon is its cyclical nature. Most people know the company for its world-leading e-commerce segment. If the U.S. or global economy falters and online retail growth slows or reverses, there’s a belief that Amazon will struggle.

But Amazon is much more than just e-commerce. While online retailing generates a lot of revenue, the razor-thin margins associated with e-commerce account for little of its operating cash flow and net income. Instead, Amazon’s cash flow base can be traced to three high-growth ancillary operating segments.

Amazon’s key component is its cloud infrastructure services platform, Amazon Web Services (AWS). AWS accounted for a third of global spending on cloud infrastructure services in the quarter ended in June, according to estimates from technology analytics firm Canalys. Companies are expected to shift a larger share of their spending to cloud services for the rest of the decade, which should only fuel double-digit growth potential for AWS.

The second fast-growing business segment that has been a cash cow for Amazon is advertising services. The ability to attract more than 3 billion visitors to its website each month is an insatiable lure for companies looking to get their messages across to consumers. Whether it’s Amazon’s growing content library or its online marketplace, it has no problem commanding top-tier advertising pricing power.

The third piece of the puzzle is subscription services like Prime. In April 2021, former Amazon CEO and founder Jeff Bezos said Prime had surpassed 200 million global subscribers. The company entered into an 11-year streaming deal with the National Basketball Association (NBA) and became the exclusive streaming partner for Thursday Night FootballPrime also has unique pricing power.

Amazon stock is available now for less than 12 times its projected 2025 cash flows, which is a 47% discount to the average forward cash flow multiple over the past five years.

Image source: Getty Images.

MasterCard

Warren Buffett’s second phenomenal stock that is a sure-fire hit in September is a global payment processing giant MasterCard (NYSE:MA).

As with Amazon, cyclicality is typically the biggest concern for current and prospective Mastercard shareholders. When the U.S. and/or global economy is weakening, it’s only natural for consumers and businesses to curtail their discretionary spending.

The good news for Mastercard is that the long-term numbers game is on its side. Of the 12 U.S. recessions since the end of World War II, only three have reached the 12-month mark, and none have exceeded 18 months. On the other hand, most economic expansions have lasted multiple years, and two have lasted at least 10 years. The long-term growth of the U.S. economy has led to fairly steady growth in spending activity.

Another reason Mastercard’s management team has been able to successfully navigate the company through periods of uncertainty is that it avoids lending and focuses solely on facilitating payments. While Mastercard’s brand is well-known and would likely have no problem becoming a respected lender, its avoidance of lending means the company doesn’t have to set aside capital to cover loan losses and delinquencies during economic downturns. This helps it bounce back from recessions faster than most financial stocks.

Mastercard is also still in the early stages of building out its infrastructure in faster-growing but chronically underfunded emerging markets. Net of currency changes, cross-border payment volumes rose 17% year-over-year in the quarter ended in June and have been growing by double-digit percentages with consistent growth as far as the eye can see. Whether this expansion is organic or acquisitive, Mastercard has a multi-decade opportunity to penetrate these underfunded markets in Southeast Asia, Africa and the Middle East.

Mastercard stock is available for 29 times next year’s earnings. While that may sound expensive, it’s actually a 14% discount to its average price-to-earnings (P/E) ratio over the past five years and represents a reasonable opportunity, as the company expects to grow earnings per share by a compound annual rate of 17% through 2028.

Sirius XM Holdings

Warren Buffett’s third sensational stock to buy in September is the only known stock split in 2024 that is set to do a reverse stock split. I’m talking about a satellite radio operator Sirius XM Holdings (NASDAQ: SIRI).

A key headwind to monitor for Sirius XM is the health of the auto market. Sirius XM’s satellite radio service is included with most new-vehicle sales. The company is counting on a percentage of those promotional three-month trials to convert into self-pay subscribers. If auto sales slow, the number of self-pay subscribers could slow — and we’ve certainly seen some evidence of a slowdown in the first six months of 2024.

While Sirius XM’s high-growth glory days may be long gone, it still has several enduring competitive advantages it can build on that should make patient shareholders richer over time.

First, it is a legally licensed monopoly. While it still competes for listeners with terrestrial and online radio providers, being the only satellite radio company should give Sirius XM a strong pricing position in subscriptions.

There’s also a huge gap in revenue generation between Sirius XM and traditional radio providers. While terrestrial and online radio companies rely heavily on advertising to stay afloat, Sirius XM generates less than 20% of its net sales from advertising. Its primary revenue driver is subscriptions — about 77% of net sales in the first six months of 2024.

Relying on advertising revenue isn’t a bad thing most of the time. But when a recession hits, it tends to crush terrestrial and online radio operators. Because Sirius XM generates most of its net sales from subscriptions, its cash flow from operations has far fewer ups and downs than traditional radio companies.

The second major catalyst for Sirius XM is its upcoming merger with Liberty Media’s Sirius XM tracking stock, Liberty Sirius XM Group. This combination will create a single class of Sirius XM shares, and Sirius XM will perform a 1-for-10 reverse split upon completion. The higher nominal share price should put Sirius XM on the radar of more institutional investors.

Finally, Sirius XM’s P/E ratio of just over 10 is very close to a 30-year low. Coupled with a solid 3.2% yield, Sirius XM is a clear buy.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Sean Williams holds positions in Amazon, Mastercard, and Sirius XM. The Motley Fool holds positions in and recommends Amazon, Berkshire Hathaway, and Mastercard. The Motley Fool recommends the following options: long January 2025 $370 call options on Mastercard and short January 2025 $380 call options on Mastercard. The Motley Fool has a disclosure policy.