2 Smart Investments to Follow Warren Buffett’s Lead

Key Points

• Despite market turmoil, Berkshire Hathaway is outperforming, up nearly 12% year-to-date (YTD) compared to the S&P 500’s 12% decline.
• The Vanguard S&P 500 ETF (VOO) offers a low-cost, broad-market approach Buffett recommends for most investors.
• Buffett’s recent investment in Domino’s highlights his focus on strong brands with steady dividends and growth potential.

Warren Buffett, widely regarded as one of the greatest investors of all time, has led Berkshire Hathaway NYSE: BRK.B for nearly 60 years. Since taking the reins in 1965, he’s delivered a compounded annual return of almost 20%, vastly outperforming the broader market.

Even as the U.S. market sinks under the weight of recession fears and global trade tensions, Berkshire has once again proven resilient. The stock is up nearly 12% year-to-date and is just 6% off its 52-week high. Compare that to the S&P 500, which is down 12% on the year and sits 16% below its high, and it’s clear why Buffett’s strategy still resonates with investors.

Now, more than ever, is a good time to take a cue from the Oracle of Omaha. Buffett has long encouraged everyday investors to take the simple, passive route: own a low-cost S&P 500 ETF, stay the course, and let compounding do the heavy lifting. Rather than trying to beat the market, his philosophy is rooted in time-tested patience; time in the market is more important than trying to time the market.

With that in mind, here are two Buffett-backed ways to invest like him today: one broad-based ETF and one individual stock that has recently earned a spot in the Berkshire portfolio.

A Reliable S&P 500 ETF for the Long Term

Buffett has long been a vocal supporter of low-cost index funds as the best long-term investment for most people. While Berkshire Hathaway disclosed earlier this year that it had exited its position in the Vanguard S&P 500 ETF NYSEARCA: VOO, Buffett’s reasoning for recommending such funds still holds strong.

VOO tracks the S&P 500 Index, offering exposure to 500 of the largest U.S. companies. It boasts a low expense ratio of just 0.03% and a 1.48% dividend yield, making it an efficient and cost-effective way to gain broad market exposure.

Earlier in the year, valuations appeared stretched, particularly among the top-weighted names in the ETF, many of which originated from the Magnificent Seven. But the recent market correction has changed that. The forward P/E ratio of the S&P 500 has now fallen closer to 18, below its five-year average, presenting a more attractive entry point for long-term investors.

VOO is currently 16% off its 52-week high and trading well below its 200-day moving average. While short-term weakness remains a risk, Buffett’s approach is all about the long game. For those willing to hold through the ups and downs, this ETF remains one of the best vehicles for compounding wealth over time.

Domino’s Pizza: A Dividend Stock With Buffett’s Backing

In the third quarter of 2024, Berkshire Hathaway quietly initiated a position in Domino’s Pizza NASDAQ: DPZ, acquiring 1.28 million shares valued at roughly $550 million at the time. While it may seem like an unusual pick, the move is classic Buffett: a steady business, a strong brand, and shareholder-friendly policies.

Domino’s is a dominant force in the quick-service restaurant industry, with an expanding international footprint and a business model that emphasizes efficiency and scale. It also appeals to dividend investors, offering a $6.96 annual payout and a 1.49% yield.

The company has raised its dividend for 12 consecutive years, with an average yearly increase of over 5%.

Despite a slight earnings miss in February, Domino’s continues to outperform the broader market and its sector. The stock is up nearly 12% year-to-date and remains technically strong, trading above its key moving averages.

Analyst sentiment remains positive, with a Moderate Buy rating from 26 analysts and a consensus price target that suggests approximately 6% potential upside.