Billionaire Warren Buffet, also known as the Oracle of Omaha, has released several low-risk stock picks for folks who are newer to investing or are those who might not have a whole lot of money to play around with. If you’re a person who has a spare $300 and you’re looking to commit to some stocks now, you want to ensure you get your portfolio off to a good start, and these picks from Buffet are a good way to do that.
Investing is one of the best ways to gain financial independence and ensure that you have money saved away for a rainy day. Or for when the times that you are ready to exit the workforce and need to ensure you have money to take care of yourself and your family for the rest of your lives.
According to an article published by The Motley Fool:
Shares of The Coca-Cola Company(KO -0.60%) will never be considered “high growth.” The beverage business just doesn’t work that way. Even when the cola giant is doing well, its revenue growth barely outpaces inflation as the drinks market is pretty well saturated.
What Coca-Cola lacks in growth potential, however, it more than makes up for in consistency and reliability. Much of that consistency can be attributed do the company’s product lineup. Coca-Cola isn’t just its namesake cola. This is also the parent to Gold Peak tea, Costa coffee, Minute Maid juice, Dasani water, Powerade sports drinks, and a bunch of other colas. It’s always got something to sell to someone, and people will always want something to drink.
The Coca-Cola Company’s reliability isn’t just rooted in its diverse range of products, though. It’s fiscally consistent too, largely because of the way its business model works. Contrary to what you might expect, Coca-Cola isn’t doing much of its own bottling these days. It’s punted that work to localized bottlers and distributors so it can focus on what it does best. And that’s marketing and branding.
The beverage company’s part in the bottling process is providing bottling professionals with concentrated flavor syrups, which, according to the Motley Fool, is a far easier product to manage that also shifts the riskier part of the business to the bottling companies.
Coca-Cola’s part of the business is very stable, which is what has made it possible for them to raise dividend payouts every single year for the last 62 years. That’s a long, long time. That dividend is likely the reason why Buffet’s Berkshire Investments is so willing to sit on the stakes it has in the company since the later part of 2006.
The next recommended investment from the Oracle of Omaha is Bank of America. Now, a lot of folks get real worried when you start talking about owning bank stock in an economic environment like ours today. And there’s good reason for that. Demand for most services offered by banks is beginning to slow down, while lots of people are defaulting or are delinquent on payments, a phenomenon that is increasing daily.
However, if you take a big step back and take in the whole picture, you’ll come to a different conclusion, one that might assuage your concerns about owning stock in a major bank. What’s happening to banks right now has happened in the past and many survived it. Remember the subprime mortgage meltdown in 2008? Or go back a few years before that to the dot-com crisis of 2000.
And that’s the key. This is a cyclical headwind. The downside of the cycle will eventually run its course, if it hasn’t already — something Buffett knows.
Enter Bank of America(BAC -1.00%). It’s the nation’s second-biggest bank as measured by assets, and arguably the country’s best-known as measured by name-recognition. This size and strength leave it well-positioned to bounce back whenever the headwinds finally stop blowing.
In the meantime, BofA is holding up better than you might expect. Although its fourth fiscal quarter’s total charge-offs on soured loans reached just under $1.2 billion, that’s still only a manageable 0.45% of its total loan portfolio (versus 0.26% a year earlier). The same quarter’s adjusted return on its tangible common equity — or ROTCE — came in at a healthy 11.7% too, indicating the bank is effectively using and managing its balance sheet.
Things could be better, to be clear. But with shares still down 25% from their early-2022 peak, the worst-case scenario is already arguably priced in, and then some. Newcomers will be getting in while the trailing price-to-earnings ratio is a mere 12, and while the dividend yield is a respectable 2.6%.
Bank of America is also Berkshire’s second-biggest position. At the moment, it’s holding more than a million shares of the bank. Which means this particular trade is worth a very nice $38 billion. That’s a sizable chunk of change, right?
The third stock is Chevron, a giant in the oil industry. And oil is most definitely a lucrative field to be involved with, no matter what the capacity. Despite the fact we live in a time when there is a growing prioritization to move away from fossil fuels and to get closer toward clean, renewable energy sources, you’d think this wouldn’t be a great investment idea.
However, this move toward environmentally friendly energy isn’t really all that close to becoming a reality, though you might be fooled by surface-level appearances. A report from the U.S. Energy Information Administration has stated that about one-third of the country’s energy needs are still being met by petroleum without anything else. Natural gas, which is another business that Chevron is involved with, takes care of another third of the nation’s energy needs.
Renewable energy sources currently provide less than 15 percent of the consumed power in the United States. This breakdown is pretty applicable to the rest of the world too.
It’s a problem simply because the total global demand for power is growing almost as quickly as renewable energy production facilities can be built. Standard & Poor’s predicts that even as far down the road as 2050, petroleum will remain the world’s single biggest source of energy. Renewables will be a close second, but natural gas should still be in a respectable third place at that point in time.
Connect the dots. It will be decades before the world can wean itself off of the use of oil and gas. There’s lots of money to be made by Chevron between now and then, and even after then. This bullish backdrop won’t stave off the volatility that’s inherent with energy stocks, which are closely tethered to oil prices.
So buckle up if you’re diving in. Between the company’s long-term prospects and the stock’s dividend yield of over 4%, however, this volatility will be worth it. Warren Buffett thinks so anyway. As of the latest look, Berkshire’s sitting on nearly $20 billion worth of Chevron stock.
There you have it, folks. Three investment tips from one of the greatest to ever be in the market. Hard to go wrong with that kind of advice.