In this piece, we will take a look at the 11 best stocks to buy for good returns. If you want to skip our overview of investing and some recent financial news, then take a look at 5 Best Stocks to But for Good Returns.
Investing in the stock market comes in flavors. For those chasing short term profit, different derivative instruments allow investors to bet on short term share price movements and minimize their potential losses. For the folks looking to slowly grow their assets over time, the best approach is long term investing. This involves carefully sifting out stocks based on strong fundamentals, buying them, and then waiting for years for the price to slowly appreciate.
One of the strongest adherents of long term investing is Warren Buffett of Berkshire Hathaway. Mr. Buffett has the biggest investment portfolio in the world, with Insider Monkey's research showing that as of Q3 2023 end, he held stakes worth $313 billion in a variety of different companies. For several of these, Mr. Buffett has owned the shares for more than a decade, primarily in dividend paying companies that allow him to reinvest the dividends back into the shares for an effort free approach to building wealth.
Another key pillar of Mr. Buffett's investment strategy is to generate double digit percentage returns that range between 20% and 30%. Insider Monkey has researched every decade of his financial journey from the mid 1900s to discover interesting facts. Mr. Buffett started his financial career in 1956, with a mere $105,100 in capital (worth roughly $1.1 million today). Back then, his business model was simple: Invest with Warren Buffett and you get to keep all of your returns below 6% and 75% of the returns in excess of that. His firm's foundational year would actually lag the S&P 500 in terms of percentage returns, and Mr. Buffett's first big hurrah would come next year when even though the index was down by 10.8%, Berkshire posted 10.4% returns and marked the first true achievement for an investor that would end up defining market dynamics later in his career.
The now well known Oracle of Omaha would then start a decade of outperforming the S&P 500 and end up defining his investment career. Over the next ten years, i.e. between 1957 and 1966, Berkshire would return 23.5% annually after Mr. Buffett's 5.5% annual fee cut. This smashed the S&P 500 out of the park, as the flagship index's average annual compounded rate was 9.2% during the same time period. To put things into perspective, $10,000 entrusted to Warren Buffett in 1957 would have been worth a cool $64,100 after fees.
These days, Warren Buffett has kept up with the times. His investment portfolio is one of the most interesting ones that we've analyzed among dozens of other big ticket finance and investment players. While most hedge funds would balk at putting most of their money into a single stock since this goes against the investment principle of portfolio diversification, Warren Buffet, naturally, does not think like anyone else. Out of the $313 billion that he has exclusively plowed into publicly traded stocks, $156 billion is in the stock of Apple Inc. (NASDAQ:AAPL). An additional $90 billion is in the shares of Bank of America Corporation (NYSE:BAC), American Express Company (NYSE:AXP), The Coca-Cola Company (NYSE:KO), and Chevron Corporation (NYSE:CVX). Warren Buffett picks his stocks carefully, and once he does, he holds on to them for dear life with few adjustments down the road.
Consider Warren Buffett’s 12 Longest Held Stocks. Three of his longest held stocks are Coca-Cola, American Express, and Moody’s Corporation (NYSE:MCO). While Mr. Buffett has tinkered with some of these companies before piling into them and waiting, his first major investments in the trio came in 1998, 1991, and 2000. Fast forwarding to today, this means that you would have to buy some new hot and upcoming companies and then wait until at least 2044 to have held them as long as Warren Buffett has.
Interestingly, American Express was also a key reason that Buffett was able to outperform the S&P 500 in the time periods we've shared above. He explained his journey in a 1968 shareholder letter where he outlined:
Last year I referred to one investment which substantially outperformed the general market in 1964, 1965 and 1966 and because of its size (the largest proportion we have ever had in anything – we hit our 40% limit) had a very material impact on our overall results and, even more so, this category. This excellent performance continued throughout 1967 and a large portion of total gain was again accounted for by this single security. Our holdings of this security have been very substantially reduced and we have nothing in this group remotely approaching the size or potential which formerly existed in this investment.
So, today we'll look at some good stocks to buy for solid returns and the top three picks are Bank of America Corporation (NYSE:BAC), Apple Inc. (NASDAQ:AAPL), and American Express Company (NYSE:AXP).
Best Stocks to Buy for Good Returns
Our Methodology
To make our list of the best stocks to buy for a good return, we decided to learn from the best and used Berkshire's Q3 2023 investment portfolio and selected the 11 biggest investments of the fund.
VeriSign, Inc. (NASDAQ:VRSN) is an internet services company that provides users with the ability to set up their websites and manage their security. A continuing and growing shift to the Internet by businesses has helped the firm financially since it has beaten analyst EPS estimates in all four of its latest quarters.
As of Q3 2023 end, 35 out of the 910 hedge funds profiled by Insider Monkey had bought and owned VeriSign, Inc. (NASDAQ:VRSN)'s shares. Warren Buffett's Berkshire Hathaway was the biggest investor among these owning 12.8 million shares that are worth $2.5 billion.
VeriSign, Inc. (NASDAQ:VRSN) joins BApple Inc. (NASDAQ:AAPL), ank of America Corporation (NYSE:BAC), and American Express Company (NYSE:AXP) in our list of the best stocks to buy for good returns.
HP Inc. (NYSE:HPQ) is a well known personal computing company headquartered in Palo Alto, California. A slowing consumer environment, most recently exhibited by lackluster Black Friday turnouts, also affected its third quarter earnings as its revenue missed analyst estimates.
During this year's September quarter, 44 out of the 910 hedge funds part of Insider Monkey's database had held a stake in the company. HP Inc. (NYSE:HPQ)'s largest hedge fund shareholder is Warren Buffett's Berkshire Hathaway due to its $2.6 billion stake.
DaVita Inc. (NYSE:DVA) is a specialized hospice company that serves the needs of kidney patients. It is one of the weaker rated stocks on our list since the average share rating is Hold and the average share price target is $104.33.
By the end of this year's third quarter, 32 out of the 910 hedge funds profiled by Insider Monkey were DaVita Inc. (NYSE:DVA)'s investors. Warren Buffett's Berkshire Hathaway owned the biggest stake among these, which was worth $3.4 billion.
Moody's Corporation (NYSE:MCO) is one of the most well known financial ratings firms in the world. The firm was busy expanding its services portfolio in November as it added a private credit analysis business division.
Insider Monkey scoured through 910 hedge funds for their September quarter of 2023 investments and found that 58 had invested in the company. Moody's Corporation (NYSE:MCO)'s largest shareholder among these was Warren Buffett's Berkshire Hathaway through its $7.7 billion stake.
The Kraft Heinz Company (NASDAQ:KHC) is a well known food and beverages company headquartered in Pittsburgh, Pennsylvania. Its shares are rated Buy on average and analysts have set an average share price target of $37.30.
As of September 2023 end, 40 out of the 910 hedge funds part of Insider Monkey's database had held a stake in The Kraft Heinz Company (NASDAQ:KHC). Out of these, the biggest shareholder was Warren Buffett's Berkshire Hathaway as it owned $10.9 billion worth of shares.
Occidental Petroleum Corporation (NYSE:OXY) is an American global oil and gas production firm with an operational presence all over the world. The firm is facing a bit of trouble in its offshore oil production region in the Gulf of Mexico, as an oil spill has made it shut down operations.
75 out of the 910 hedge funds surveyed by Insider Monkey for their Q3 2023 investments had owned the firm's shares. Occidental Petroleum Corporation (NYSE:OXY)'s largest investor among these is none other than Warren Buffett's Berkshire Hathaway since it holds 224 million shares that are worth $14.5 billion.
Bank of America Corporation (NYSE:BAC), Occidental Petroleum Corporation (NYSE:OXY), Apple Inc. (NASDAQ:AAPL), and American Express Company (NYSE:AXP) are some great stocks to buy for good returns.