In both bull and bear markets, it's never too late to buy stocks. Picking the right stocks to buy, of course, is the biggest challenge. For investors looking to buy stocks today, here are three that look enticing.
Why buy stocks in the first place?
By buying stocks, investors position themselves to watch their money grow, whether it's through share price growth or dividends. Your stock broker will have instructions on how to buy the stock, but the important issue is picking the right stocks. I believe that the three best stocks to buy now are Apple, Costco, and Berkshire Hathaway.
Finally, investors should keep in mind that there is never a "right" time to buy stocks. Since attempting to time when the market will rise or fall has proved to be impossible for anyone to do consistently, the best thing investors can do is maximize their time in the market, giving themselves the greatest opportunity to watch their portfolios' value rise over time.
Ready to buy stocks? Start here
1. Apple (NASDAQ:AAPL): It's no secret that stock valuations are currently a bit exorbitant. Indeed, the average price-to-earnings ratio of stocks in the S&P 500 today is 25, up from about 22 one year ago. This makes conservatively priced stocks that also happen to be excellent businesses rarer than usual. Nevertheless, they're still hanging around -- and Apple is one of them.
With a P/E ratio of just 14, Apple gives investors an opportunity to buy a stock with a leading position in its key markets without paying a premium price. In addition, Apple stock shareholders get a nice dividend yield (annual dividend payments per share as a percentage of the stock price) of 1.9%.
2. Costco (NASDAQ:COST): With Costco stock, investors will have to pay a greater premium for the company's earnings than they'll have to pay for Apple. Costco stock has a P/E ratio of about 30. But there's good reason for Costco's steep valuation: Not only has the company carved out a strong, enduring competitive advantage for itself by gaining a cost advantage through economies of scale and wildly efficient operations, but management has also consistently improved operations. This is particularly evident by Costco's swelling net profit margin, which has increased from 1.7% to 2% between 2012 and 2016 -- a big and important gain for a warehouse bulk retailer.
3. Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B): Last, it would be a shame to overlook the conglomerate built by the world's greatest investor himself, Warren Buffett. Under the Berkshire Hathaway name, Buffett has built up a portfolio of enduring subsidiaries and stock holdings poised to stand the test of time. Under Berkshire's ownership are built-to-last subsidiaries like Geico, Duracell, and Burlington Northern Santa Fe Railway. And some of Berkshire's largest stock holdings include iconic businesses like Coca-Cola, American Express, and Wells Fargo.
Of course, when it comes to buying stocks, there's no guarantee. Historically, however, stocks have proved to be well worth the risk, compounding at approximately 10% annually over the last 100 years when dividends are reinvested. While it's impossible to know whether these three stocks could yield a similar 10% average annualized return in the coming years, buying these stocks will likely give investors a good chance of seeing an outcome like this.
Daniel Sparks owns shares of Apple. The Motley Fool owns shares of and recommends Apple, Berkshire Hathaway (B shares), and Costco Wholesale. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool recommends American Express and Coca-Cola. The Motley Fool has a disclosure policy.