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3 Stocks to Buy to Follow Warren Buffett's 2 Rules for Investing

By Keith Speights – Sep 26, 2021 at 6:10AM

Key Points

  • Apple's product ecosystem should make it a winner over the long term.
  • Brookfield Renewable is a leader in an unstoppable growth market.
  • Johnson & Johnson claims an impressive track record that's hard to beat.

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The legendary investor's rules are simple yet difficult to pull off. These stocks should make following them easier.

You could fill a book with Warren Buffett's great investing advice. And some authors have. But the multibillionaire himself has said that there are really only two rules for investing:

  1. Never lose money.
  2. Don't forget rule No. 1.

The second rule isn't too hard, but the first one is a doozy. How can you invest in ways that never lose money? Here are three stocks to buy that give you a good chance at following Buffett's two rules.

Warren Buffett with people in the background.

Image source: The Motley Fool.

1. Apple

Buffett appears to think that investing in Apple (AAPL -0.34%) is a great way to avoid losing money (and make a lot of money) over the long term. The tech giant is by far the single largest holding in Berkshire Hathaway's portfolio

The legendary investor likes Apple so much that he's referred to it as "probably the best business I know in the world." Some might argue otherwise, but Buffett makes a good point.  

Apple's product ecosystem is a remarkable thing to behold. Every year, the company rolls out a new version of its iPhone. Every year, millions of customers flock to buy those new phones. Many of them also use other Apple products and services that are part of its iPhone-centric ecosystem.

Of course, it's possible that Apple stock could be a loser -- especially if it fails to innovate. However, the company has ample cash to invest in research and development. Apple also has plenty of areas to target, including augmented reality and self-driving cars.

2. Brookfield Renewable

Brookfield Renewable (BEP 1.08%) (BEPC 0.80%) isn't a Buffett stock. It does offer a lot that the Oracle of Omaha would probably like, though.

The company ranks as a leader in renewable energy. Brookfield Renewable operates hydroelectric, wind, solar, and storage facilities across the world. Its energy production capacity tops 21 gigawatts.

As you might expect, the future for renewable energy looks really bright. Many of the biggest countries and companies in the world have set ambitious goals to reduce their carbon emissions. This will inevitably drive higher demand for renewable energy.

Brookfield Renewable is well-positioned to profit from this trend. The company's development pipeline could boost its capacity by more than 31 gigawatts, with more than half of that total stemming from solar facilities. Brookfield Renewable stands as one of the best renewable energy stocks to buy and is one that's unlikely to lose your investing dollars over the long run. 

3. Johnson & Johnson

What are the most dependable stocks for long-term investors to buy and hold? Many investors would put Johnson & Johnson (JNJ 0.08%) near the top of the list. And for good reason.

For one thing, Johnson & Johnson claims an enviable track record of success through the years. It's been the largest healthcare company in the world for a long time, an achievement that didn't come by accident. J&J routinely makes Fortune's list of the world's most admired companies and was ranked No. 9 by The Wall Street Journal among the best-managed companies in 2020. 

Many healthcare products and services are must-haves instead of nice-to-haves. Johnson & Johnson is a leader in nearly every market in which it competes. Roughly 70% of the company's total revenue comes from products that are either No. 1 or No. 2 in their respective markets.

Johnson & Johnson isn't perfect. The company has paid for some of its mistakes, including hefty settlements related to opioid drug and talc-related lawsuits. However, if you hold the healthcare stock long enough, your chances of making money instead of losing money are exceptionally good.

Keith Speights owns shares of Apple, Berkshire Hathaway (B shares), Brookfield Renewable Corporation Inc., and Brookfield Renewable Partners L.P. The Motley Fool owns shares of and recommends Apple and Berkshire Hathaway (B shares). The Motley Fool recommends Johnson & Johnson and recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

Stocks Mentioned

Johnson & Johnson Stock Quote
Johnson & Johnson
$178.88 (0.08%) $0.14
Apple Stock Quote
$147.81 (-0.34%) $0.50
Berkshire Hathaway Stock Quote
Berkshire Hathaway
$477,402.98 (0.07%) $317.98
Berkshire Hathaway Stock Quote
Berkshire Hathaway
$316.15 (0.10%) $0.31
Brookfield Renewable Partners Stock Quote
Brookfield Renewable Partners
$29.01 (1.08%) $0.31
Brookfield Renewable Stock Quote
Brookfield Renewable
$32.70 (0.80%) $0.26

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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