If there's a lesson Wall Street is always willing to teach, it's the value of patience. For example, there have been 38 double-digit percentage crashes or corrections in the broad-based S&P 500 since the beginning of 1950. Despite the frequency of these moves lower, every crash or correction has eventually been erased by a bull-market rally.
In other words, buying and holding stakes in great companies over long periods of time has been a moneymaking strategy for investors.
Best of all, investors don't need Warren Buffett's bankroll to build wealth on Wall Street. If you have $400 ready to invest and a long-term mindset, here are some of the smartest stocks you can buy right now.
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Berkshire Hathaway
If investors want a stock with a proven track record, one of the smartest ways to put $400 to work right now is to buy Berkshire Hathaway (BRK.A 0.46%) (BRK.B 0.61%).
Since Warren Buffett took over as CEO of Berkshire Hathaway in 1965, the company's Class A shares (BRK.A) have averaged an annual return of 20%. Taking into account the year-to-date gain for Berkshire Hathaway, we're talking about an aggregate return of more than 3,300,000% and the creation of over $600 billion in value for the company's shareholders. Being patient has paid off big-time for Berkshire Hathaway's investors.
One of the key reasons Buffett is such a great investor -- Berkshire's investment portfolio totals almost $330 billion -- is his laser focus on cyclical businesses. The Oracle of Omaha isn't a market timer and is well aware that recessions are an inevitable part of the economic cycle. However, Buffett also realizes that the U.S. and global economy spend much of their time expanding, whereas recessions usually only last for a few months to a couple of quarters. By purchasing stakes in cyclical businesses and being patient, Buffett is playing a numbers game he's practically assured of winning.
The Oracle of Omaha is also making a boatload of money from dividend stocks. Although Berkshire Hathaway doesn't pay a dividend, Buffett's company will collect north of $5 billion in dividend income this year. Since dividend stocks are almost always profitable and time-tested, they're the perfect place for Buffett and his investment team to put Berkshire Hathaway's money to work.
A final reason to trust your $400 in Berkshire Hathaway is the leadership. Buffett and his investment team stick to their strengths when putting capital to work. For instance, the Oracle of Omaha knows the banking industry inside and out, while his investing lieutenants, Todd Combs and Ted Weschler, have a better read on technology and healthcare stocks.
Even if Berkshire Hathaway can't maintain a 20% annual average return, it's a good bet to match or outpace the broader market moving forward.
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Green Thumb Industries
The U.S. marijuana industry remains one of the smartest places for growth stock investors to put their money to work. If you've got $400 to spare, multi-state operator (MSO) Green Thumb Industries (GTBIF -1.55%) has all the tools necessary to show investors the green.
Before diving into Green Thumb Industries, let's tackle one of the biggest objections to investing in pot stocks right now: the lack of federal cannabis reform. Even though federal legalization would make life easier for U.S. MSOs, it's not a necessity. In total, 36 states have legalized marijuana in some capacity, and the Department of Justice is allowing individual states to regulate their own industries. As long as this remains the status quo, Green Thumb and its well-funded peers are going to be in great shape.
More specific to Green Thumb, there are three factors that help it stand out. First, there's its size. You can count on one hand how many publicly traded MSOs are on pace to open more than 100 cannabis dispensaries -- and you don't even need all of your fingers. When October began, Green Thumb had 65 operating dispensaries and held enough retail licenses in its back pocket to open around four dozen additional locations.
Second, Green Thumb's management team favors limited-license states. In limited-license markets, regulators purposefully limit how many dispensary licenses are issued in total, as well as to a single business. Operating in limited-license markets means the company is being afforded the opportunity to build up its brand(s) and garner a loyal following without the threat of being steamrolled by MSOs with deeper pockets.
Third, and maybe most important, is Green Thumb's product mix. A majority of the company's sales are generated from derivatives, such as vapes, edibles, and oils. Derivative pot products usually sport higher price points and better margins than dried cannabis flower. For Green Thumb, higher-margin derivatives have been its key to reaching recurring profitability.
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Teladoc Health
A third smart stock long-term investors can pile into right now with $400 is telemedicine giant Teladoc Health (TDOC -1.67%).
Arguably the biggest knock against Teladoc is that it's facing some difficult year-over-year comparisons after finding itself in the right place at the right time in 2020. The coronavirus pandemic encouraged physicians to utilize virtual visits for high-risk and potentially infected patients, which more than doubled Teladoc's total platform visits for the year. That visit growth will slow considerably in 2021 as higher vaccination rates allow doctors to see their patients in person once again.
But the skeptics here appear to be overlooking the fact that Teladoc is permanently changing how personalized care is administered in the U.S. While telemedicine will never replace the need for some in-office visits, it does offer a cheaper and effective way to connect patients with doctors or specialists. It can be an especially helpful tool for physicians who need to keep tabs on chronically ill patients. Teladoc's virtual-visit platform should help improve patient outcomes and lower costs for health insurers.
Something else that helps Teladoc stand out is its acquisition of applied health signals company Livongo Health in the fourth quarter of 2020. Livongo uses artificial intelligence to send its subscribers tips that help them lead healthier lives.
Prior to being acquired, Livongo had turned the corner to recurring profitability and was growing its subscriber base by roughly 100% a year. As of the end of June, it had 715,000 chronic care enrollees, many of which were diabetics. With the company looking to further expand its reach to patients with hypertension and weight management issues, this combo of Livongo and Teladoc under one umbrella looks unstoppable.
