Why do so many people follow Warren Buffett? Because the billionaire investor has such an excellent track record. Berkshire Hathaway, with Buffett at the helm, has posted more than a 20% compound annual gain over the past 56 years. That's compared to a 10.5% compound annual increase by the S&P 500 Index during the same period.
Buffett prides himself on buying excellent companies -- and holding. His stock picks don't beat the market every day. But over the long term, Buffett has come out a clear winner. Here's the good news: You don't have to be a billionaire to follow in Buffett's footsteps. In fact, with only $300, you can get in on some of his favorite stocks. Let's check out three that each trade for less than $300 a share.
Buffett bought shares of Amazon (AMZN -1.14%) back in 2019. The stock has gained nearly 70% since then. So it's been a winner for Buffett over just a few years. But there's reason for Buffett to follow his usual strategy and hold on for the long term -- and for other investors to do the same.
Amazon is a leader in two high-growth businesses: e-commerce and cloud computing. Of course, rising inflation and economic worries have weighed on the e-commerce business these days. But Amazon is managing the costs it can control and maximizing the use of its vast fulfillment network.
It's important to remember that today's economic situation is temporary. And when recovery happens, Amazon's e-commerce operation is set to soar. Even better, the cloud computing business continues to boom during today's tough times. In the most recent quarter, Amazon Web Services (AWS) reported a 36% increase in operating income. AWS is typically the main profit driver for Amazon.
Amazon shares are trading around their lowest in five years in relation to sales. Considering e-commerce and cloud computing growth potential, today's price looks like a steal.
2. Johnson & Johnson
Johnson & Johnson (JNJ 0.21%) is a longtime holding for Buffett. One element the investor surely appreciates is J&J's dividend policy. The company is a Dividend King. That means it's raised its dividend for more than 50 straight years. J&J pays out $4.52 annually at a yield of 2.78%. That's a higher dividend yield than the industry average of about 1.98%, according to Dividend.com figures.
Beyond dividends, J&J offers revenue and profit strength. The company's pharmaceutical business brought in more than $13 billion in revenue in the second quarter. And last year, net income soared past $20 billion. J&J has multiple blockbuster drugs across treatment areas, including immunology, neuroscience, and oncology. And the company's 99 candidates in the pipeline may represent revenue down the road.
One major element holding J&J's growth back has been its consumer health business. But J&J plans to spin off that business into a separate entity next year. That leaves room for the stronger businesses of pharmaceuticals and medtech to set the pace for J&J in the years to come.
This transformation means J&J may be at the start of a new growth story. And that makes right now a great time to invest.
Buffett started buying Coca-Cola (KO 0.49%) shares in the late 1980s and never looked back. The world's biggest non-alcoholic beverage company is among one of his top holdings. There's a lot to like about Coca-Cola beyond just the taste of its drinks. Like J&J, Coca-Cola is a Dividend King. With that track record, it's reasonable to be optimistic about future dividends.
Coca-Cola has a vast presence worldwide. Its products are sold in more than 200 countries. And it boasts about 200 brands. And speaking of brands, brand strength helps the company keep on winning. That and other elements such as product innovation -- for instance, developing zero sugar or low-sugar drinks. And key financial metrics return on invested capital and free cash flow have been on the rise over recent years.
Right now, Coca-Cola's five-year average organic revenue growth rate is at the high end of its 4% to 6% long-term growth target. And in the second quarter, the company reported 8% growth in global case unit volume and double-digit growth in net revenue. That's in spite of headwinds that include supply chain issues and higher transport costs.
Coca-Cola's valuation hasn't fluctuated tremendously. It's generally traded between 25 and 30 times trailing-12-month earnings over the past couple of years. So it's still a bargain considering its long-term success and dominance in its market.