Warren Buffett has inspired investors for decades, during both bull markets and bear markets. Why? He's led Berkshire Hathaway to a compounded annual gain of 20% over 56 years. That's compared to 10.5% for the S&P 500 Index.
Buffett shows us you don't have to win every year to score a long-term victory. And that's comforting after a tough year like 2022.
That's also why it's a great idea to start 2023 by investing in a couple of Buffett stocks. My favorites are a company with leadership in two high-growth markets and a healthcare player that can offer your portfolio some safety. Let's check them out.
1. Amazon
Amazon (AMZN -1.14%) didn't give investors much to cheer about last year. The e-commerce powerhouse struggled with inflation -- and so did its customers. That hurt earnings. Amazon reported quarter after quarter of declines in operating income and operating cash flow.
But here's why you still should buy the stock. First, these troubles are temporary. Times of rising inflation and economic difficulties don't last forever.
Meanwhile, Amazon has the strength to make it through the tough times. Importantly, revenue still is on the rise, and Amazon Web Services (AWS) -- the cloud computing unit -- continues to report double-digit growth in sales and operating income.
At the same time, the company is making moves that should help it pick up speed once the situation improves. For example, it's improving its cost structure and favoring investment in its high-growth area of cloud computing.
Now let's look to the future. Amazon is a leader in e-commerce and cloud computing, and these markets are growing in the double-digits. Amazon is set to benefit from this over the long term.
Today, Amazon shares are trading for 1.7 times sales, which is their lowest since 2015. This is a great opportunity to pick up a stock that could deliver major gains over time.
2. McKesson
McKesson (MCK -1.35%) actually outperformed the general market last year, but it's not too late to buy this solid, long-term stock. Even after climbing 50% last year, the healthcare company only trades at 15 times forward earnings estimates.
There are plenty of reasons to like McKesson -- and I believe the stock has room to run. First, the company offers the safety of healthcare without the big risk of a potential product failing during development. That's because it doesn't develop products -- it distributes them and offers services to pharma and biotech players.
McKesson also recently made some moves to favor growth. The company exited its European businesses and is ramping up its presence in the growth areas of oncology and biopharma services. For example, McKesson joined forces with HCA Healthcare to broaden access for patients and doctors to oncology clinical trials.
The company has grown annual revenue steadily over the past two decades. The new focus should help that to continue.
Finally, you can count on McKesson for passive income, too. In the first six months of the current fiscal year, it returned $139 million to shareholders in the form of dividend payments.
McKesson may not soar immediately from today's level, but the stock still is a bargain right now considering its growth prospects, safety profile, and potential to offer passive income. All of these elements make it likely McKesson will continue to gain over time. And that's great news for long-term investors -- including Warren Buffett and you.
