It's easy to understand why Warren Buffett stocks are popular with investors. First of all, Buffett has scored top performance over time with his holdings. That means it makes sense to follow the billionaire investor's lead and try his stock picks. Second, Buffett stocks are known for offering a quality business at a good price -- and potential for gains over the long term.
Today, buying Buffett stocks could bolster your portfolio whether the market continues to struggle or shifts into bull territory. Here's why: Some Buffett stocks are dirt cheap after getting crushed last year. But they have what it takes to recover as the market improves. They'll offer you growth potential. Other Buffett stocks beat the bear market. They'll offer your portfolio security.
Ready to give them a try? Here are five to buy hand over fist right now.
1. Amazon
Amazon (AMZN -1.59%) is a leader in two high-growth businesses: e-commerce and cloud computing. Over the past year, e-commerce has weighed on Amazon though. Higher inflation increased costs and left shoppers with less buying power. That resulted in disappointing earnings at Amazon.
But there are two bits of good news here: Economic downturns don't last forever. And Amazon has the strength to make it through these tough times -- and go on to thrive.
The company right now is cutting costs where needed and has increased investment in key growth areas. For example, it boosted spending on technology infrastructure by $10 billion last year.
And here's more good news. Amazon Web Services (AWS) -- the cloud computing business -- still is growing sales and operating income in the double digits. This is key because AWS generally makes up most of Amazon's total operating income.
The stock today is trading at its lowest valuation in relation to sales since 2015. That looks cheap considering Amazon's earnings track record and future prospects.
AMZN PS Ratio data by YCharts
2. Coca-Cola
Coca-Cola (KO 1.35%) climbed 7.4% last year, beating the bear market. But the stock still remains a deal. It trades around its usual valuation -- at about 24 times forward earnings estimates.
What do you get for this price? A company with enormous brand strength, earnings that continue to increase even through tough times, growth potential, and a track record of dividend growth.
The world's biggest nonalcoholic beverage company reported increases in case volume, net revenue, and operating income in the third quarter. And it lifted its full-year guidance.
In spite of Coca-Cola's presence in more than 200 countries, there still is opportunity for the beverage giant to grow. Commercial beverages represent about 30% of drinks in developing countries -- and Coca-Cola's share of that is about 7%. This represents a key growth opportunity for Coca-Cola over time.
As for dividends, Coca-Cola is a Dividend King. That means it's lifted its dividend for at least the past 50 years. The company's rising free cash flow over time indicates that this can continue -- and offer you passive income you can count on.
3. Johnson & Johnson
Johnson & Johnson (JNJ -0.64%) is another Dividend King. It's also another player that beat the market last year. And, like Coca-Cola, in spite of the gains, J&J's valuation still remains reasonable. The stock is trading for only 16 times forward earnings estimates.
So, we've got two things Buffett likes here: dividend growth and a stock price that isn't expensive. And here's another plus: As a healthcare company, J&J's revenue should hold up nicely no matter what the economic situation. That's because people can't put off taking their medication and undergoing certain surgical procedures. This makes J&J a great investment to hold on to when times are tough.
Today, J&J offers us a bonus too. The company is spinning off its lowest-growth business -- consumer health -- to focus on its highest-growth businesses. Those are pharmaceuticals and medtech. Their revenue each gained more than 8% in the recent quarter. This move should result in earnings growth for J&J -- and that could lead the shares higher over time.
4. Procter & Gamble
Procter & Gamble (PG 0.39%) is another great stock to add safety to your portfolio. It's a Dividend King so it's likely to not only bring you passive income annually -- but growth in that income from year to year. In fact, P&G has returned $65 billion to shareholders over the past four years in the form of dividends and share buybacks.
The company also represents a steady player when it comes to earnings because it sells market-leading products many of us use on a daily basis -- such as Tide laundry detergent and Gillette razors.
This brand strength, along with a focus on innovation, helped P&G continue to steadily grow through a changing market -- from pre-coronavirus days to today. From fiscal 2018 through 2022, the company reported an average 6% increase in organic sales -- and on a currency-neutral basis, earnings per share rose 12%.
Today, the stock trades for 26 times trailing-12-month earnings. That's in line with its valuation over time. And that looks like a reasonable price for a company that offers recurrent passive income -- and steady growth.
5. McKesson
McKesson (MCK 0.95%) crushed the market last year. The stock climbed 50%. But it's not too late to get in on this healthcare player. The company has been streamlining its operations to deliver more growth over time. For example, it's divesting its European businesses and increasing its focus in the growth areas of oncology and biopharma services.
McKesson offers even more safety than your usual healthcare player. Here's why. The company distributes medical products and sells services to biotech and pharmaceutical companies. It doesn't develop drugs or devices -- so it doesn't carry the risk of one of these potential products failing during clinical testing.
Yet, the company still offers the security of earnings stability even during tough times. As mentioned, people need their medical treatments no matter what the economy is doing.
McKesson has steadily increased annual revenue over time. And the company recently raised its full-year earnings guidance.
In spite of gains, the stock trades for only 15 times forward earnings estimates. That's a price Buffett -- and you -- probably will love for a company that has what it takes to offer growth and security over time.
