Lots of investors can boast of a great year, and there are some who have done well in consecutive years. But if you look at long-term track records, you'll be hard-pressed to find anyone who has outperformed Warren Buffett.
Buffett took control of Berkshire Hathaway (BRK.A -0.23%) (BRK.B -0.28%) way back in 1965 and since then the holding company's share price has increased at a rate of 19.6% annually. Investors who held on the whole time have seen a return of more than 3,160,000% at the stock's recent closing price.
Berkshire Hathaway's equity portfolio is a good place to look for new stock ideas. Before running out and recreating Buffett's actions, though, you should know that even he doesn't recommend blindly following every investment he makes. Here are three that stand out from the pack as excellent stocks to buy now.
Amazon
The first Buffett stock to consider buying now is one that lost a lot of ground in 2022. Amazon (AMZN 0.75%) shares climbed 24% in January but the stock is still about 47% below the high-water mark it set in 2021.
You're most likely familiar with the e-commerce operation that generates most of Amazon's revenue. What you probably don't realize is that the company's cloud computing business, Amazon Web Services (AWS), generates the vast majority of the company's profits.
Sales from the AWS segment rose 29% in 2022 to $80.1 billion, which led to a $22.8 billion operating profit. The overall cloud computing market was estimated at $369 billion in 2021. It's expected to rise at an annual rate of 15.7%, according to Grand View Research.
With a red-hot cloud computing segment and a leading e-commerce operation, this is a great stock to buy now and hold for the long run.
Ally Financial
Shares of Ally Financial (ALLY -0.36%) were hammered in 2022 as investors worried an economic slowdown would devastate its loan portfolio. This all-digital bank was General Motors' financial segment and it didn't reach the stock market as a separate company until 2014.
Given Ally's close association with America's auto industry, investors were worried its automotive-heavy loan portfolio would collapse in the face of worsening macroeconomic conditions. The stock recently surged after reporting fourth-quarter earnings because its automotive portfolio is holding up much better than analysts had expected.
Ally originated $9.2 billion worth of auto loans in the fourth quarter of 2022. That's $1.7 billion less than it originated a year earlier. Fortunately, the average yield of 9.57% received on new auto loans is 2.6% higher than yields received on loans originated during the previous year's period.
Unlike Amazon, Ally pays a quarterly dividend that has risen 131% over the past five years. Much wider margins between interest paid on deposits and interest received from its loan portfolio should allow for more big payout bumps over the next several years.
Johnson & Johnson
If you're looking for a dividend-paying stock you can safely add to your portfolio, it's hard to do better than Johnson & Johnson (JNJ 0.47%). At recent prices, J&J offers a 2.8% dividend yield and investors can reasonably expect it to climb higher. Last April, the company increased its quarterly dividend payout for the 60th consecutive year.
You're more than likely familiar with Band-Aids, Listerine, and other iconic brands from J&J's consumer health division. Consumer health is still a $15 billion per year business for J&J, but it pales in comparison to sales from its pharmaceutical and medical technology segments.
Adjusted for the effects of foreign exchange, medical technology sales rose 6.2% to $27.4 billion and pharmaceutical sales grew 6.7% to reach $52.6 billion last year. Later this year, J&J will spin off its consumer health division in order to focus on its relatively fast-growing business segments. This means investors who buy J&J now could end up getting two dividend-paying stocks for the price of one.
At recent prices, you can scoop up J&J for just 15.6 times forward-looking earnings estimates. Considering the company's steadily climbing pharmaceutical and medical technology sales, this looks like a fair price to pay for the hyper-reliable dividend stock.
