Contrary to popular belief, one does not need much to begin investing. Even amounts such as $1,000 will not only get one started, but also buy whole shares of most of the stocks chosen by Warren Buffett's team at Berkshire Hathaway.
This includes consumer-oriented stocks, and under current conditions, stocks like Apple (AAPL -0.35%), Amazon (AMZN 3.43%), and Floor & Decor (FND 2.66%) look like they are in an excellent position to serve investors well.
Apple
When considering the stocks Warren Buffett owns, Apple almost has to be a choice, considering that it makes up nearly half of Berkshire Hathaway's stock portfolio. While people know it for many products, Apple derives the majority of its revenue from the iPhone.
As that product matured, Apple pivoted into Apple Services, which includes Apple TV+, Apple Pay, and the Apple Card. These additions should help the company grow even if hardware sales begin to plateau.
Additionally, few companies can match Apple in liquidity, which now stands at about $162 billion. This gives it one of the more stable balance sheets in existence.
That solidity may even compensate for the fact that its net income of $97 billion for fiscal 2023 (ended Sept. 30) fell 3% from the previous fiscal year. Such a drop is unusual for Apple and is likely due to uncertainty in the economy.
Still, amid these conditions, the stock is up 40% this year. And while its price-to-earnings (P/E) ratio of 30 is significantly higher than the earnings multiples of the last decade, it prices the stock at a point where it can still benefit from growth once the economy improves.
Amazon
Amazon is another Berkshire investment that has served investors well. Investors know it best for pioneering e-commerce and later cloud computing. Moreover, as competitors emerged, Amazon has managed to maintain its lead in both industries.
It has also prospered in a unique way. It is unclear if its online sales business, its largest revenue source, turns a profit. However, its e-commerce segments support subscription, reseller, and ad businesses, which likely drive a positive net income. Additionally, Amazon benefits from higher margins with the cloud computing segment Amazon Web Services (AWS). In most quarters, AWS drives the majority of its operating income.
Despite its $1.5 trillion market cap, Amazon has returned to rapid profit growth. Net income for the first three quarters of 2023 was almost $20 billion, a dramatic turnaround from the $3 billion loss in the same period in 2022.
That has brought about a significant recovery in the stock this year. And despite a recent 73 P/E ratio, its earnings multiple is near historical lows. This positions investors who follow Buffett's team in this stock to derive significant returns from a modest investment.
Floor & Decor
Another consumer stock benefiting from a unique business model is Floor & Decor. Indeed, the regional to national expansion it is undergoing is usually good for stock market growth.
However, Floor & Decor prospers by specializing in hard flooring and decor. It offers more variety than competitors such as Home Depot and cuts out the middleman by negotiating with the supplier directly. The more the company expands, the more power it holds to negotiate lower prices.
Admittedly, rising operating costs have weighed on Floor & Decor. In the first three quarters of 2023, net income of $209 million dropped 9% from year-ago levels. This has occurred even as it earns more revenue due to the 17 additional stores it opened in the first nine months of the year.
Unfortunately, relentless selling amid rising interest rates and worries about the economy wiped out most of the gains for this year. But its recent P/E ratio of 31 has been a historical low in this decade. When the flooring industry finally recovers, the retail stock will likely surge higher along with the economy.
