There's never any real shortage of stocks to consider buying. The only consideration is which stocks, or which kinds of stocks. Your job as an investor is to find the best risk-versus-reward scenarios available to you. This task is more challenging, however, when you're hunting for a true forever holding. These names must be in a business that will last ... well, forever. These companies must also be capable of adapting as needed.
To this end, here's a rundown of three value stocks you can comfortably buy and hold forever with a $500 investment. You might want to act sooner than later, too. With interest rates increasingly looking like they're going to remain relatively high for a while, value stocks may be entering a prolonged period of outperformance of growth stocks.
1. Bank of America
There's no denying this is a tough time to be in the banking business. Economic uncertainty is crimping demand for banking services and more existing loans are slipping into delinquency and even default. The echoes of last year's collapse of SVB Financial's Silicon Valley Bank and First Republic Bank were also rekindled by New York Community Bancorp's recent disclosure of "material weakness" with its loan review process, ultimately leading to the ouster of its CEO.
Don't read too much into this noise, however. Nothing is happening to the banking industry right now that banks haven't experienced and overcome before. The business is predictably cyclical. The specific causes and responses are also predictable.
That's great news for Bank of America (BAC +0.00%), and its shareholders. By virtue of being one of the nation's biggest and best-capitalized banks, it's well-positioned to ride out the storm. Its revenue is expected to slump 9% this year, but earnings are still projected to rise, and then rise again next year on top-line growth of a little more than 5%.
There's a reason BofA shares still perform so well of late, though. The banking industry's turnaround may take shape even sooner than anticipated.
NYSE: BAC
Key Data Points
Take the green shoots on the corporate underwriting front as an example. While EY (formerly Ernst & Young) reports the worldwide total of initial public offerings completed in the first quarter was down 7%, total fundraising proceeds were up 7% year over year. That improvement precedes what Morgan Stanley suggests will be a 50% uptick in corporate dealmaking in 2024.
Investment banking is, of course, only one sliver of Bank of America's business. But, most of its business lines ebb and flow together. BofA shares are currently priced at 11.7 times this year's projected per-share earnings of $3.14.
2. Kinder Morgan
If you think the world's going to be burning less oil and gas now that renewable energy sources like solar and wind are available, think again. While the overall growth rate of oil consumption is apt to peak by 2028, we're still going to be consuming more crude in a couple of decades than we do now. Indeed, thanks to an ever-growing global population and its ever-growing need for power, the U.S. Energy Information Administration believes petroleum will remain the planet's top source of energy production at least until 2050.
And that's just crude oil. Natural gas alone will still be the world's third-biggest source of power-producing fuel by that point in time, only being lapped by renewables sometime in the late-2030s; we'll be burning more gas at that time than we currently are as well. And we're still going to need a way of moving gas and oil around to get it where it ultimately needs to be.
Enter Kinder Morgan (KMI 1.20%).
It's an oil and gas company, but it's distinctly different than more familiar energy names like ExxonMobil and Shell. See, Kinder Morgan is an energy logistics outfit. It owns and operates 82,000 miles' worth of pipelines capable of transporting crude oil, natural gas, gasoline, and even carbon dioxide (which can help improve the output of existing wells) across the United States. As long as the U.S. is drilling and then burning gas and oil, Kinder Morgan's services will be in demand.
NYSE: KMI
Key Data Points
Here's the key crux of the bullish argument, though: This pipeline company's success isn't tethered to the price of oil or gas. It charges by the amount of gas and oil it transports and how far it delivers it; the price of the crude oil or natural gas being ferried doesn't factor into Kinder Morgan's top and bottom lines.
This business model is, of course, ideally suited for supporting dividends. In this vein, Kinder Morgan's current dividend yield stands at 6.1%.
3. Berkshire Hathaway
Last but not least, think about scooping up a stake in Berkshire Hathaway (BRK.A 0.55%) (BRK.B 0.55%) while it's priced at less than 10 times its trailing-12-month per-share earnings.
It's not a conventional stock. Rather, it's a basket of stocks hand-picked by Warren Buffett plus an even bigger collection of privately owned companies like GEICO Insurance, Duracell batteries, BNSF Railway, and See's Candies, just to name a few. Berkshire is still viewed and priced like a value stock, however, because these privately owned businesses produce such reliable cash flow -- one of the more common attributes of value stocks. These private businesses accounted for roughly two-thirds of Berkshire Hathaway's 2023 operating earnings.
That's still not the precise reason you'd want to own a stake in this name, though. Neither are dividends since Berkshire doesn't pay any!
Instead, the chief reason value-seeking investors might want to step into a position in Berkshire Hathaway right now is the fact that it's still the easiest and most effective way of getting the most out of this category of stocks. See, Warren Buffett isn't just a fan of value investing. He's a proven picker of the very best value stocks! Berkshire's long-term market-beating results prove it.
NYSE: BRK.B
Key Data Points
Bonus: Berkshire shareholders can take comfort in the fact that Buffett would rather sit on unused cash instead of taking on a new -- and potentially unproductive -- holding just for the sake of doing something with idle money. Without seeing anything else out there worth buying for the long haul right now, Berkshire Hathaway is currently sitting on $167.6 billion worth of cash waiting for a true opportunity.
Note that there are two versions of Berkshire shares. The A shares are trading in the ballpark of $620,000 each right now. If you've only got about $500 to put to work at the moment, you'll want to consider the B shares, which are currently priced near $410. Don't worry, though. Both tickers perform about the same.
