The S&P 500 is down more than 7% over the past month (as of this writing), inching closer to correction territory. Investors are generally concerned about President Donald Trump's tariffs igniting trade wars and, as a result, the potential for the U.S. economy to slow down significantly.
That's left many people hunting for the best place to put their money amid the uncertainty, and there may be no better investment strategy example to follow right now (or any time) than Warren Buffett's. His buy-and-hold strategy has proved to be wise time and again, and it's what's helped make his company, Berkshire Hathaway, have such a successful portfolio.
For a couple of examples of great stocks to buy with $2,000 of investable cash, look no further than two fantastic companies in Berkshire Hathaway's $284 billion portfolio: Amazon (AMZN +0.26%) and American Express (AXP +1.82%)
Image source: The Motley Fool.
1. It's smart to bet on Amazon
Amazon is only a small portion of Berkshire Hathaway's portfolio, but it's an important one to consider buying right now amid the general market volatility. Some investors may be worried about Amazon's e-commerce business if a recession rolls around, but that may be overlooking a few things about the company's business.
For one, Amazon's e-commerce business has historically done well during downturns. During the 2008 financial crisis, the company's revenue rose 29% from 2007 to 2008. And from 2020 to 2021, after the COVID-19 pandemic-induced economic slowdown, sales rose 22% annually. While there's no guarantee of future success, Amazon's massive e-commerce marketplace has plenty of household staples consumers will continue to buy in a downturn.
NASDAQ: AMZN
Key Data Points
Amazon also has a strong cloud-computing business, Amazon Web Services (AWS), that's well positioned to grow along with the artificial intelligence (AI) cloud market. AWS generated $28.8 billion in sales in the fourth quarter -- 15% of total sales -- and accounted for half of Amazon's operating income.
AWS holds the lead for cloud-computing market share right now, beating Microsoft and Alphabet, and there's likely room for more growth. Goldman Sachs estimates that AI will help push cloud sales higher over the next five years, reaching an estimated $2 trillion globally.
Amazon's stock is down about 12% over the past few months, making now a good time to pick up shares at a discount.
2. American Express is a Buffett favorite
American Express is a longtime favorite of Buffett, who first added the financial stock to Berkshire's portfolio back in 1991. American Express now accounts for 14% of Berkshire's total holdings, its second largest position after Apple.
American Express recently reported strong 2024 results, with revenue increasing 9% to $65.9 billion and its diluted earnings per share rising 25% to $14.01. More growth is likely on the way too, as management says revenue will rise 9% in 2025, and earnings per share (EPS) will increase 14% to 15.25 at the midpoint.
NYSE: AXP
Key Data Points
American Express also added 13 million new cardholders last year, an impressive feat. Nearly three-quarters of those new cards are "fee-paying products" for which American Express receives an annual fee.
I understand the argument that owning a stock that's dependent on consumer spending at a time when the economic outlook looks less rosy may not seem like a wise idea. But American Express has tumbled 9% year to date, pushing the stock's price-to-earnings (P/E) multiple down to 19 and making it much more affordable than the S&P 500's P/E ratio of 26.5.
With American Express' strong position in the credit card market and its stock trading at a much cheaper valuation than just a few months ago, now could be a good time to pick up some shares of this Buffett stock.
