If you're looking for solid investing advice, one of the best sources is the legendary Warren Buffett. The Oracle of Omaha is a master of the buy-and-hold investing strategy, acquiring stock in companies that have great reputations, strong cash flow, and predictable profits.
And his results are undeniable. Under his leadership, Berkshire Hathaway's portfolio has averaged an almost 20% gain since 1964, nearly doubling the performance of the S&P 500 in that period.
Buffett's investing style transformed Berkshire Hathaway from a struggling textile company to a massively successful holding company that has positions in insurance, railroads, consumer goods and more. As an investor, how can you afford not to follow Buffett's guidance?
But you don't need Buffett's billions to invest like him. If you have just $1,000 to put into the market, you can get three outstanding Warren Buffett stocks: Amazon (AMZN 1.62%), Chevron (CVX 0.34%), and Kroger (KR -0.57%).
Image source: The Motley Fool.
Amazon
Much as Berkshire transformed itself back in the day, Amazon is going through some amazing changes of its own. The company is still an e-commerce machine, with North America sales coming at $92.9 billion in the first quarter and $33.5 billion in international sales. But after expenses, the company brought in only $6.8 billion in total profits from its e-commerce efforts.
Amazon Web Services, however, is a much different story. The cloud computing division brought in $29.2 billion in revenue and a solid $17.7 million in profits in the first quarter because the segment is much cheaper to operate. AWS provides infrastructure and storage to businesses that want to rent computing power and storage rather than build expensive data centers themselves.
And because modern data centers are extremely expensive (particularly if you want to incorporate large language models and generative AI services), AWS is growing in demand. AWS revenue in the first quarter was up nearly 17% from a year ago. And Amazon dominates the space with a 29% market share, better than Microsoft Azure (22%) and Alphabet's Google Cloud (12%).
Chevron
When global tensions flare -- particularly in the Middle East -- one of the best places to look for safety is oil. And I think that's particularly the case right now as the United States and Iran had a very recent flash point, and Israel and Iran remain at odds amid an uneasy ceasefire. Yes, OPEC+ plans to increase its production, which could push prices down, but if Iran follows through on its threat to close the Strait of Hormuz and disrupt 20% of the globe's oil supply, then the price of oil is nearly impossible to predict.
So far this year, oil is down roughly 16% but climbed 12% in the last month alone. And when oil prices go up, the profits of major oil producers like Chevron do as well.
Chevron reported $3.5 billion in earnings, or $2 per share, in the first quarter, in addition to free cash flow of $7.6 billion. Granted, earnings were down 30% from a year ago due to oil prices dropping over the last 12 months.
But here's the thing about Chevron -- whether oil prices are up or down, the stock remains a solid choice. It offers a strong dividend yield of 4.7%, which offsets the fact that Chevron stock is roughly flat so far this year.
How important is that dividend? With an annual payout of $6.84 per share, Buffett made $118 million in the last year just from the Chevron payout.
Kroger
Cincinnati-based grocery store chain Kroger is one of my favorite stocks for stability, particularly when people are a little more worried about money. It's one of the biggest grocery store chains in the U.S., operating 2,700 stores under the brands Kroger, Fred Meyer, Ralphs, King Soopers, and Harris Teeter.
It also operates three dozen food production and manufacturing facilities that allow it to create private-label, low-cost products. These store-brand products are cheaper than their name-brand counterparts and give Kroger a greater profit margin -- a win-win for both the store and the customer.
Earnings for the first quarter included $45.1 billion in revenue, which was nearly flat on a year-over-year basis. Adjusted earnings per share were $1.49, and its gross margin increased to 23% from 22% a year ago.
There's nothing flashy here, but Buffett doesn't look for flashy. He looks for consistency, smart businesses and companies that take care of their investors. Kroger does a good job of that -- it just raised the dividend by 9%, which means Kroger has now increased its annual dividend for 20 consecutive years.
How to buy Warren Buffett stocks
With your stash of $1,000 in this scenario, there's two ways to buy Amazon, Chevron, and Kroger. You could buy two shares each -- Amazon is the most expensive of the trio and Kroger the cheapest, so your portfolio would be a little lopsided but the number of shares you had would be equal.
Or you could use a brokerage like Robinhood that offers fractional shares, and then spend $333 on each stock. Fractional shares are a convenient way to invest small amounts of cash on a regular basis to build your portfolio over time.
Either way, these three Warren Buffett stocks would be solid picks for anyone who wants to follow the Oracle of Omaha's path to being richer.
