The Best Warren Buffett Stocks to Buy for $1,000 Right Now

Warren Buffett’s approach to picking stocks may seem outdated. However, it works. That is, given enough time, Buffett’s Berkshire Hathaway reliably outperforms the broader market. This cannot change in the near future either.

The conglomerate owns stock in dozens of different companies, and you can too by buying Berkshire stock, but if you’d rather own individual stocks than a whole basket of them, that’s also an option. Simply choose the most compelling Berkshire-owned names at any given time.

To that end, here’s a closer look at three of the best bets currently held in Berkshire Hathaway’s portfolio.

1. Chevron

Contrary to a growing assumption, the oil and gas business is not dying. If anything, it is still growing despite the emergence of cleaner energy alternatives. Standard & Poor’s estimates that even by 2050, liquid fuels (gasoline, oil, diesel) will still be the planet’s largest source of energy. The growth of alternative energy simply will not be able to keep up with the increase in demand arising from population growth and the continued proliferation of energy-consuming technology.

Come in Chevron (CVX 1.30%).

There is nothing particularly unique about it. It’s a major integrated player, meaning it’s not just big, it does everything from exploration to drilling to refining, both onshore and offshore. Recognizing that it needs to adapt and evolve, even if the inevitable future of clean energy is decades away, the company is also looking into renewable energies.

However, its likely longevity isn’t the only reason Buffett is a fan of the energy giant. Chevron also offers a very attractive dividend at an attractive valuation. The stock is currently priced at just 12 times expected earnings per share for the next four quarters and boasts an anticipated dividend yield of 4.5%. You’d be hard pressed to find a better return at this valuation with this low degree of risk.

That dividend also grows reliably, by the way. While Chevron’s earnings ebb and flow with the price of crude oil, the company is big enough — and its profit centers are diverse enough — to support 37 consecutive years of annual dividend payout increases.

2. American Express

A handful of analysts were more than a little down on the credit card company American Express (AXP 1.43%) of late. Bank of America recently downgraded it from a buy rating to a neutral rating, for example, citing reduced consumer spending. BofA analyst Mihir Bhatia also fears that investors may start shunning American Express in favor of similar but cheaper alternatives such as Financial synchronization or Capital One Financial.

And to be fair, these are not unreasonable worries.

However, most hold stocks based on their likely long-term future rather than their short-term outlook. And given American Express’s track record of success, the relative weakness of the stock in May is more of an opportunity than a warning.

You know AmEx as a credit card outfit. However, this classification is not accurate. Its role as a payment intermediary is arguably more of a means to an end. Its core business is actually managing the benefits and rewards programs centered around its credit cards. Some cardholders are willing to pay up to $695 per year in exchange for shopping, entertainment and hotel credits, in addition to access to airport lounges, travel agencies, preferred car rental and travel insurance. The annual fees on its cards can pay more than that, especially if the holder is a regular user of their AmEx card. This may not change in the long term, even if consumer spending slows a bit in the short term.

Of course, AmEx collects roughly 10 cents in revenue for each card transaction it facilitates (as well as a small percentage of the total transaction) … the ultimate goal of its generous benefits programs.

This might help: Thanks to Buffett shedding a sizable chunk of his stake in Bank of America, American Express is now Berkshire Hathaway’s second-largest holding. The fund owns nearly 152 million shares with a collective value of $37 billion. This represents more than a fifth of the total value of American Express and more than 12% of Berkshire’s total stock portfolio.

3. Amazon

Finally, add Amazon (AMZN 0.52%) to your list of Warren Buffett stocks to buy if you have an extra $1,000 that you know you won’t need anytime soon.

It’s a seemingly unusual choice for Berkshire. Buffett typically isn’t a fan of tech stocks with business models that can not only be difficult to understand, but also products and services that can be easily overturned by competitors.

Except, on second thought, Amazon isn’t a terribly surprising Buffett choice after all. Here are some of the key qualities that the Oracle of Omaha recommends for any future investment. These are companies with a clear competitive advantage and companies with compelling — but plausible — long-term growth prospects. Amazon fits both bills very well, even if it adapts to do so. For example, Amazon got into the cloud computing business a few years ago because it knew that eventually there would be a massive need, and it knew that it could provide such a service as well as any other equipment.

Amazon.com itself is evolving. At one point it was strictly an e-commerce site. It is now an advertising platform that happens to offer online shopping. It’s not inconceivable that its high-margin advertising business could one day produce more net operating income than selling merchandise does (if it doesn’t already).

The proof is in the numbers. Amazon is expected to grow its top line by more than 10% this year as well as next year, and then repeat the operation for at least the next few years after that.

Amazon is not a giant Berkshire Hathaway holding. It owns just 10 million shares worth just under $2 billion. That’s less than 1% of Amazon itself, as well as less than 1% of Berkshire’s total value.

However, Buffett is willing to stick with this ticker that before 2019 almost no one expected to buy. That alone says a lot.