Warren Buffett doesn't offer a newsletter to investors that provides a list of the stocks he likes. But he doesn't have to. Berkshire Hathaway's portfolio features every stock Buffett likes so much that he's put the conglomerate's money on the line.
Not every stock in Berkshire's portfolio is a great choice to buy with the current market dynamics. Several of them are, though. Here are my picks for the three best Buffett stocks to buy with $500 right now.
1. Lennar
Lennar(NYSE: LEN) is one of two homebuilder stocks Buffett owns. It's the only one with a share price (currently around $188) that's affordable with a $500 budget, though.
Why buy Lennar stock right now? There are two main reasons -- one short-term and the other longer-term.
The short-term reason is that the Federal Reserve is cutting interest rates for the first time since 2020. Co-CEO Stuart Miller said in Lennar's second-quarter earnings call that rate cuts could activate "pent-up demand." He's almost certainly right.
Lennar has been quite successful over the last few years with high interest rates. However, lower rates are great news for the company.
The longer-term reason to buy the stock is the ongoing U.S. housing shortage. As one of the nation's largest homebuilders, Lennar is well-positioned to help alleviate this supply demand imbalance.
2. Louisiana-Pacific
Louisiana-Pacific (NYSE: LPX) was one of several stocks Buffett sold in Q2. However, I think it's a great stock to buy now. And with a share price of around $107, it's affordable for investors with limited cash.
The company is a leading provider of building solutions. Its top-selling product is engineered wood siding, which generated 51% of total revenue in 2023. Around 40% of LP's revenue comes from oriented strand board, a less expensive alternative to plywood.
As you might expect, the Fed's rate cuts should be good for LP's business for the same reason they're good for Lennar. The chronic U.S. housing shortage should also work to LP's advantage over the next decade.
LP's price-to-earnings-to-growth (PEG) ratio based on five-year earnings growth projections is only 0.78, based on data from LSEG. Any PEG multiple below 1.0 is considered to be an attractive valuation.
3. Amazon
After buying one share each of Lennar and Louisiana-Pacific, you'd have roughly $206 remaining from your initial $500. That's more than enough to scoop up a share of another exceptional Buffett stock -- Amazon(NASDAQ: AMZN).
Lower interest rates could lead to increased consumer spending. That could be music to the ears of Amazon, which operates the world's largest e-commerce platform. It could also help Amazon Web Services (AWS), the leading cloud services provider. Lower rates reduce the costs for businesses to invest in growth projects, including technology infrastructure.
Even without the Fed's moves, though, AWS should be a major growth driver for Amazon over the next decade and beyond. Currently, less than 15% of global IT spending is in the cloud with the remainder on-premises. Amazon CEO Andy Jassy expects those numbers to flip over the next several years.
Artificial intelligence (AI), especially generative AI, will likely pour fuel on the fire of this migration to the cloud. Jassy noted in Amazon's Q2 earnings call that "companies of all sizes are excited about leveraging AI."
Amazon has been adept through the years at expanding into new markets, with AWS serving as a prime example. Look for more growth from the company as it moves into satellite internet services with the launch of its Kuiper low-Earth orbit satellite constellation.
Where to invest $1,000 right now
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Keith Speights has positions in Amazon and Berkshire Hathaway. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, and Lennar. The Motley Fool has a disclosure policy.
