The Smartest Financial Stocks to Buy With $500 Right Now
With the market rocketing higher after the Federal Reserve's big interest rate cut, it may feel like there's nothing good to invest in on Wall Street. After all, the major market indexes are breaking records, which suggests a perhaps overly exuberant investor base is running the show right now. But don't despair, you can still find investments worth buying if you look hard enough and really think through what is going on today. Here are three candidates for you to consider, even if you only have $500 in your pocket.
1. Berkshire Hathaway is doing big things
To get the most obvious factor out of the way right up front, $500 is nowhere near enough to buy Berkshire Hathaway's (NYSE: BRK.A)(NYSE: BRK.B) class A shares, which trade for more than $685,000 each. But $500 is just enough to buy the B shares, which are trading near $455. So don't despair if you want to trade alongside the Oracle of Omaha, Warren Buffett.
The key to understanding Berkshire Hathaway is that it is so large and diversified that it is very similar to a mutual fund. If you view it from this perspective, there's really no right or wrong time to buy because what you are buying is Buffett's investment approach. Notably, he tends to be opportunistic. What's interesting right now is that Berkshire Hathaway has been selling large stakes in some of its big winners, including Apple (NASDAQ: AAPL) and Bank of America (NYSE: BAC). That's bolstering the company's already massive cash hoard, which stood at over $270 billion at the end of the second quarter of 2024.
The bad news here is that Buffett may think there's a material risk of a bear market. The good news is that he's building cash that he can put to work in new investments at what might be better prices down the road. If you are a value-oriented investor, investing alongside Buffett in a market that seems a bit frothy might not be a bad call.
2. Visa is a growth stock that looks attractively priced
Over the past decade Visa's (NYSE: V) revenue has grown at an annualized rate of 10% or so. That's pretty good. Earnings per share expanded at an annualized rate of 15% over that same span. That's even better! Although no company's fortunes go only upward, Visa is still well positioned despite a long period of success behind it. A key part of that is its position as one of the two largest transaction processors in the world. Growth investors should be interested here, but there's more to the story.
Visa's price-to-sales ratio is currently around 16.9 times versus a five-year average of 17.7 times. Its price-to-earnings ratio is roughly 30.9 times compared to a long-term average of 34 times. And while its dividend yield is a tiny 0.7% or so, that happens to be near the high end of its historical yield range. All in, Visa is a growth stock that looks relatively cheap even though the price is near all-time highs. That's worth digging into right now, before more investors get wise.
3. Realty Income is a boring dividend tortoise
Realty Income (NYSE: O) has trademarked the nickname "The Monthly Dividend Company." That shows a great commitment to paying investors well for sticking around. To that end, the company's monthly dividend has been increased annually for 29 consecutive years. That's a streak that's unlikely to end, too, thanks to an investment grade rated balance sheet and the real estate investment trust's (REIT's) status as the largest player in the net lease niche (net leases require tenants to pay most property-level operating costs).
Being large and financially strong confers material advantages when it comes to investing in real estate because it affords Realty Income easy access to low-cost capital. That generally means it can compete aggressively for deals and still make a profit. Meanwhile, the REIT has a very diverse portfolio, with assets in the United States and Europe and exposure to retail and industrial properties. Add in a hefty 5% dividend yield and income investors will probably find this boring stock pretty exciting. To be fair, the yield will make up a large portion of the return, and the dividend will only grow slowly over time. But if you are trying to live off your dividend income that probably won't matter too much to you.
Don't give up, there are options out there if you look
When the market looks expensive it can be easy to just give up, particularly if you only have a modest amount of money to put to work (like $500 or $1,000). But you can still find interesting stocks like Berkshire Hathaway B shares, Visa, and Realty Income. Each will suit a different type of investor, but each still has something worth digging into if you are looking to invest today.
Should you invest $1,000 in Berkshire Hathaway right now?
Before you buy stock in Berkshire Hathaway, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $743,952!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 23, 2024
Bank of America is an advertising partner of The Ascent, a Motley Fool company. Reuben Gregg Brewer has positions in Realty Income. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Realty Income, and Visa. The Motley Fool has a disclosure policy.
The Smartest Financial Stocks to Buy With $500 Right Now was originally published by The Motley Fool