The best Warren Buffett stocks to buy with $300 right now

Investors with spare cash could do far worse than browse Warren Buffett’s holdings Berkshire Hathaway ( BRK.A -0.73% ) ( BRK.B -0.55% ). Buffett and his investment team have beaten the market for decades by following an efficient, no-nonsense approach to stock picking.

Two relatively cheap Buffett stocks that look poised to reward shareholders are Apple (AAPL 1.67% ) and Chevron (CLC -0.52% ). Here’s why these stocks would be great places to store cash for 2022 and beyond.

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Apple: 5G upgrade cycle in full swing

Apple is currently Warren Buffett’s largest investment stake in Berkshire. Buffett originally invested $36 billion in the stock between 2016 and 2018. Omaha Oracle’s timing isn’t always perfect, but the investment plays into Buffett’s image as a pick magician of shares. Apple’s stock price has risen more than 300% since the end of 2018.

The market value of this investment is approximately one-third of Berkshire Hathaway’s book value (total assets minus all liabilities). It’s a good vote of confidence from the greatest investor of all time.

Buffett sees a close connection between the Apple brand and the consumer. This sticky relationship is reflected in Apple’s growing installed base of active devices. In January, Apple CEO Tim Cook revealed the company had more than 1.8 billion active devices, up from 1.65 billion at the start of 2021.

The prospects for further growth in the installed base appear very favorable in the short term. The iPhone 13 launch generated a record holiday quarter, with iPhone revenue growing 9% year-over-year to $72 billion. Apple is set to launch a budget 5G iPhone SE model this year, which should lead to even more upgrades.

It’s a bonus that a strong upgrade cycle for the iPhone will also lead to increased spending on higher-margin services, such as apps and subscriptions. In the 12 months to December, Apple generated a staggering $101 billion free cash flow, which is the actual amount of cash a company generates after all costs and expenses, and management continues return excess cash to shareholders in the form of dividends and share buybacks.

It’s no wonder Buffett continues to hold Apple stock. He has an outstanding brand and a very profitable business. Apple would make a solid addition to any investor’s holdings this year.

Chevron: A Discount on Higher Gas Prices

Consumer wallets are being hit at the pump, but the perfect antidote to that is to follow Buffett and consider buying shares of Chevron.

The oil producer has increased its dividend for 34 consecutive years and currently pays an above-average dividend yield of 4.1%. Even though the stock has rebounded in recent months, Warren Buffett bought an additional 10 million Chevron shares during the fourth quarter, so he might still see the current price level as a good buy point. The stock is up around 14.7% since the end of 2021.

Buffett likes to invest in well-managed industry leaders, and Chevron fits that criteria. Even with falling oil prices over the past decade, it has been able to increase its free cash flow to fund a growing dividend through 2019.

Additionally, management made a timely acquisition of Noble Energy in late 2020. Noble bolstered Chevron’s upstream exploration and production activities just as energy prices began to recover from low levels. the lowest observed in nearly 20 years.

Chevron can generate profits with oil prices of at least $45 a barrel (they currently hover around $105 a barrel), but the company is simultaneously investing to achieve net zero carbon emissions by 2030. management has reduced capital expenditures over the past two years. years and is reallocating resources to growing its hydrogen and renewable fuels businesses, which are expected to generate more than $1 billion in incremental free cash flow within a decade.

The quarterly dividend recently increased by $0.08 to $1.42 per share, which will be paid March 10 to shareholders of record February 16. For the full year, management plans to triple its share buybacks to $3 billion to $5 billion, which could boost earnings-per-share growth and generate more returns for investors.

Chevron’s growing dividend as well as rising oil prices make it an excellent hedge against near-term inflation. With stocks trading at a relatively cheap forward price-to-earnings ratio of 12.4, investors can also expect some capital appreciation if oil prices continue to climb.

All in all, a high yielding oil stock would be a perfect complement to a growth stock like Apple in 2022.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

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