The Best Warren Buffett Stocks to Buy With $500 Right Now

Warren Buffett's investing skills have made shareholders of Berkshire Hathaway a lot of money over the years. From 1965 through 2023, Buffett guided Berkshire to a cumulative return of 4,384,748%, which works out to a compound annual return of 19.8%. Most investors are fortunate if they can outperform the S&P 500's 10% average annual return by a few percent, but earning close to 20% annual returns over half a century is extraordinary.

Fortunately, Berkshire Hathaway is required to disclose its stock holdings every quarter with the Securities and Exchange Commission on Form 13F, so any investor can get an inside peek at the stock picks of Buffett and his investing deputies. Here are two of Berkshire's largest holdings that you can add to your stock portfolio with less than $500.

1. Apple

Apple (NASDAQ: AAPL) is Berkshire's largest holding. Warren Buffett originally invested in the stock in 2016. After a sharp climb in the stock price, the position had swelled to a stake worth $174 billion at the end of 2023, making it one of the most profitable investments of Buffett's career. Despite reducing the stake this year, it's apparent that Buffett still likes Apple's business. He noted earlier this year it was "extremely likely" Apple would remain Berkshire's largest stock holding by the end of the year.

Apple has built its brand around thoughtful product design that creates a seamless experience between hardware and software. It has the second most visited electronics website, according to Statista, behind Samsung. Over a third of the company's sales are made direct through one of Apple's retail stores or its website.

While some retailers are struggling with macroeconomic headwinds, Apple has continued to show strength. The company's gross profit margin for the June quarter came in at 46.3%, up from 43.3% in the same quarter two years ago. An increasing gross margin is a key indicator of a strong consumer brand.

As a manufacturer of consumer electronics, Apple is an incredibly profitable business. The company earned $101 billion in profit on $385 billion of revenue over the last four quarters. Growing sales of high-margin services continues to show that customers love using their Apple devices. Services, including App Store purchases and subscriptions, remain Apple's fastest-growing opportunity, with revenue from these sales up 14% year over year in the June-ending quarter.

Analysts are expecting an uptick in demand over the next year as customers upgrade their devices to the latest hardware to take advantage of artificial intelligence (AI) features coming with the Apple Intelligence update. Apple stock has hit new highs recently but still trades at a reasonable valuation that can support solid returns for long-term investors.

2. Amazon

Amazon (NASDAQ: AMZN) is another valuable brand that can help you build wealth over the long term. It stands alone in e-commerce, with $257 billion in trailing sales through its online and physical stores. Berkshire has held a stake in Amazon since 2019. Over that time, the stock has more than doubled and continues to show potential for more market-beating returns.

Convenience and selection were key factors that allowed Amazon to conquer the e-commerce market, and it continues to lean into these strengths. Amazon's total sales grew 10% year over year in Q2 while operating income nearly doubled over the year-ago quarter. The e-commerce leader is finding ways to improve shipping speed and reduce transportation costs, which is having a big impact on the bottom line. Importantly, improving retail margins are helping the company further expand its selection and solidify its lead.

Amazon's dominant online retail business has spawned other profitable revenue streams that make the stock a solid long-term investment. The company is the leading cloud services provider; that's how Amazon Web Services generates most of the company's profit. Amazon also has emerged as the leading retail media company, with revenue from advertising services coming to $51 billion over the last four quarters and growing 20% year over year in Q2.

Amazon is continuing to grow its free cash flow and sales that should lead to excellent returns for investors. The company generated $48 billion in free cash flow on $604 billion of revenue over the last year. Its ability to leverage its e-commerce dominance to develop other profitable business opportunities is why Amazon stock is worth holding for the long term.

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. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.