Best Starter Stocks To Buy
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So where should a novice investor begin? Opinions vary, but any "starter stock" should have certain characteristics, which may include low volatility, solid management, a sustainable dividend payment and an easily understood business model. Oh, and it should be profitable, too. The following nine portfolio starter stocks are proven industry leaders that check most of those boxes.
Unlike most blue-chip stocks, Berkshire Hathaway had a strong 2022. The stock easily outpaced the S&P 500, losing just 1.2% while the S&P 500 shed 19.4%. 2023 should be markedly better for Berkshire and its 92-year-old figurehead Warren Buffett. Insurance industry profits look promising for the year, which benefits Berkshire, as the company owns Geico and, following an October 2022 purchase, insurer Alleghany as well. "Insurance could be a nice tailwind for Berkshire in 2023 if there are weaknesses elsewhere," noted Edward Jones analyst James Shanahan, who recently issued a "buy" rating on Berkshire Hathaway. Berkshire is also one of those hard-to-find stocks that consistently bests the benchmark S&P 500 over the long haul - it's done so over the last six months, as well as over the last one- and five-year periods.
It's no coincidence that Apple, with a 38% weighting, is easily the largest stock position in the Berkshire Hathaway portfolio. That begs the question: If Apple is good enough for Warren Buffett, shouldn't it be good enough for a brand-new portfolio? If you're looking to early 2023 returns for an answer, you'll get a strong "yes," as Apple shares surged 11.1% in January. In a tough economic environment, analysts expect Apple's fiscal first-quarter earnings to clock in at $1.94 per share, a year-over-year decline of about 8%. For the long haul, however, Apple is one of the strongest-performing stocks in the past three decades and is loaded with management talent and creative ingenuity. It should be a mainstay for any nascent investment portfolio.
As of Jan. 31, Microsoft's stock had lost about 19% over the past year. When you're looking for a "starter stock," however, leave recency bias behind and focus on the fundamentals. For example, virtually every analyst covering MSFT has a "buy" rating on the stock. Morgan Stanley analyst Keith Weiss currently has a target price of $307 for MSFT, which closed at $247.81 on Jan. 31. Microsoft is also placing a big bet on artificial intelligence, with a $10 billion investment in ChatGPT maker OpenAI. MSFT hopes to accelerate AI breakthroughs, especially in the supercomputing and cloud computing marketplaces. Getting in front of the AI revolution should spur further growth in Microsoft stock over the long haul.
AT&T saw its core wireless base expand in 2022, adding 2.9 million subscribers against only 201,000 for its chief rival, Verizon Communications Inc. (VZ). Overall, T's wireless revenues rose 8% in 2022 and the company expects a 4% wireless growth rate in 2023. That's good news for investors, who should see an improvement in T's already impressive 5.6% dividend yield. Low-volatility stocks with great dividends should be a mainstay of any starter stock portfolio, and AT&T certainly fits the bill here.
Bank of America is another low-volatility stock that should have a home in a starter stock portfolio built for the long term. In the near term, Oppenheimer analyst Chris Kotowski believes banks will be "steadier than most think" in 2023. BAC has also dropped the hammer on the digital banking front, with 73% of its verified digital users conducting their banking digitally via the Bank of America web portal or through its mobile app. Tack on a steady dividend payout of 2.5%, and BAC becomes a top financial industry selection for any beginning portfolio.
Investing in the stock market today could be a great way to grow your wealth. But where do we start? To begin with, you might be better off investing in blue-chips stocks that are less volatile. What about penny stocks, you might ask. Well, a small movement in penny stocks could translate into big gains, but those gains could also turn into big losses overnight if we are not careful. So, unless you are willing to stomach such big swings, you might be better off sticking with well-known companies for a start.
Admittedly, choosing the right stocks to invest in can be a time-consuming endeavor. This is true even for some of the most seasoned investors. If you are new to the stock market, buying companies that you are familiar with maybe a good place to start. It would be beneficial to have an idea of how the companies make money. Besides, picking stocks with strong balance sheets and stellar growth prospects could increase your chances of success.
Learning how to invest in stocks as a beginner can be a daunting task. There are thousands of securities to consider, and no particular strategy or approach guarantees success. However, if you retreat from the swirling chaos surrounding stock markets on a day-to-day basis, you could miss out on opportunities to grow your money over the long term.
What beginners want from their stock investments is pretty much the same as what everyone else wants: the best returns possible for as long as possible. However, where beginners tend to differ from veteran market watchers is in their ability to ride out the ups and downs inherent to owning a stock.
The sort of companies capable of posting huge gains are also ones capable of posting enormous losses. So, while you might eventually start branching out, beginners should likely avoid stocks with characteristics that can make them prone to big swings.
Certain industries can be notoriously fickle and are typically the first to take a plunge when the economy turns south. Things like consumer goods or cars seem like great stocks when times are good, but they tend to crater in bad markets.
While taking more risks to earn greater rewards is part of what investing in stocks is all about, easing yourself into the field may be essential to making your experience a positive one. To familiarize yourself with the process, consider sticking to conservative, relatively safe stocks and creating a portfolio of defensive stocks at the beginning.
In our view, the best stock market investments are often low-cost mutual funds, like index funds and ETFs. By purchasing these instead of individual stocks, you can buy a big chunk of the stock market in one transaction.
Investing in stocks will allow your money to grow and outpace inflation over time. As your goal gets closer, you can slowly start to dial back your stock allocation and add in more bonds, which are generally safer investments.
While stocks are great for many beginner investors, the "trading" part of this proposition is probably not. A buy-and-hold strategy using stock mutual funds, index funds and ETFs is generally a better choice for beginners.
When seeking out the best stocks to buy now, investors will need to be brave and patient in regard to timing, as well as agile as the stock market eventually transitions from bear market to bull market. Go ahead and add resolute to the character traits you'll need this year, because many market strategists say you can't get from one market to the other without going through a recession first.
Given the uncertain, sometimes roiling backdrop for stocks, where should investors look when seeking out the best stocks to buy now? A popular piece of advice among Wall Street strategists now is to resist the bargain-basement appeal of the most beaten-up stocks and focus instead on high-quality shares. "Investors should avoid volatile names and be cautious on both deep-value and unprofitable growth companies," says Koesterich. "Instead, emphasize quality with a focus on earnings consistency and good profitability."
Now may be a good time to tilt toward value-oriented companies and small-cap stocks, both longtime underperformers that are showing signs of new life. Over the past five years, for example, the S&P 500 Value Index (opens in new tab) has returned 6.2% annualized, compared with 9.1% for the S&P 500 Growth Index (opens in new tab). Through early 2023, value has outperformed growth, with a 4.1% return compared to growth's 3.8% gain. "We would stick with value. These cycles last a while," says Ryan Detrick, chief market strategist at money management firm Carson Group (opens in new tab). Sectors typically grouped in the value style include energy, financials, industrials and materials.
So, with all of this in mind, here are 12 of the best stocks to buy now. The names featured here vary by size and industry and are not meant to compose a diversified portfolio. But all, for one reason or another, are well positioned to benefit from a transition to a bull market from a bear market in 2023.
Don't ignore the tenets of diversification and shun tech or the growthier side of the market completely when adjusting your portfolio to include the best stocks to buy now. Instead, take a barbell approach, says Tony DeSpirito, a managing director and portfolio manager at BlackRock (opens in new tab). This will allow you to scoop up value-focused shares at historically attractive relative price-to-earnings ratios (P/Es) and high-growth stocks at valuations that have come down from the stratosphere and are now at normal, if not yet underpriced, levels.
Take Advanced Micro Devices (AMD (opens in new tab), $76.61), a leading semiconductor manufacturer. Analysts have mixed ratings on one of Wall Street's best semiconductor stocks in part because an economic slowdown and negative investor sentiment are near-term obstacles.
Matador Resources (MTDR (opens in new tab), $52.38) is an oil and gas exploration and production company that has risen alongside its fellow energy stocks over the last 12 months. Specifically, MTDR stock is up more than 20% year-over-year.
Even with its impressive growth on the charts, MTDR is one of best values on this list of the best stocks to buy now. Shares are currently trading at just 5.1 times forward earnings, well below Matador's five-year average of 11.2. 781b155fdc