History proves time and time again that long-term investing is one of the best ways to build wealth in the stock market. The key to achieving this is buying and holding shares of quality companies that can perform across economic and market cycles and allowing your investments to grow over time.
One important part of long-term investing is diversifying your portfolio across various sectors. The financial industry offers a wide range of companies that provide essential services across the economy and can thrive in different economic conditions. Here are three no-brainer stocks you can invest in today for less than $1,000 that can help you build long-lasting, generational wealth.
CEO Warren Buffett’s investing prowess is undeniable, and his long-term investment strategies offer invaluable lessons for both life and investing. Since taking the helm of Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) in 1965, Buffett has achieved an impressive annual return of nearly 20%, nearly doubling the S&P 500 index’s returns over the same time.
Berkshire Hathaway’s long track record of success makes it a good source of many investing ideas. Today, the company manages a massive $271 billion stock investment portfolio, which has grown substantially under the leadership of Buffet and his right-hand man, the late Charlie Munger.
While its investments make up a decent share of its earnings, Berkshire’s privately held businesses are the engine that keeps it humming. The conglomerate owns numerous businesses across industries that can thrive across economic and market cycles, including those in transportation, consumer products, utilities, and manufacturing. However, its largest holdings are in insurance. In fact, Berkshire Hathaway is the second-largest property and casualty insurer in the U.S. today.
Well-run, established insurance companies have long track records of profitable underwriting and grow nicely alongside an expanding economy, as it does most of the time. However, these businesses also prove resilient during downturns or inflation because, as Buffett says, insurance products “will never be obsolete, and sales volume will generally increase along with both economic growth and inflation.”
Berkshire’s insurance holdings, along with its other businesses, make it a cash-producing machine. Over the past 12 months, the company generated $21 billion in free cash flow. Over the past decade, its free cash flow has averaged $23.9 billion annually, providing the conglomerate with plenty of money to spend on dividends, share buybacks, acquisitions, and investments.
In addition, Berkshire has $288 billion in short-term treasuries, which gives it capital to use during the next market downturn. With its strong cash flows and prudent investment portfolio management, Berkshire is a resilient, no-brainer stock to buy today.
Speaking of insurance companies, Progressive (NYSE: PGR) is one of the best to do it. Decades ago, it was commonplace for insurers to break even on their policies with returns coming from their investment portfolios. In 1965, Peter B. Lewis (son of co-founder Joseph Lewis) rejected this and prioritized earning an underwriting profit on its policies, even if it meant losing out on some customers.
In 1971, the company committed to achieving a combined ratio of 96, meaning it would earn $4 in profit for every $100 of premium earned. This goal has been a cornerstone of its success. The company has a long history of growing its premiums while maintaining solid profitability metrics.
This has translated into excellent investment results for long-term shareholders. Over the last three decades, the company has returned 18.4% annually to investors, well above the S&P 500’s annualized return of 10%. Best of all, the insurer continues underwriting profitable policies.
Progressive is positioned to grow during an inflationary environment but also benefits from an expanding economy, which happens to be the case most of the time. In the past 70 years, the U.S. has been in a recession in only 15% of the months.
It also earns money from its massive investment portfolio, which has been raking in more cash thanks to higher interest rates. At the end of the third quarter, Progressive’s investment portfolio was valued at $79 billion, and this year, it has earned $2 billion in net investment income, a 47% increase from last year.
Progressive continues to grow profitably. In today’s environment, where inflation remains stubbornly above the Federal Reserve’s 2% target while interest rates remain elevated, Progressive is another resilient stock that can continue to perform well for long-term shareholders.
American Express (NYSE: AXP) is a staple in the consumer spending space, largely thanks to its marketing and strong brand. Despite competition from Visa, Mastercard, and banks that issue cards through them, American Express has held firm thanks to its brand, which customers associate with luxury and the finer things in life.
This strong brand is why American Express has been a staple in Berkshire Hathaway’s portfolio. In an interview with Bloomberg a few years ago, Buffett said he “could do all kinds of things with hundreds of billions of dollars, but I can’t put in the minds of people what is in their minds about American Express.”
In the 30 years Berkshire has held the credit card company, its investment has grown from around $1.3 billion to $41.1 billion.
American Express benefits from a growing U.S. economy as consumer spending grows. Additionally, it can do well during inflationary periods when rising prices put upward pressure on consumer spending. Not only that, but its robust customer base can withstand economic downturns better than competitors, which is why the company continues to thrive today.
With its strong brand and robust customer base, American Express is another excellent stock worth investing in for the long haul.
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American Express is an advertising partner of Motley Fool Money. Courtney Carlsen has positions in Progressive. The Motley Fool has positions in and recommends Berkshire Hathaway, Mastercard, Progressive, and Visa. The Motley Fool recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
3 No-Brainer Stocks to Buy With $1,000 and Hold Forever was originally published by The Motley Fool
