The Best Warren Buffett Stocks to Buy With $5,000 Right Now

Key Points

• The COVID-19 pandemic's economic lull took a lingering toll on the steel industry as well as on Nucor stock. The industry and the company seem to finally be pushing past it.

• Oil companies like Chevron are far from dead just yet.

• Contrary to a common assumption, American Express isn't just another credit card company.

• 10 stocks we like better than Nucor ›

Warren Buffett's anti-excitement approach to picking stocks may not be everyone's preferred style. There's no denying, however, that Buffett's got the gift. Share prices of his conglomerate, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), have dramatically outperformed the overall market for most multiyear time frames since the 1960s. That's why you'd be wise to poach a few of his picks when you're looking for a new name to add to your portfolio.

If you have $5,000 in available cash that isn't needed for monthly bills, to bolster an emergency fund, or to pay down short-term debt, you might want to put it towards an investment in one (or all) of these three Buffett-approved Berkshire holdings. Here's why.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

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1. Nucor

Probably the most talked about of Buffett's recent stock transactions is Berkshire buying a stake in struggling health insurer UnitedHealth Group (NYSE: UNH). Share prices are down by roughly half from April's peak value, mostly in response to disappointing results and news that the company's Medicare billing practices were being investigated by the Department of Justice. Of course, the time to step into a quality company is when its stock is well down.

Even having Buffett-like boldness, however, might not justify you jumping into this particular trade when there are so many other good options available. There are still just too many unknowns surrounding this company, like new regulatory requirements and competition encouraged by the White House.

A far more widely palatable Buffett pick to copy is Berkshire's new position in Nucor (NYSE: NUE).

It's not exactly a household name. The steel company's $34 billion market cap just isn't all that big anymore, nor is steel a sexy growth industry like artificial intelligence or space launches.

Steel is a solid, all-around business to be in, though. While consumption of it was down slightly during, after, and because of the COVID-19 pandemic, the World Steel Organization is looking for a slight improvement in demand this year, echoing an outlook from Fitch. And this turn is likely to be the beginning of a much longer trend. Precedence Research believes worldwide demand for steel is set to grow at an average annualized pace of a little more than 5% (enormous growth by the industry's historical standards) through 2034; the planet's physical infrastructure just needs massive updating, while at the same time population growth is driving the need for more residential housing here and abroad. The continued proliferation of new green energy projects is also driving demand.

That doesn't mean Nucor will always be easy to own. Indeed, steel and steel stock prices are notoriously volatile.

After making no net progress for the past three years, when it looks like the global steel business is working its way out of a rut, though, it's certainly not difficult to see why Buffett and his lieutenants liked this name well enough to scoop up a 6.6 million-share stake worth right around $1 billion. At its current stock price, $5,000 will get you roughly 33.5 shares of this dividend-paying stock.

2. Chevron

Chevron (NYSE: CVX) isn't a new trade. In fact, Berkshire's been sitting on a position in the oil giant since 2020, occasionally selling some, but mostly buying to make it the conglomerate's fifth-biggest stock holding now. With the recent addition of 3.4 million shares, Berkshire Hathaway now owns 112 million shares of Chevron, collectively worth more than $19 billion.

It's a surprising trade even for Buffett. Although he's a fan of traditional businesses like this one, even the Oracle of Omaha has to see that alternative energy poses an existential threat to the hydrocarbon energy industry.

Or, perhaps he just sees the bigger picture. That is, it will take several more years before the world reaches "peak oil," (the point at which daily consumption of crude starts to permanently decline), and it will take several more decades before demand for oil becomes so modest that the business becomes untenable. Goldman Sachs says the planet's oil consumption won't reach its apex until 2034, while Chevron rival ExxonMobil predicts that even as far down the road as 2050, more than half of the world's energy needs will still be met by oil, or by the natural gas that's often found in conjunction with crude.

Translation: There's still plenty of money to be made in this business, and there will be for a long while.

Much of this money will be passed along to Chevron shareholders in the form of dividends, which is just fine by Buffett. Newcomers will be plugging into it while the stock's forward-looking dividend yield stands at a healthy 4.3%. A $5,000 investment will get you just under 132 shares.

3. American Express

Finally, add American Express (NYSE: AXP) to your list of Warren Buffett stocks to buy right now if you're looking to put $5,000 to work in some quality companies for the long haul. That $5,000 will get you a bit more than 15.5 shares.

Berkshire Hathaway didn't buy any American Express stock with its most recent round of purchases. Why would it? Through decades' worth of its own slow-and-steady growth paired with the attrition of other major holdings, American Express is now Berkshire's second-biggest holding, worth $48 billion. That's nearly 22% of the credit card company itself, and 16% of Berkshire Hathaway's stock portfolio.

You might not want to buy (proportionally speaking) quite as much of the company as Buffett has. But you may still want to buy some for yourself for the same reason Buffett has stuck with this trade for as long as he has. That is, it's a well-run company with a surprisingly well-defended moat.

On the surface, it's just another credit card name, in the same vein as Mastercard and Visa, two other companies Berkshire owns, by the way. That's not what American Express is, though. Whereas Visa and Mastercard are only operators of payment networks that serve credit card issuers, American Express is both the issuer and the payment network. This arrangement provides the company with a great deal of cost-effective flexibility.

But even this distinguishing detail doesn't do American Express full justice. It might be more accurate to describe American Express as a perks and rewards program manager that operates its business around card-based payments. That's why some of its customers are willing to pay up to almost $700 per year in exchange for credits toward digital entertainment, ride-hailing, discounted hotel stays, and access to private airport lounges.

These paid-for perks, of course, also mean most of American Express' cardholders are at least a little affluent, and therefore mostly unfazed by economic headwinds that might stymie other consumers' spending, or their ability to make their payments. The numbers say as much anyway. Despite inflation and other economic headwinds blowing at this time, the company's second-quarter revenue grew 9% year over year to a record-breaking figure of $17.9 billion. Adjusted earnings jumped 17% from $3.49 per share to $4.08, extending a lengthening growth streak that was only recently -- and only temporarily -- interrupted by the COVID-19 pandemic.

Should you invest $1,000 in Nucor right now?

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American Express is an advertising partner of Motley Fool Money. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Chevron, Goldman Sachs Group, Mastercard, and Visa. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.