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1 Stock To Buy

Amazon announced its first stock split since the dot-com boom, telling investors on Wednesday that they'll receive 20 shares for each share they currently own. The stock soared 6% in extended trading.

1 stock to buy

Andy Jassy, Amazon's CEO, has faced a rough start to his tenure, which began in July. The stock was the worst performer among Big Tech companies last year and has dropped 16% so far in 2022, joining a decline across the sector. Amazon just reported its slowest rate of growth for any quarter since 2001 and, according to a recent Wall Street Journal report, billionaire activist investor Dan Loeb, who's been adding to his Amazon holdings, told investors on a private call that he sees about $1 trillion in untapped value at the company.

Last month, Amazon boosted its maximum base salary for corporate workers to $350,000, up from $160,000, as it contends with an increasingly competitive labor market. Historically, Amazon has relied on generous stock awards to attract talent, but the shares underperformed in 2021, and employees have pressured the company to make changes.

This is Amazon's fourth stock split since its IPO in 1997, and its first since 1999, when the company was a fraction of its current size. It also split on a 2-for-1 basis on June 2, 1998; a 3-for-1 basis on Jan. 5, 1999; and a 2-for-1 basis on Sept. 2, 1999.

The Oracle of Omaha put tens of billions of dollars to work when all three major U.S. stock indexes entered a bear market in 2022. One stock that's been consistently purchased since the beginning of last year is Occidental Petroleum (OXY 0.18%).

Occidental is an integrated energy stock that generates most of its revenue from its upstream drilling segment. With Berkshire Hathaway purchasing over 208 million shares of Occidental, the belief has to be that oil prices will remain above their historic average.

Warren Buffett has also been actively adding to Berkshire Hathaway's largest holding, tech stock Apple (AAPL 1.56%). Even though Buffett has never been much of a research buff when it comes to high-tech companies, Apple has made it easy on the Oracle of Omaha by checking all the appropriate boxes.

I'd be remiss if I didn't also add that Apple has what's arguably the most-impressive capital-return program on the planet. Despite being beat out by Microsoft for the largest nominal-dollar annual dividend, Apple takes the crown for having repurchased well over $550 billion worth of its common stock since the beginning of 2013.

Warren Buffett and his team have also been avid buyers of media stock Paramount Global (PARA 2.76%) during the current bear market. It's not uncommon for ad-driven operating models to come under pressure when the risk of a U.S. recession rises. There's no question that Paramount's legacy TV Media segment is contending with some level of weakness tied to an advertising slowdown.

Berkshire Hathaway's earnings reports also contain valuable nuggets of data that you won't find in the company's 13F filings. Specifically, these earnings reports detail buying activity in what's easily Warren Buffett's No. 1 stock to buy during bear markets. That stock is none other than shares of his own company, Berkshire Hathaway.

The rules governing share buybacks required Berkshire Hathaway stock to trade at or below 120% of book value. For well over a half-decade prior to mid-July 2018, Berkshire's stock never fell to or below this level, which meant Buffett and Munger weren't able to repurchase any of their own company's stock.

On July 17, 2018, things changed. The Berkshire board passed new measures that took Buffett and Munger off the proverbial bench and allowed them to take some home run swings with their company's ever-growing treasure chest of cash. The new measures allowed Berkshire Hathaway stock to be repurchased without any ceiling as long as the company had at least $30 billion in cash, cash equivalents, and U.S. Treasuries available, and both Buffett and Munger agreed it was priced below intrinsic value.

Every single quarter since this change was made, Warren Buffett and Charlie Munger have bought back Berkshire stock. In fact, Berkshire Hathaway is the only stock the Oracle of Omaha purchased in each of the past two bear markets (the COVID crash and the current bear market). All told, $66 billion worth of Berkshire Hathaway stock has been bought back in less than five years.

As noted, buying back stock and steadily reducing the outstanding share count is an easy way to help long-term shareholders build wealth. Over time, existing stakeholders will own a larger percentage of the company as the number of outstanding shares declines.

But most importantly, repurchasing $66 billion in stock is a crystal-clear message to shareholders and Wall Street that Buffett is confident in the business he and his team have built. Many of the companies in Berkshire's $328 billion investment portfolio are cyclical businesses that are positioned to thrive during long-winded periods of expansion. The Oracle of Omaha is well aware that the current turbulent environment will eventually pass -- and he's thus far been willing to bet $66 billion on that assessment.

Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Microsoft. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

A stock split is a mechanism that allows a publicly traded company to alter its share price and outstanding share count without affecting its market cap or operations. A forward stock split can make shares more nominally affordable for everyday investors who don't have access to fractional-share purchases with their online broker. Meanwhile, reverse stock splits can boost a company's share price to ensure it remains compliant for listing on one of the major U.S. exchanges.

Most investors get excited about forward stock splits, because a company wouldn't be conducting a forward split if its share price hadn't risen significant. And a company's share price wouldn't soar if it weren't out-innovating its competition and executing well.

There's little question that the top stock-split stock for investors to buy hand over fist right now is Alphabet, the parent company of Google, YouTube, and autonomous driving company Waymo. Although concerns about weaker ad spending could adversely affect Alphabet in the very short-term, this is a company that brings sustained competitive advantages to the table.

The other major issue with Tesla is its valuation. Whereas auto stocks are typically valued at a single-digit forward-year price-to-earnings multiple, investors are currently paying 54 times Wall Street's consensus earnings for the upcoming year to own shares of Tesla.

The year 2022 was a lousy one for the stock market. Even after factoring in dividends, the S&P 500 fell 19.4% in those 12 months, while the tech-heavy Nasdaq composite took a 33.1% haircut. The catalysts behind Wall Street's sell-off are all too familiar: Inflation, soaring interest rates, persistent recession fears and the Russia-Ukraine war snowballed into an avalanche of worries that investors couldn't ignore, and many previously high-flying stocks took a beating as the "risk off" mindset came to dominate markets. This, thankfully, provided a window of opportunity for investors to snap up great companies at a discount entering the new year.

Before each new year, U.S. News selects 10 stocks to buy for the year ahead. Here's a rundown of the 10 best stocks to buy for 2023 and how each has fared thus far based on total returns, which include dividends:

First up is Apple, the largest publicly traded company in the world, if you exclude government-backed behemoths such as oil giant Saudi Aramco. Like other tech stocks, AAPL shares had a rough go of it in 2022, as recession fears and soaring interest rates spooked investors in the sector. Following a rare 26.4% pullback in 2022, Apple now trades at 26 times earnings, offering investors a sound entry point into the $2.5 trillion iPhone maker. Although its most recent earnings report technically missed expectations, that was more due to supply chain snarls than demand issues. In fact, Apple reported an active-installed base of more than 2 billion devices, and revenue in its high-margin services segment surpassed $20 billion. AAPL stock is bouncing back from its 2022 woes, with shares up 22.5% in 2023 through March 23.

Next up is Citigroup, a nearly $90 billion multinational bank with both retail and investment banking arms. What Citigroup offers investors is twofold: First, it pays a healthy 4.6% dividend yield, which is a nice buffer for shareholders in an era of rising rates and high inflation. Importantly, that dividend is sustainable over time, with Citigroup using less than 30% of earnings to finance its payouts. Aside from its high dividend, Citigroup also looks like a value stock at current levels, trading for seven times forward earnings and just 0.47 times book value. Famed investor and financial guru Warren Buffett began buying Citigroup stock in the first quarter of 2022, and Berkshire Hathaway Inc. (BRK.A, BRK.B) now owns a roughly $2.4 billion stake in the company. Citigroup stock is down 3% in 2023 through March 23.

Another return pick from last year's list, this off-the-beaten-path stock is a $9 billion Latin American airport operator. The only industrial on this list, ASR also offers geographic diversification and is a mid-cap company that isn't on most investors' radars. The stock was a diamond in the rough in 2022, posting a total return of 17% in a bear market. It helps, of course, that passenger traffic has been surging: In February 2023, passenger traffic shot up 23.9% year over year, driven by a 25.6% surge in Mexico. Airport operators earn money when airlines rent out gates and pay landing fees, as well as from parking, ground transportation, airport retail and advertising, among other sources. ASR's largest airports are in Cancun, Mexico; San Juan, Puerto Rico; and Medellin, Colombia. The stock pays a 2.7% dividend, and shares have posted a total return of 24.2% in 2023 through March 23. 041b061a72


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