During the 2020 annual meeting of his firm Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B), Warren Buffett had a slide with four words that summarized his discussion: “Never bet against America.” The recovery in broader markets since early spring is potentially a testament to how the investing community agrees with the “Oracle of Omaha.” Therefore today, I’ll discuss five American stocks to buy to invest in the U.S.
According to recent research led by Andreas Kuckertz of the University of Hohenheim, Germany, “Innovation-driven economies, such as those of the USA, Japan, and most European countries benefit from new jobs created by entrepreneurs and additional economic growth.”
Similarly, Catherine Fazio of Boston University and her colleagues conclude that in the U.S., “High-growth startups contribute disproportionately to net job creation and to impactful innovation, laying a crucial foundation for economic dynamism and prosperity.”
Buffett’s belief in the equity markets’ growth potential in part stems that innovation and dynamism. So which American stocks may be appropriate, especially for long-term investors? For starters, growth and value are two fundamental approaches to investing.
Growth companies are typically defined as those whose earnings or revenues increase at higher-than-average rates. Many such companies do not pay a dividend or provide only a small payout. They also usually trade at relatively high price-to-earnings valuations and tend to be more volatile than the broader market.
On the other hand, value investors concentrate on businesses that have fallen out of favor but still have good fundamentals. Three value ratios typically analyzed include price-to-book, price-to-earnings, and price-to-sales ratio.
Investors may also consider investing in exchange-traded funds (ETFs). Those that follow broader indices or have a thematic approach may potentially be appropriate for most market participants. For example, the S&P 500 index measures the stock performance of the largest publicly traded 500 companies in the U.S. These companies comprise around 80% of the overall U.S. stock market’s value and cover approximately 24 separate industry groups.
For many investors, the S&P’s performance shows how U.S. equities in general are performing. Larger companies make up a more significant portion of the index’s value and influence its performance. It is also important to note that the S&P 500 is heavily skewed to tech. In other words, those investors who may consider buying into a broader market exchange-traded fund would benefit if large tech shares continue to do well in the current environment.
With that, here are five American stocks to buy to invest in the U.S.:
- Ford’s (NYSE:F)
- iShares Core S&P Total US Stock Market ETF (NYSEARCA:ITOT)
- Twitter (NASDAQ:TWTR)
- Vanguard ESG US Stock ETF (CBOE:ESGV)
- Walmart (NYSE:WMT)
52-week Price Range: $3.96-$9.65
Michigan-headquartered Ford Motor Company’s history goes back to 1903 when Henry Ford led 12 investors to form the carmaker. Now it is a global automotive company with a full line of cars, trucks, sport utility vehicles (SUVs), and Lincoln luxury vehicles.
On July 30, management reported better-than-anticipated Q2 operating results. Net income of $1.1 billion included a $3.5 billion gain on its earlier investment in autonomous vehicle specialist Argo AI, which has a Self Driving System (SDS).
Regular InvestorPlace readers would likely remember that Ford and Volkswagen (OTCMKTS:VLKAY) have co-invested in Argo AI, becoming “substantial majority” shareholders. The two carmakers are independently integrating Argo AI’s SDS into their vehicles.
In June 2020, Ford and Volkswagen finalized agreements to expand their global alliance, leveraging complementary strengths across an expected combined 8 million commercial cars, electric vehicles, and midsize pickup trucks. Analysts regard Ford’s push into electric vehicles as a substantial move that could likely take the stock price over the $10-level.
Ford’s recent quarterly earnings also showed a strong balance sheet, with more than $39 billion in cash at the end of Q2. Ford CFO Tim Stone said, “You’re seeing us fix things that held us back in the past, accelerate in areas like commercial vehicles and SUVs, and set ourselves up for growth in connectivity, electrification, and autonomous vehicles.”
If you’re looking for American stocks to buy, F shares may well help electrify your long-term portfolio.
iShares Core S&P Total US Stock Market ETF (ITOT)
52-Week Range: $58.52 – $76.57
Dividend Yield: 2.11%
Expense Ratio: 0.03% per year, or $3 on a $10,000 investment
The iShares Core S&P Total US Stock Market ETF tracks the S&P Total Market index, thus giving it exposure to the total U.S. stock market, ranging from some of the smallest to the largest companies.
It currently has 3,567 holdings, meaning the fund offers broad diversification at a low cost. The top ten stocks make up approximately 25% of total net assets, which stand close to $26.5 billion.
ITOT’s top three companies are Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), and Amazon (NASDAQ:AMZN). The top three sectors (by weighting) of the fund are Information Technology, Health Care, and Consumer Discretionary.
Year-to-date, the fund is roughly flat. That result does not include the dividend payments. Moreover, the metric shows only half the story for the year. On March 23, it hit a 52-week low at $48.52. Since then, it is up about 50%. Put another way, $1,000 invested in ITOT in early spring would now be $1,500.
If you’re looking to diversify across American stocks, then an exchange-traded fund like ITOT could be a robust addition to a long-term portfolio.
52 Week Range: $20-$45.86
Dividend Yield: N/A
California-based Twitter owns and operates one of the most popular social networking services in the world. It describes itself as “what’s happening in the world and what people are talking about right now.”
The platform has become increasingly popular since the 2016 U.S. Presidential election, as President Trump frequently expresses a wide range of opinions on the site. Analysts expect Twitter to be used extensively by politicians during this election season, too — a development that is likely to support TWTR’s stock price.
In late July, the group released its Q2 earnings. Revenue came at $683 million, down 19% YoY. As a result of the drop in ad revenue, there has been increased speculation that Twitter is working on a new subscription service. The exact details of such a paywall are yet to emerge.
During the quarter, Twitter saw a 34% YoY growth in monetizable Daily Active Usage (mDAU). Management defines mDAU as people, organizations, or other accounts who logged in or were otherwise authenticated and accessed Twitter on any given day through its app or website that can show ads.
InvestorPlace.com readers would be familiar with the fact that activist investors Silver Lake and Elliot Management have large stakes in the company as well as board seats. Market participants are hopeful that these board members will help align Twitter’s strategy with creating value for shareholders.
I’m also optimistic that long-term investors in this American stock would likely see a decade of cash-flow growth in TWTR.
Vanguard ESG US Stock ETF (ESGV)
52-Week Range: $38.85 – 61.47
Dividend Yield: 0.93%
Expense Ratio: 0.12 % per year, or $12 on a $10,000 investment
Ethical concerns have become a pressing consideration for many investors seeking to put their money into companies that align with their views and values. Suppose you would like to invest in American stocks that meet specific environmental, social, and governance (ESG) criteria. In that case, an exchange-traded fund like the Vanguard ESG US Stock Fund may be appropriate. ESGV has 1,464 holdings and tracks the performance of the FTSE US All Cap Choice index.
The fund excludes stocks of companies in the following industries: adult entertainment, alcohol, tobacco, weapons, fossil fuels, gambling, and nuclear power. Additionally, shares of individual companies that do not meet specific diversity criteria, as well as the principles of the United Nations Global Compact, are not included.
The most important sectors (by weighting) are Technology (30.90%), Financials (16.70%), Consumer Services (15.40%), Healthcare (14.60%) and Consumer Goods (8.10%). These five sectors comprise over 85% of the fund. The top ten holdings constitute 27.5% of total net assets, which are around $1.6 billion. ESGV’s top three companies are Microsoft, Apple, and Amazon.
Year-to-date (YTD), the fund is up over 8.7%. On August 7, it hit an all-time high of $61.47. I’d buy the dips in ESGV to add a diverse range of American stocks that meet certain environmental and social criteria.
52-week Price Range: $102-$134.13
Current Dividend Yield: 1.65%
Arkansas-based Walmart is the largest retailer in the world and employer in Fortune 500. Each week, over 260 million customers shop at 11,500 stores in 27 countries as well as on its e-commerce websites. Around 90% of Americans live within 10 miles of a Walmart.
Although Walmart has an all-American reputation, over half the stores are located outside the U.S. Many analysts credit its robust e-commerce presence overseas for its international growth, especially in China and Mexico.
Over a decade ago, Walmart became a clear beneficiary of changes in consumer spending during the Great Recession’s economic headwinds. And WMT stock has reflected this shopping shift. In January 2010, WMT shares were hovering at $50. Now, they are over $134.
Put another way, if you had invested $1,000 in the company in early 2009, you would now have over $2,650. And that does not include any dividend income you would have received.
In mid-May, Walmart released robust Q1 FY21 results. Quarterly earnings came at $1.18 per share on revenue of $134.62 billion. The group has kept its doors open for business throughout the coronavirus outbreak. E-commerce sales in the U.S. grew by 74%, and its same-store sales jumped by 10% in the first quarter as shoppers stocked up due to the lockdown.
Investors were also pleased to see that during the quarter, the group’s operating expenses as a percentage of revenue fell significantly. Operating expenses accounted for 20.3% of Walmart’s revenue last quarter, versus 20.9% a year ago.
The group is expected to release earnings next on August 18. WMT stock is up 10% YTD. If you are looking for stable American stocks that could be appropriate for both conservative income and total return investors, you may want to consider the retailing giant.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. As of this writing, Tezcan did not hold a position in any of the aforementioned securities.