You should make every investment count. Warren Buffett says to think of it as if you have just 20 stocks to buy over your lifetime and every time you buy one, your card gets punched. He calls it his 20-slot rule. “You’d really have to think carefully about what you did,” he said. “And you’d be forced to load up on what you really think about. So you’d do much better.”
It’s why Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) is concentrated in just a handful of stocks. Although there are several dozen companies in the portfolio, just three stocks represent almost two-thirds of the total, and five stocks account for 75% of the holdings.
So, if you’re just starting out investing and want to make your 20 punches count, check out these three stocks to buy to get you off and running.
Camping World Holdings (CWH)
Recreational vehicles () were hot commodities before COVID, but they became de rigueur during the pandemic. Not only was getting away from cities important, but lockdowns allowed many to work from home wherever that might be, including if it was on four wheels.
That made the stock of RV dealer Camping World Holdings (NYSE:CWH) a rocket ship. In one year, shares surged over 600% and hit an all-time high of $46 a share. It took the Federal Reserve maniacally raising interest rates to force the wheels to fly off. The value of Camping World shares halved. Not only were many employees called back to the office, but RV buyers were now paying exorbitant installments on what quickly became driveway art. Since we’re still living in a high-inflation, high-interest rate environment, why buy Camping World stock now?
In the just-completed third quarter, Camping World sold 15,205 RVs, down 14% year-over-year but close to the same number it sold in 2019. While 2018 had been the industry peak, what we’re seeing today is a reversion to the mean. The RV dealer’s business is simply returning to more normalized levels.
In the meantime, Camping World Holdings trades at 16 times next year’s earnings and a negligible percentage of its sales. You’re buying a business consolidating around its historical trend but at a vastly discounted valuation.
Chipotle Mexican Grill (CMG)
We’re going from deep discounts to premium prices, but Chipotle Mexican Grill (NYSE:CMG) is worth the cost. The Mexican food chain manages to satisfy consumers’ desire for quick, healthy food that also tastes good — and doing so at an excellent profit.
Chipotle can’t stop growing. With nearly 3,300 restaurants across the country, the company fends off cannibalization. Same restaurant sales rose 5% in the latest quarter as revenues jumped 11% to $2.5 billion. Operating margins also widened 90 basis points to 16%.
Digital ordering became popular during the pandemic. Chipotle leans heavily into its technology now. Some 36.6% of its orders are via digital channels. Similarly, its Chipotlane drive-thru windows are now a standard feature. Chipotle opened 62 locations during the quarter, and 54 of them had drive-thrus. It’s no longer an option for restaurants — they must have pickup windows, or they will die as the sit-down experience diminishes.
Yet, as noted earlier, Chipotle stock isn’t cheap. At 52 times earnings and 43x FCF, you’re paying up for the privilege of buying the stock. And at over $2,100 a share, investors with only minimal amounts of money available will need to tap fractional shares to buy a piece of this growth machine. It’s worth it though, as the mix of affordable, healthy and fast casual food continues resonating with hungry consumers.
Hudson Technologies (HDSN)
The window is quickly closing on the chance to get in on Hudson Technologies (NASDAQ:HDSN) at such a discount. A 2020 law has been phasing out virgin and reclaimed hydrofluorocarbons for years. As the leading provider of green refrigerants with a 35% share of the market, Hudson is in the catbird seat to capitalize on the opportunity.
The so-called American Innovation and Manufacturing Act requires an 85% reduction in refrigerants by 2036. As that year draws near, possible shortages of popular refrigerants like R-410A and R-134a could surface, affecting prices. Hudson could see a demand for reclaimed refrigerants surge as the law cuts deeper into supplies.
Look at the current period as the calm before the industry is shocked into awareness. Hudson’s sales and profits fell in the current quarter, mostly due to tough comparisons to last year when the first HFC cuts hit the market. But 2024 marks a 40% reduction in baseline HFC production and should jolt the industry.
Hudson used this year to pay off its term loan, saving it millions on interest expenses. It’s now in a much better position financially and ready for the next phase of growth.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.