2 U.S. Stocks Every Canadian Investor Should Own

Other than buying dividend stocks in Canada, investors should also diversify into solid growth stocks in the U.S., such as Amazon.

| More on:
stock analysis

Image source: Getty Images

The economy in the United States is much bigger. Besides, many U.S. companies also operate internationally. So, it’s a good idea for Canadians to invest in U.S. stocks. For immediate diversification, Canadian investors can start off with a stock like Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B), which provides U.S. market-like returns but with potentially lower risk.

Since 2007, BRK.B stock’s compound annual growth rate (CAGR) was about 9.25% versus SPDR S&P 500 ETF’s (ASX:SPY) return of 8.85%. Since 2012, BRK.B stock’s CAGR was 13.23% versus SPY’s 13.20%. However, in both periods, BRK.B stock provided a tad greater resiliency.

Berkshire Hathaway stock

Berkshire is a holding company with a diverse range of businesses, such as insurance, railroad, utilities, manufacturing, retail, and service. Additionally, its common stock portfolio was worth close to US$344 billion at the end of 2022. At the time, its seven-largest holdings were Apple (44% of portfolio), Bank of America (8.9%), Chevron (8.3%), Coca-Cola (7.4%), American Express (7.1%), Occidental Petroleum (3.9%), and Kraft Heinz (3.7%). As well, it had a substantial cash holding of US$128.6 billion at the end of December.

Berkshire typically keeps a lot of cash on hand to be ready to deploy in attractive investment opportunities whenever they may arise from volatile financial markets or an unpredictable economy. Warren Buffett is able to make extraordinary deals that retail investors have no access to.

A Business Insider article gave an example:

“Warren Buffett struck one of the must lucrative deals of his career when he agreed to inject $5 billion into Bank of America during the U.S. debt-ceiling crisis in 2011 … for preferred shares … Berkshire also received stock warrants granting it the right to buy 700 million of the bank’s common shares at a price of US$7.14 per share” anytime before September 2, 2021.

“The investor waited to use the warrants until the annual dividends from 700 million common shares exceeded the US$300 million in yearly income that Berkshire was receiving from its preferred stock. He exercised all of the warrants in August 2017 and covered the $5 billion cost of doing so by giving up virtually all of Berkshire’s preferred shares. The common shares it received were worth over US$20 billion at the end of 2017, meaning Berkshire more than tripled its money on paper, even before accounting for the dividends it received.”

U.S. growth stocks

Canadian eligible dividends are taxed at lower rates for Canadian investors holding shares in their non-registered accounts. Popular dividend stocks include the big Canadian banks and telecoms and utilities. Therefore, you might want to add U.S. growth stocks to your portfolio.

You can investigate ideas from SPDR Portfolio S&P 500 Growth ETF (NYSEMKT:SPYG). Its top holdings are Apple (13.4% of the ETF), Microsoft (6.7%), Alphabet (6.4%), NVIDIA (3.6%), Exxon Mobil (2.6%), UnitedHealth (2.5%), Tesla (2.4%), Amazon (2.4%), and Visa (2.1%).

The analyst consensus opinion is of that the following are undervalued stocks. Analysts believe Amazon trades at a discount of approximately 20%, UnitedHealth (18%), Alphabet 15%, Tesla (13%), and Visa (11%). They believe the other large holdings mentioned are about fairly valued.

In summary

Canadian investors can consider building a position in the U.S. market, perhaps via Berkshire Hathaway. Additionally, they can also explore solid growth stocks in the U.S., such as the five listed in the prior paragraph.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. American Express is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Fool contributor Kay Ng has positions in Bank of America on the NEO exchange,  Alphabet,  Amazon.com, Microsoft, and Visa. The Motley Fool recommends Alphabet, Amazon.com, Apple, Bank of America, Berkshire Hathaway, Kraft Heinz, Microsoft, Nvidia, Tesla, and Visa. The Motley Fool has a disclosure policy.

More on Investing

Hand arranging wood block stacking as step stair with arrow up.
Tech Stocks

3 Canadian Growth Stocks I’d Buy Under $30

These under $30 Canadian growth stocks are well-positioned to capitalize on mega trends such as e-commerce, the electrification of vehicles,…

Read more »

Gas pipelines
Stocks for Beginners

3 Reasons to Buy Enbridge Stock Like There’s No Tomorrow

Enbridge (TSX:ENB) is a superb long-term option. Here's why you should buy Enbridge stock right now and hold it for…

Read more »

money cash dividends
Dividend Stocks

This 8.39% Dividend Stock Can Pay $100 Cash Every Month

Consider investing in this monthly dividend stock at current levels to lock in high-yielding monthly distributions to create a good…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Tech Stocks

Why This Tech Stock Just Jumped 18%

This tech stock just saw shares surge after announcing it was being acquired, but more growth could still be in…

Read more »

Canadian flag
Investing

3 Top-Performing Canadian Stocks That Should Just Keep Winning

Given their healthy growth prospects and solid underlying businesses, the uptrend in these three top-performing Canadian stocks could continue.

Read more »

The sun sets behind a power source
Investing

3 Reasons to Buy Fortis Stock Like There’s No Tomorrow

As far as top dividend stocks are concerned, Fortis (TSX:FTS) remains a top option long-term investors should consider right now.

Read more »

growing plant shoots on stacked coins
Stocks for Beginners

1 Copper Stock to Buy as Copper Prices Shine

The price of copper continues to climb, and more copper production is on the way for this top stock up…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

Here’s the Average TFSA Balance in 2024

The Bank of Montreal (TSX:BMO) says that the average TFSA balance is $41,510, far below the maximum.

Read more »