The secret to growing rich like Warren Buffett is to have patience and grow rich slowly. The billionaire value investor builds a strong foundation through his core portfolio that keeps his wealth safe and growing. He sets aside some money for his non-core portfolio, doing trial and error with new industries, countries, and technologies. Buffett’s core portfolio has five stocks: Apple, Bank of America, American Express, Coca-Cola, and Chevron. These five stocks make up 73.5% of Berkshire Hathaway’s portfolio.
Image source: The Motley Fool
How Warren Buffett built his portfolio
Warren Buffett accumulated shares of the above five companies over time, investing whenever the stocks fell. All five companies are market leaders in their respective sectors, which gives Buffett’s portfolio the diversification it needs.
You can also build a core portfolio of just three to five stocks of different sectors. And then, you allocate a small percentage of your portfolio, probably 2-5%, to upcoming growth stocks like electric vehicle (EV) maker BYD and hedging stocks like grocery chain Kroger.
The best Warren Buffett-inspired stocks to buy with $300
Taking lessons from Buffett’s portfolio, you can make a Canadian replica of these stocks with just $300. Remember, start small and keep adding on every dip.
Royal Bank of Canada
The current economic uncertainty has pushed bank stocks to their lows as they face high credit risk. Like Bank of America, Royal Bank of Canada (TSX:RY) is one of Canada’s largest banks, with all key banking ratios in balance. It has a diversified portfolio of services: personal and commercial banking, capital markets, wealth management and insurance. It earns 60% of its revenue from Canada, 24% from the United States, and 16% from other countries.
The banking sector is currently going through a hard time as rising interest rates, and inflation increased the banking loan portfolio. Consumers and companies have now started to feel the pressure of high interest rates, increasing the risk of default. The market has already priced in rising credit risk as credit rating agencies downgraded U.S. banks.
Fun Fact: Canadians spent 14.9% of their household income on service debt in the second quarter, up from 12.5% during the pandemic and in line with 15% pre-pandemic.
RBC has another risk, the $13.5 billion acquisition of HSBC Canada. The acquisition comes at a time when the economy is weak. HSBC Canada has a heavy residential mortgage portfolio, with 84% of uninsured mortgages. If Canada’s housing bubble bursts and people default on mortgages, RBC could take a bigger blow.
But investors have already priced in all the above risks. Hence, Royal Bank of Canada’s stock is down 17% from its 2022 peak, inflating its dividend yield to 4.55%. The bank withstood bigger recessions than the one anticipated in 2024. It also has a rich history of giving dividends. At the most, it would pause its dividend growth as it only pays 49% of its cash flows in dividends.
RBC is a stock to buy in your core portfolio after every dip and accumulate a higher dividend yield.
One stock for growth
While Buffett invests in traditional businesses, he also invests in some tech and automotive companies like cloud computing firm Snowflake and China’s BYD. Tapping the future growth trends, you could consider investing in Magna International (TSX:MG). While Magna and BYD have different features, Magna is your best bet in EVs is the TSX.
The stock has dipped 12.3% this month, creating an opportunity to buy the stock at a discount. Instead of auto companies, you can invest in component suppliers and secure your growth in the EV wave. Magna has sufficient liquidity to withstand a recession, which could slow car demand. But it has the long-term secular trend of shifting to electric cars.
Investing tip
You could buy both TSX stocks for $300. The strategy to earn money from these stocks is to buy and hold for the long term and keep buying at dips. While these stocks won’t make you rich quickly, they will give your portfolio a strong foundation that can keep you wealthy even in a crisis.
