Here are seven of the best ways to invest $1,000.
If you have an extra $1,000 sitting in a savings or checking account, one of the best ways to earn a return on that money is to invest in the stock market. If you’re new to investing, buying a low-cost, diversified S&P 500 exchange-traded fund, such as the SPDR S&P 500 ETF Trust (ticker: SPY), is a relatively low-risk place to start. However, if you’d rather begin building your own stock portfolio from scratch, here are seven of the best blue-chip stocks to buy with $1,000 that have “buy” ratings from the Morningstar analyst team.
Microsoft Corp. (MSFT)
Microsoft is the world’s largest software company and owner of the Windows operating system, Office business software suite and Azure cloud computing service. Morningstar analyst Dan Romanoff says Azure is the core of Microsoft’s business in the 2020s. He says Azure’s 45% growth rate in fiscal 2022 was staggering given that it is already a $45 billion business. He says Microsoft has had tremendous success in transitioning its Office customers from a licensing model to a subscription model and upselling higher-priced products. Finally, Microsoft is well positioned in cloud-based online gaming. Morningstar has a “buy” rating and $352 fair value estimate for MSFT stock, which closed at $287.02 on Aug. 11.
Alphabet is one of the world’s largest companies and is the parent company of Google and YouTube. Analyst Ali Mogharabi says Alphabet’s second-quarter earnings miss was disappointing, but the company’s search advertising and cloud services growth numbers were encouraging. Mogharabi says Alphabet is taking steps to control costs, is generating impressive cash flow from its ad business and has its cloud services business on a path to profitability. In addition, he says Alphabet has plenty of cash for additional investments and tuck-in acquisitions. Morningstar has a “buy” rating and $169 fair value estimate for GOOGL stock, which closed at $118.84 on Aug. 11.
Amazon.com Inc. (AMZN)
Amazon is the market leader in e-commerce and cloud services. Romanoff says Amazon’s second-quarter earnings beat demonstrated to investors that its online retail business is recovering. In addition, increases in Amazon Prime membership fees and third-party seller fees boosted Amazon’s total revenue and margins, while AWS cloud services revenue and advertising revenue grew by 33% and 18% year over year, respectively. Romanoff says Amazon benefits from numerous size and scale advantages. He says AWS, advertising and subscriptions will be Amazon’s main growth drivers over the next five years. Morningstar has a “buy” rating and $192 fair value estimate for AMZN stock, which closed at $140.64 on Aug. 11.
Berkshire Hathaway Inc. (BRK.A, BRK.B)
Berkshire Hathaway is a holding company that owns a diverse portfolio of public and private companies that is managed by Wall Street legend Warren Buffett. If you have just $1,000 to put into the stock market, you can essentially buy shares of Berkshire stock and put Buffett in charge of your portfolio. Analyst Greggory Warren notes that Berkshire’s stock holdings have taken a hit in 2022, but its diversification and low risk profile make Berkshire an excellent defensive investment during periods of economic uncertainty. Morningstar has a “buy” rating and $357 fair value estimate for BRK.B stock, which closed at $296.47 on Aug. 11.
Meta Platforms Inc. (META)
Meta Platforms is a market leader in social media and online advertising and is the owner of Facebook, Instagram and other popular platforms. Meta shares are down more than 49% year to date after Facebook reported its first-ever drop in daily active users in February. Meta also reported its first quarter of negative revenue growth in the second quarter and guided for negative revenue growth in the third quarter. Despite all the near-term challenges, Mogharabi says, Meta’s 2022 weakness is a long-term buying opportunity. Morningstar has a “buy” rating and $346 fair value estimate for META stock, which closed at $177.49 on Aug. 11.
JPMorgan Chase & Co. (JPM)
JPMorgan Chase is one of the world’s largest banks and financial services companies. Analyst Eric Compton says JPMorgan is arguably the most dominant U.S. bank. He says the bank’s diversification, scale and risk management create a tremendous competitive advantage. Compton also says JPMorgan is one of the best-managed banks in the market. Not only is JPMorgan the largest U.S. credit card issuer, but it is also one of the largest merchant acquirers. In addition, its investment bank generates an exceptional amount of fee revenue. Morningstar has a “buy” rating and $149 fair value estimate for JPM stock, which closed at $120.14 on Aug. 11.
Bank of America Corp. (BAC)
Bank of America is one of the largest diversified U.S. banks and financial holding companies. The bank’s holdings have a relatively high sensitivity to interest rates, suggesting that the Federal Reserve could significantly boost its net interest margins in the near term. However, Bank of America shares are down 25% in 2022 on concerns that the aggressive rate hikes will trigger a recession and a slowdown in loan growth. Compton says the bank will continue to gain market share given its integrated retail and commercial offerings. Morningstar has a “buy” rating and $40 fair value estimate for BAC stock, which closed at $35.91 on Aug. 11.
7 best stocks to buy with $1,000:
— Microsoft Corp. (MSFT)
— Amazon.com Inc. (AMZN)
— Berkshire Hathaway Inc. (BRK.A, BRK.B)
— Meta Platforms Inc. (META)
— JPMorgan Chase & Co. (JPM)
— Bank of America Corp. (BAC)
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7 Best Stocks to Buy With $1,000 originally appeared on usnews.com
Update 08/12/22: This story was published at an earlier date and has been updated with new information.
