How To Invest In Stocks – 5 Best Stocks To Buy For Beginners

Over the long term, stocks give the best returns as compared to other traditional asset classes. While equity investing is fascinating it can be perplexing especially if you are new to the stock markets. Here are the five best stocks that you can buy as a beginner.

To invest in stocks, you would need to open a stock trading account. You can then invest in stocks of your choice.

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1. Berkshire Hathaway (NYSE: BRK.B)

Even if you haven’t ever invested in stocks, in all likelihood you would have heard about Warren Buffett. Also known as the Oracle of Omaha, Buffett is among the richest persons globally and has made all his wealth by investing. He is arguably among the best investors of all time. While you may lack the prowess of a Buffett, as many other retail investors do, you can still invest like him by buying Berkshire Hathaway stock.

Warren Buffett is the chairman of Berkshire Hathaway. The company is a conglomerate and holds several companies ranging from candy makers to aircraft part manufacturers. It also owns GEICO insurance. Also, the company has a portfolio of publicly traded stocks which is currently valued at over $300 billion. Apple is the largest holding for Berkshire Hathaway.

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Berkshire Hathaway looks like a good stock to buy

Buffett makes most of the investment decisions at Berkshire Hathaway so buying the stock is like betting on his expertise. While Berkshire Hathaway stock underperformed the markets in 2019 and 2020 by a fairly wide margin, it is outperforming the markets this year amid the rebound in value stocks.

Berkshire Hathaway has come off its 52-week highs and has fallen below the 50-day SMA (simple moving average). The stock could find support at the 100-day SMA which is currently at $266.70. The stock might be getting oversold now with a 14-day RSI (relative strength) index of 37.2. RSI values below 30 signal oversold positions. Looking at the valuations, Berkshire Hathaway trades at an NTM (next-12 months) EV (enterprise value)-ti-EBITDA (earnings before interest tax, depreciation, and amortization) of 13.8x which looks reasonable.

That said, leaving the financial number crunching aside, Berkshire Hathaway can be a part of the core portfolio especially if you are a beginner investor. Over the long term, the stock can deliver better than market returns, just like it has done over the last many decades.

2. Apple (NYSE: AAPL)

Apple is the largest company on the planet with a market capitalization of $2.23 trillion. If it were to be a company, Apple would be among the top 10 countries by market capitalization. If was the best performing FAANG (Facebook, Apple, Amazon, Netflix, and Google-parent Alphabet) stock in 2019 and 2020.

However, Apple is trading almost flat in 2021 and is underperforming the US stock markets which are trading near their all-time highs. The recent underperformance could be an opportunity to buy Apple.

apple stock

Apple stock analysis

Looking at the business, Apple has global operations. From a predominantly gadget maker, the company has been pivoting towards the more value add and high margin services business. It has created an impeccable Apple ecosystem and earns every time you make an app store purchase. While the hefty fees which can be upwards of 30% have been an eyesore for developers, it has also meant a lucrative earnings stream for Apple.

The stock has seen a valuation multiple rerating and currently trades at an NTM PE multiple of 26x. The multiples are higher than the historical averages but we are in a smartphone supercycle led by the increased pace of digitization as well the 5G adoption. Over the long term, Apple’s planned entry into electric vehicles would also drive value.

Apple is a good long term stock

The stock is looking good on the charts also and has crossed above the 50-day and 100-day SMA. It could however be getting overbought as its 14-day RSI value is 63.3. RSI values above 70 signal overbought positions.

That said, if you are an iPhone fan or if you aspire to own an Apple product, you can also benefit from the growing demand and popularity of Apple products by buying the stock. It could be a good stock to buy especially for beginner investors as it belongs to the breed of buy and hold stock that you need not monitor daily. Apple is the largest holding for Warren Buffett for a reason.

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3. The Walt Disney Company (NYSE: DIS)

disney stock

Disney is another stock that looks like a good buy for beginner investors. The company is present in several verticals including movie production and theme parks. 2020 was a turbulent year for the company as its parks were closed due to the COVID-19 related restrictions. The company, however, doubled down on its streaming plans in the year and set itself an ambitious target.

The company expects Disney+ subscriber numbers to triple by fiscal 2024 and rise to between 230-260 million. After adding Hulu and ESPN+ subscribers, Disney expects to have been 300-350 million subscribers by the end of 2024. That would make it a formidable force in the streaming industry.

From a fundamental perspective, in the short term, the reopening of the theme parks will help buoy the earnings of Disney. In the long term, the streaming service will add shareholder value. Currently, the company is investing heavily in the streaming business and these will start reflecting in the profits over the next couple of years.

Disney stock technical analysis

Looking at the technicals, Disney stock has been facing strong resistance at the 50-day SMA which is currently at $178.72. It also trades below the 100-day SMA which is a bearish indicator. Disney’s 14-day RSI of 54 is a neutral indicator. The stock trades at an NTM PE multiple of 47x. While the multiples are higher than the historical average, they still look reasonable. Firstly, Disney’s earnings would see a rise in 2022 and beyond amid the rebound in the Parks segment’s profitability. Also, the company has seen a valuation rerating amid the pivot to streaming.

If you are a beginner investor, you might still admire Disney parks and movies. Also, Disney is an easy-to-understand business and can be a part of the core portfolio for investors.

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4. Amazon (NYSE: AMZN)

Amazon is among the most successful American business of the century. It is among the biggest companies and the stock has outperformed the markets by a wide margin since it went public. While many wonder, whether it is late to buy the stock, it can never be late to buy a quality company like Amazon.

For beginners, while Amazon is present in several verticals, e-commerce and cloud are its two main businesses. The North American e-commerce business drives most of Amazon’s revenues while the cloud operations account for the bulk of the profitability.

The company is the market leader in the cloud market. AWS is growing fast and is the most profitable business segment for Amazon. It reported an operating income of $4.1 billion in the first quarter of 2021 which was over 46% of the total operating income.

Amazon stock technical analysis

Amazon stock trades above its 50-day, 100-day, and 200-day SMA which is a bullish technical indicator. After the recent underperformance, it could be worthwhile buying the stock now.

AMZN stock trades at an NTM (next-12 months) PE multiple of just under 60x. The multiple has averaged 84x, 80x, and 104x over the last one year, three years, and five years respectively. Amazon’s current valuation multiples are near historical lows which look unwarranted.

Amazon has several growth drivers, both organic and inorganic. Despite being an almost $2 trillion-dollar company, Amazon is always looking at ways to increase its growth. The stock looks like a good buy, especially for beginner investors.

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5. Coca-Cola Company (NYSE: KO)

Coca-Cola has received some negative publicity due to the Cristiano Ronaldo controversy. There is little denying that many people are getting aware of the health aspects of higher soft drink consumption. However, Coca-Cola has also been pivoting its portfolio towards healthier alternatives.

Coca-Cola stock trades at an NTM PE multiple of 24.4x which is slightly higher than its 5-year average of 23.2x. However, in general, stocks have seen a rerating with US markets near their all-time highs. If you crave regular income from your investments, Coca-Cola will fit the bill with its dividend yield of 3.1% which is almost twice that of the S&P 500. The company is a consistent dividend payer and even finds a place in Warren Buffett’s portfolio.

Coca-Cola stock analysis

Coca-Cola has fallen below the 50-day SMA but trades above the 100-day and 200-day SMA. The 14-day RSI is neutral at 45.5. Overall, given the popularity of Coca-Cola’s products and the company’s pivot towards healthier alternatives, it looks like a good stock to buy. If you are a beginner, think this way, every time you buy a Coke can, you help increase the company’s earnings.

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About Mohit PRO INVESTOR

Mohit Oberoi is a freelance finance writer based in India. He has completed his MBA with finance as majors and also holds a CFA charter. He has over 14 years of experience in financial markets. He has been writing extensively on global markets for the last seven years and has written over 7,500 articles. He covers metals, electric vehicles, asset managers, tech stocks, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.