It's my view that ASX investors who are looking to brace their portfolios against further geopolitical or economic shocks should resist the siren's song of buying energy shares, oil ETFs or other short-term bets.

Instead, those investors should consider which companies are best placed to protect their earnings bases amid the significant challenges that the world is currently throwing their way.

It's my view that consumer staples stocks are a sector that is best positioned to protect investor capital amid high levels of uncertainty. Consumer staples stocks are companies that produce or sell goods that we tend to need to buy regularly. That includes food, drinks and household essentials, as well as alcohol and tobacco. Woolworths Group Ltd (ASX: WOW), Coles Group Ltd (ASX: COL) and Endeavour Group Ltd (ASX: EDV) are all prominent examples on the ASX.

However, I think an ASX ETF is a better option than a single ASX stock in terms of protecting a portfolio against uncertainty. That's why I think the iShares Global Consumer Staples ETF (ASX: IXI) is a perfect fund for an uncertain 2026.

Why this ASX ETF is an antidote for uncertainty

As the name implies, this ASX ETF holds a basket of global consumer staples stocks. These range from food and drink producers like Coca-Cola Co, Nestle and Cadbury-owner Mondelez International and makers of household essentials like Colgate-Palmolive and Procter & Gamble to staples retailers and grocers like Walmart, Costco Wholesale and Kroger. Even our own Woolworths and Coles feature as holdings.

It's my view that these sorts of companies can ride out economic shocks and inflation better than any other sector. We all need to buy food and household essentials on a regular basis. That means that, although painful to consumers, these companies can effectively pass on higher costs without the threat of significant sales losses.

Even if consumers switch en masse from expensive branded products to cheaper home-brand options, this ASX ETF holds a mix of companies with strong brands (Procter & Gamble, Coca-Cola) and supermarket stores, mitigating this potential trend.

IXI's holdings are also spread across many different markets, also lowering geographic and currency risk to the ASX investor.

Pulling all of these factors together, and I think we have an ASX ETF that is a perfect investment for the uncertain world we find ourselves in in 2026.

The post This ASX ETF is perfect for an uncertain world appeared first on The Motley Fool Australia.

You do not need to pick individual stocks straight away. You do not need to forecast earnings next quarter. And you definitely do not need to trade every week.

Exchange-traded funds (ETFs) can provide instant diversification and exposure to global markets with a single trade.

With that in mind, here are three ASX ETFs that could make sense for beginner investors in March and beyond.

iShares S&P 500 ETF (ASX: IVV)

The first ETF for beginner investors to consider buying is the iShares S&P 500 ETF.

This fund tracks the famous S&P 500 index, giving investors exposure to 500 of the largest stocks in the United States. That includes businesses such as Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Walmart (NYSE: WMT).

Rather than trying to pick which US stock will perform best, this ASX ETF spreads your investment across the broad US market. The S&P 500 index has historically delivered strong long-term returns, supported by innovation, corporate profitability, and economic growth.

For beginners, this type of broad exposure can provide a solid foundation.

Betashares Australian Quality ETF (ASX: AQLT)

If you want exposure closer to home, the Betashares Australian Quality ETF could be worth a look.

This ASX ETF focuses on high-quality Australian shares that boast strong balance sheets, stable earnings, and high return on equity. It aims to tilt towards the best businesses rather than simply tracking the market.

Holdings often include established names with durable competitive positions and solid financial metrics.

For a new investor, a quality-focused approach can reduce exposure to weaker businesses and provide a smoother ride over time. This fund was recently recommended to clients by analysts at Betashares.

VanEck Morningstar Wide Moat AUD ETF (ASX: MOAT)

Another beginner-friendly option is the VanEck Morningstar Wide Moat AUD ETF.

This ASX ETF invests in US stocks that have sustainable competitive advantages. These advantages can include brand strength, intellectual property, or cost leadership.

Its holdings change periodically but currently include shares such as United Parcel Service (NYSE: UPS), Bristol-Myers Squibb (NYSE: BMY), and Huntington Ingalls Industries (NYSE: HII).

Instead of chasing fast-growing but speculative businesses, this fund focuses on shares that can defend their profits over the long term. This has proven to be a highly successful strategy for legendary investor Warren Buffett. And it is never a bad idea for beginners to follow in his footsteps.

The post 3 ASX ETFs for beginner investors to buy in March appeared first on The Motley Fool Australia.

With more than $8 billion in assets under management, QUAL is currently the fifth most popular ASX ETF on our markets. It comes in behind the Vanguard Australian Shares Index ETF (ASX: VAS), the Vanguard MSCI Index International Shares ETF (ASX: VGS), the iShares S&P 500 ETF (ASX: IVV) and the BetaShares Australia 200 ETF (ASX: A200).

Unlike those four ETFs, though, QUAL isn't a market-wide index fund that blindly invests in companies according to their market capitalisation, with few other considerations.

Instead, it tracks an index that actively screens companies to identify their quality. These screens include factors like a stock's return on equity, earnings stability and financial leverage.

After applying these screens to a range of internationally listed shares, the VanEck International Quality ETF settles on a portfolio of around 300 different stocks, hailing from more than a dozen different countries. These countries range from Switzerland, Japan and the United Kingdom to China, Denmark and Ireland.

However, the vast majority of QUAL's portfolio is drawn from the United States of America, which commands more than three-quarters of this ETF's weighted holdings.

So, let's get into what you're actually buying when purchasing QUAL units in 2026.

QUAL: What's in this ASX ETF's box?

Here are the current top ten holdings of the VanEck International Quality ETF, as well as their respective weightings in the QUAL portfolio:

1. Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL) at 5.67% of the total QUAL portfolio
2. Meta Platforms Inc (NASDAQ: META) at 5.02%
3. NVIDIA Corporation (NASDAQ: NVDA) at 4.64%
4. Apple Inc (NASDAQ: AAPL) at 4.62%
5. Microsoft Corporation (NASDAQ: MSFT) at 4.46%
6. Eli Lilly & Co (NYSE: LLY) at 3.44%
7. Visa Inc (NYSE: V) at 2.92%
8. ASML Holding N.V. (AMS: ASML) at 2.52%
9. Johnson & Johnson (NYSE: JNJ) at 1.86%
10. Walmart Inc (NYSE: WMT) at 1.77%

Some other significant QUAL holdings include Mastercard Inc (NYSE: MA), Netflix Inc (NASDAQ: NFLX), Costco Wholesale Corp (NASDAQ: COST) and Caterpillar Inc (NYSE: CAT).

Not only does this list reveal how dominant the US is in this ASX ETF, but it shows how similar its holdings are to a broad-market US index fund like the iShares S&P 500 ETF. We discussed that ETF just the other day, so check out how its holdings compare to QUAL's here.

This methodology seems to have worked quite well for the VanEck International Quality ETF, though. As of 31 December, QUAL units have returned an average of 14.8% per annum over the past ten years, and 22.85% per annum over the past three. It will be interesting to see if this performance keeps up in 2026.

This ASX ETF charges a management fee of 0.4% per annum.

The post Investing in the VanEck International Quality ETF (QUAL)? Here's what you're really buying appeared first on The Motley Fool Australia.

A 20-year investing horizon gives compounding the freedom to work its magic, smoothing out the bumps and capturing the long-run performance of global markets.

The good news for Australian investors is that the ASX offers world-class ETFs that provide instant diversification across many of the most innovative stocks and strongest economies on the planet.

If you're looking to set up a portfolio you won't need to tinker with for a very long time, the following three ASX ETFs are hard to beat.

iShares S&P 500 ETF (ASX: IVV)

When it comes to long-term wealth creation, it is hard to look beyond the US market.

The iShares S&P 500 ETF tracks the S&P 500 index, giving investors a slice of America's 500 largest stocks. These are the businesses driving innovation in technology, healthcare, consumer spending, and industrials.

This includes giants such as Microsoft (NASDAQ: MSFT), Nvidia (NASDAQ: NVDA), Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL), Tesla (NASDAQ: TSLA), and Walmart (NYSE: WMT). These companies have shaped global consumer behaviour, created new industries, and consistently reinvested into product development and growth. For a 20-year investment horizon, it is arguably a must-have building block.

Betashares India Quality ETF (ASX: IIND)

India is increasingly being viewed as one of the world's most exciting long-term economic growth stories. With a young population, a rapidly expanding middle class, modernising infrastructure, and booming digital adoption, the country is expected to be one of the fastest-growing major economies for decades.

The Betashares India Quality ETF focuses specifically on high-quality Indian companies with strong fundamentals. Its portfolio includes leading names such as Infosys (NYSE: INFY), Tata Consultancy Services (NSEI: TCS), and HDFC Bank (NSEI: HDFCBANK). These are businesses benefitting from both domestic expansion and the global outsourcing boom.

India is still early in its economic development cycle compared to Western markets, meaning its long-term runway could be significantly larger. For Australian investors wanting emerging-market growth without taking on excessive risk, this fund offers a blend of quality, diversification, and future upside. It was recently named as one to consider buying by analysts at Betashares.

Betashares Global Shares Ex-US ETF (ASX: EXUS)

If you have your US exposure sorted, then it could be worth looking at the new Betashares Global Shares Ex-US ETF.

This ASX ETF gives investors exposure to more than 900 large and mid-cap stocks across 22 developed markets outside the US and Australia.

Its top holdings include ASML (NASDAQ: ASML), Roche (SWX: ROG), AstraZeneca (LSE: AZN), Nestlé (SWX: NESN), and SAP (ETR: SAP). These are global leaders in semiconductors, pharmaceuticals, consumer goods, and enterprise software.

This fund balances a long-term portfolio by reducing concentration in American technology stocks and increasing exposure to financials, industrials, healthcare, and consumer defensives. It was also recently named as one to consider buying by the fund manager.

The post The best ASX ETFs to buy and hold for 20 years appeared first on The Motley Fool Australia.

Exchange-traded funds (ETFs) provide a simple answer.

With one trade, you can gain exposure to a diversified basket of shares, reducing the risk of putting all your eggs in one basket.

But where to start? Here are three ASX ETFs that could be excellent building blocks for new investors in 2026 and beyond.

iShares S&P 500 ETF (ASX: IVV)

The iShares S&P 500 ETF is a popular option and for good reason. It gives investors exposure to 500 of the largest listed stocks in the United States. These include global giants like Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Nvidia (NASDAQ: NVDA), and Walmart (NYSE: WMT).

The US market has been a long-term powerhouse for wealth creation, and many of the businesses in the iShares S&P 500 ETF are global leaders in their industries. For beginners, this ASX ETF provides a low-cost, convenient way to tap into US growth without needing to pick individual stocks.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

For investors wanting global reach beyond the US, the Vanguard MSCI Index International Shares ETF is a strong choice. This ASX ETF holds more than 1,200 stocks across developed markets, giving you exposure to European, Japanese, and Canadian stocks alongside US names.

Current holdings include Nestle (SWX: NESN), HSBC (LSE: HSBA), SAP SE (FRA: SAP), Toyota Motor Corporation (TYO: 7203), and Royal Bank of Canada (TSX: RY). By spreading your holdings across multiple regions, the Vanguard MSCI Index International Shares ETF helps smooth out the risks of being tied to any single market and offers instant global diversification.

Betashares Global Quality Leaders ETF (ASX: QLTY)

The Betashares Global Quality Leaders ETF could be another great option for beginners. It focuses on quality rather than quantity. It invests in around 150 global stocks that score highly on measures like profitability, strong balance sheets, and earnings stability.

Holdings include names like payments giant Mastercard (NYSE: MA), design leader Adobe (NASDAQ: ADBE), luxury products owner Hermes International, and sleep disorder treatment company ResMed Inc (ASX: RMD). These businesses tend to be more resilient through economic cycles, which can give new investors confidence that they are buying into companies with long-term staying power.

This fund was recently named as one to consider buying by the team at Betashares.

The post The best ASX ETFs for new investors in 2026 appeared first on The Motley Fool Australia.

The US is, quite simply and indisputably, home to most of the best companies in the world. Think about the goods and services we all use on a daily basis in the workplace. Whether it be Microsoft's Office, Teams or Windows, Adobe's Photoshop or Alphabet's Google Search or YouTube, these products are at the forefront of workplace productivity. And they are all owned by US stocks. It's a similar story at home. Chances are, most readers have some Colgate toothpaste, Gillette razors, Fairy dishwashing liquid or Coca-Cola sitting on a shelf somewhere as we speak.

ASX shares are great, but it is the US markets that really offer investors a chance to own a slice of the best businesses in the world. At least in my view.

So with that in mind, here are ten US stocks that I would buy for my self-managed superannuation fund (if I had one, that is) today.

10 US stocks I would pick for a superannuation fund today

Starting off, let's go for Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL), and Amazon.com Inc (NASDAQ: AMZN). These three members of the 'Magnificent 7' are all dominant in their own spaces. Microsoft has an impressive array of workplace software, which we touched on above. Together with LinkedIn, they form an indispensable part of many workplaces today, which I don't see changing anytime soon. Additionally, it has a large presence in the gaming space with its Xbox brand.

We could say the same for Alphabet. It's hard to overstate how valuable Google Search is to everyday work and life. With a near monopoly on the global search market, Alphabet is a tried-and-true winner at this point. YouTube is also incredibly popular, as is the Gemini AI platform and Google Cloud.

E-commerce titan Amazon is also a sure bet for a superannuation fund in my view. Amazon is globally dominant, with its sprawling online marketplace offering an ever-increasing range of products. This company is also a leader in backend cloud services through its AWS platform, which makes up an increasingly large portion of the company's profits. Amazon is the only company on this list that doesn't pay a dividend. But I think it will start soon, which is enough to get it on this list.

Adding some more US tech stocks 

Continuing the 'Magnificent 7' tech theme, I think NVIDIA Corporation (NASDAQ: NVDA) is another stock worthy of inclusion in a super fund. Nvidia has the potential to grow at an impressive pace, despite its US$4 trillion size. Being the leader in chip and artificial intelligence hardware is a license to print money in 2025, and Nvidia has proven it can do so.

Moving outside the Magnificent 7 now, let's talk about Mastercard Inc (NYSE: MA). Mastercard is one of those companies that doesn't make headlines too often, but has still been growing at a healthy pace for many years now. The global shift to cashless payments continues to march on, and Mastercard is a prime beneficiary of this. This is a phenomenal 'set-and-forget' stock to buy for a super fund.

Some consumer staples stocks for a super fund

As is our next company, the famous Coca-Cola Co (NYSE: KO). Coke is one of the most successful companies of all time, and given the sheer volume of drinks that it continues to sell, it looks set to remain so. People simply love Coca-Cola, as well as Sprite, Fanta, Mother and the myriad of other drinks in this company's stable. 

One of Coca-Cola's most famous backers is the legendary Warren Buffett, whose company, Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B) is our next stock. Although Berkshire is famous for its massive historical returns, there is an elephant in the room – Buffett's impending retirement. Although the 95-year-old will step down from Berkshire at the end of this year, I think Buffett has set the company up for generations of success, thanks to Berkshire's massive portfolio of high-quality businesses.

Another company that Buffett has invested in before is Procter & Gamble Inc (NYSE: PG), which is our next US stock worth discussing.

Brand power

This company is the business behind the Gillette and Fairy names we discussed earlier, as well as other popular household brands like Oral-B, Tide, Pantene, Old Spice and Vicks. These products are all life essentials, and their brands command a lot of goodwill and trust right around the world. I can't think of better attributes that a US stock can offer a superannuation fund.

Continuing with the consumer staples theme, Walmart Inc (NYSE: WMT) is another US stock that would do well in a super fund. Walmart is a dominant supermarket chain in the United States, with a growing international presence, too. It has enduring popularity amongst consumers thanks to its highly competitive prices. 

In my opinion, it is highly likely that Walmart will continue to be the first choice of many Americans when it comes to stocking their households. As such, it's a company that I regard as a rock-solid, buy-and-hold investment.

Finally, let's talk about a company we all know and may or may not love. McDonald's Corp (NYSE: MCD) is one of the most famous brands in the world, and is available almost anywhere in the world. Its logo and products have become part of popular culture, and remain enormously popular wherever you go. That makes this US stock a great buy for investors worried about inflation, recessions or other kinds of economic problems.

The post 10 US dividend stocks I'd buy for a superannuation fund today appeared first on The Motley Fool Australia.

While there is no guaranteed timeline or formula, history shows that patient investors who stick to quality can give themselves every chance of achieving it.

So, how long could it take to double your money — and what's the smartest way to go about it?

The rule of 72

A simple way to estimate how long it will take your investment to double is the rule of 72.

For this rule, you divide 72 by your expected annual return to find out how long it would take.

For example, if your portfolio returns 8% a year, your money doubles in around nine years. If it returns 10%, it takes about seven years.

That's the power of compounding — your returns generate more returns, creating a snowball effect over time.

Focus on quality

It might be tempting to chase risky penny stocks in the hope of doubling your money quickly, but history suggests a better strategy is buying and holding quality businesses.

On the ASX, shares like ResMed Inc (ASX: RMD), TechnologyOne Ltd (ASX: TNE), and Lovisa Holdings Ltd. (ASX: LOV) have all rewarded patient shareholders with compounding returns that comfortably doubled their investments over the long haul.

For investors who prefer diversification, exchange-traded funds (ETFs) such as the iShares S&P 500 ETF (ASX: IVV) or the Betashares Nasdaq 100 ETF (ASX: NDQ) provide exposure to global leaders like Apple (NASDAQ: AAPL), Nvidia (NASDAQ: NVDA), and Walmart (NYSE: WMT) — companies with proven track records of wealth creation.

Buying and hold these types of shares or ETFs could set you on a path to doubling your money.

Patience pays

Markets won't rise in a straight line. Volatility is part of the journey, and even the best shares go through periods where their share prices fall. The key is staying invested and resisting the urge to sell at the first sign of trouble.

Over decades, investors who stick with their strategy and reinvest dividends are the ones most likely to see their money double — and then maybe even double again.

Foolish takeaway

Doubling your money in the ASX share market isn't about gambling on short-term trades. It is about compounding, quality, and time. By focusing on high-quality ASX shares and ETFs, and holding for the long haul, investors can turn today's savings into tomorrow's wealth. The secret isn't speed — it is patience.

The post How to double your money in the ASX share market appeared first on The Motley Fool Australia.

Here's how you can grow your wealth with ASX shares while keeping risk under control.

Focus on quality

The easiest way to avoid unnecessary risk is to stick with companies that have sustainable competitive advantages, strong balance sheets, and resilient earnings.

These aren't always the most exciting stocks, but they are the ones that compound wealth year after year. ASX shares like Goodman Group (ASX: GMG), which is benefiting from long-term demand for industrial property and data centres, and ResMed Inc. (ASX: RMD), a global healthcare leader, are prime examples of this.

These businesses have proven track records of weathering economic downturns while continuing to grow, which can help protect your portfolio when markets get rocky.

Use ASX ETFs to spread your risk

If choosing individual ASX shares feels daunting, exchange-traded funds (ETFs) can provide instant diversification.

For example, the iShares S&P 500 ETF (ASX: IVV) gives you exposure to 500 of the biggest US companies, from Apple (NASDAQ: AAPL) to Walmart (NYSE: WMT).

Combining a few well-chosen ETFs with quality ASX shares ensures you're not overexposed to any single company or sector, reducing the chances of a major setback if one part of the market struggles.

Invest consistently

Rather than trying to time the market, which even professionals struggle to do, invest a set amount regularly.

This strategy, known as dollar-cost averaging, helps you buy more ASX shares when prices are low and fewer when they are high, smoothing out your entry price over time.

Even modest, consistent contributions can snowball into a substantial portfolio thanks to the power of compounding — especially if dividends are reinvested along the way.

Keep your emotions in check

The biggest threat to most investors isn't the market — it is their own emotions. Selling in a panic during downturns or chasing overhyped stocks can destroy years of steady progress.

By sticking to a clear plan based on quality, diversification, and consistent investing, you can avoid the emotional traps that derail so many portfolios.

Foolish takeaway

Building wealth with ASX shares doesn't require luck or risky bets. By focusing on quality companies, diversifying with ETFs, investing consistently, and keeping your emotions in check, you can steadily grow your wealth while avoiding the stress and pitfalls of a high-risk approach.

The post How to build wealth with ASX shares without taking big risks appeared first on The Motley Fool Australia.

This low-cost, high-quality fund provides Australian investors with exposure to 500 of the largest stocks listed in the United States.

From tech titans to consumer giants, the IVV ETF offers a diversified gateway to the world's biggest stock market.

Here are five reasons why smart investors might want to consider buying this ASX ETF today.

1. Exposure to world-leading businesses

The iShares S&P 500 ETF tracks the S&P 500 Index, giving investors a stake in some of the most dominant companies on the planet. This includes Apple (NASDAQ: AAPL), Microsoft Corp (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), Tesla (NASDAQ: TSLA), Alphabet (NASDAQ: GOOGL), Nvidia (NASDAQ: NVDA), and Walmart (NYSE: WMT). These are global businesses with entrenched competitive advantages, strong balance sheets, and enormous cash-generating capabilities.

2. Strong performance

The S&P 500 has delivered an average annual return of around 10% over the long term. While past performance is not a guarantee of future results, this index has weathered wars, recessions, and pandemics, all while creating wealth for patient investors. By owning the IVV ETF, you're effectively backing a diversified portfolio of blue-chip US stocks with a strong track record of compounding returns. If the market is going higher over the next decade, these shares are likely to lead the charge.

3. Instant diversification

Instead of trying to pick individual winners — a strategy even professional investors struggle with — this ASX ETF allows you to own a slice of 500 stocks in a single trade. This reduces the risk of a single stock hurting your portfolio. It also helps smooth out returns over time. Better yet, the IVV ETF comes with a management fee of just 0.04%. This makes it one of the most cost-effective ETFs available to Australian investors. This means more of your returns stay in your portfolio instead of going to a fund manager.

4. A hedge against domestic concentration risk

Australian portfolios tend to be heavily weighted towards sectors like banks and mining. The IVV ETF provides diversification by offering exposure to sectors that are under-represented on the ASX. This includes technology, healthcare, and consumer discretionary. This makes it a powerful complement to a home-biased portfolio, helping investors tap into global trends and innovation.

5. Warren Buffett's stamp of approval

Legendary investor Warren Buffett has long said that most investors should buy a low-cost index fund that tracks the S&P 500 index instead of trying to beat the market. In fact, Buffett has stated that he wants the bulk of his estate to be invested in one. If it is good enough for the Oracle of Omaha, it certainly is worth a look from Australian investors seeking reliable, long-term growth.

Foolish takeaway

For those seeking a simple, low-maintenance way to invest in the world's top companies, the iShares S&P 500 ETF is tough to beat. With instant diversification, global exposure, and a history of strong returns, this ETF could be a smart addition to any long-term investment portfolio.

The post 5 reasons to buy the iShares S&P 500 IVV ETF appeared first on The Motley Fool Australia.

These investment vehicles offer a simple way to gain exposure to a broad basket of shares, sectors, or themes.

Whether you're just getting started or already building a long-term portfolio, here's how ASX ETFs can help you grow your wealth.

Start with diversification

One of the biggest advantages of ETFs is instant diversification. Instead of putting all your eggs in one basket, an ETF spreads your investment across dozens (or even thousands) of different companies. This reduces your risk while still allowing you to benefit from overall market growth.

For example, the iShares S&P 500 ETF (ASX: IVV) gives you access to the 500 largest companies in the United States — from Apple (NASDAQ: AAPL) to Amazon (NASDAQ: AMZN) to Walmart (NYSE: WMT). It's a popular choice for investors seeking global exposure with a strong track record of long-term growth.

Let compounding do the heavy lifting

When you invest in an ETF and reinvest any income (such as distributions or dividends), you're harnessing the power of compounding. This is where your returns begin to generate their own returns over time — often referred to as the snowball effect.

For example, investing $500 a month into ASX ETFs with a 10% average annual return (not guaranteed, but in line with historical averages) could grow into $100,000 in 10 years, and over $1 million in 30 years. The earlier you start, the more compounding works in your favour.

Focus on quality and growth

Not all ASX ETFs are the same. Some are built for income, others for defensive positioning. But for long-term wealth growth, consider those that focus on quality companies and global opportunities.

A few to explore include:

BetaShares Global Quality Leaders ETF (ASX: QLTY). It offers exposure to high-quality global companies with strong balance sheets, profitability, and earnings stability.

VanEck Morningstar Wide Moat ETF (ASX: MOAT). This ASX ETF tracks US companies with sustainable competitive advantages or economic moats. This is an investment focus championed by Warren Buffett.

Betashares Nasdaq 100 ETF (ASX: NDQ): It allows you to invest in tech giants like Microsoft (NASDAQ: MSFT), NVIDIA (NASDAQ: NVDA), and Alphabet (NASDAQ: GOOGL).

Consistency beats timing

Trying to time the market perfectly is nearly impossible — even for the professionals.

Instead, consistent investing through dollar-cost averaging is a smarter approach. By investing a set amount at regular intervals (say, monthly), you smooth out market volatility and avoid making emotional decisions.

Foolish takeaway

Growing your wealth doesn't require picking the next big stock or jumping in and out of the market. With a disciplined approach, smart ETF selection, and a long-term mindset, you can build a strong, resilient portfolio that compounds over time.

The post How to grow your wealth the easy way with ASX ETFs appeared first on The Motley Fool Australia.

But if you're not a fan of stock-picking, don't worry. That's because there are exchange traded funds (ETFs) out there to save the day.

The beauty of ETFs is that they provide instant diversification through access to large number of quality dividend payers with a single click of the button.

With that in mind, here are three top ASX ETFs to consider for passive income this May. They are as follows:

Vanguard Australian Shares High Yield ETF (ASX: VHY)

If you're looking for consistent income from homegrown companies, the Vanguard Australian Shares High Yield ETF is hard to ignore.

This ETF tracks an index of quality Australian companies with above-average dividend yields, drawing from sectors like financials, energy, and consumer staples. It includes household names like Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), and pays distributions quarterly — a big plus for income-focused investors.

While it won't shoot the lights out on capital growth, this fund is designed to deliver strong, reliable income, making it a strong foundation for any passive income strategy. It currently trades with a 5.1% dividend yield.

BetaShares S&P 500 Yield Maximiser (ASX: UMAX)

For income investors wanting to diversify their income streams beyond the ASX, the BetaShares S&P 500 Yield Maximiser ETF could be worth considering.

This fund has been designed to generate as much income as possible from the top 500 companies listed on Wall Street through a covered call strategy. This includes giants such as Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Walmart (NYSE: WMT).

This strategy means the ASX ETF has been able to provide investors with significantly better dividend yields than you would get by just investing in the 500 companies individually. For example, at present, the ETF offers a 12-month trailing distribution yield of 4.7%.

Betashares Australian Cash Plus Fund (ASX: MMKT)

Finally, a very different option for income investors to consider. It is the Betashares Australian Cash Plus Fund.

Betashares believes that this ASX ETF could be a top pick for investors that are seeking an enhanced yield from their core cash allocation.

The fund manager recently highlighted that "MMKT provides monthly income to investors by offering diversified exposure to not only Australian bank deposits, but also a range of more sophisticated money market securities usually only available to institutional investors."

The fund currently trades with a trailing dividend yield of 4.5%.

The post 3 ASX ETFs to buy for passive income in May appeared first on The Motley Fool Australia.

Unfortunately, for many beginner investors, this uncertainty ultimately leads to inaction.

But doing nothing can be just as risky as making the wrong move.

The good news? You don't need to become a stock-picking genius to build long-term wealth. In fact, there's a far easier and more reliable way to get started: exchange-traded funds (ETFs).

What is an ASX ETF?

An ETF is simply a basket of shares bundled into one investment that you can buy on the ASX just like any other stock. Instead of betting on a single company, you're spreading your money across dozens (or even hundreds or thousands) of businesses in one go with a single click of a button.

Think of it as the set-and-forget option for building wealth.

You don't need to know which bank is the best buy, or whether tech stocks are about to rally. The ASX ETF does the heavy lifting — tracking a specific index or theme so you can invest broadly, without the stress.

Investing without the guesswork

One of the biggest hurdles for beginners is fear of picking the wrong stock and seeing their money go up in flames.

But that's exactly why ASX ETFs exist. They take the pressure off making perfect decisions and give you instant diversification.

For example, the Vanguard Australian Shares Index ETF (ASX: VAS) gives investors exposure to the top 300 Aussie shares. This includes banks, tech stocks, miners, retailers, and healthcare providers.

The iShares S&P 500 ETF (ASX: IVV) gives you a slice of the 500 biggest names on Wall Street in the United States. This means companies like Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Walmart (NYSE: WMT), and Amazon (NASDAQ: AMZN).

Or there's the Betashares Australian Quality ETF (ASX: AQLT). It filters for top-quality local companies based on earnings and financial strength.

Foolish takeaway

Markets will rise and fall — that's part of the deal. But over time, diversified investments tend to grow. By consistently investing in ASX ETFs and reinvesting any dividends, you give compounding the chance to work in your favour.

And because ETFs are generally low-cost, the fees won't quietly eat away at your returns like they can with some managed funds.

So, if you've been putting off investing because stock picking feels too hard or too risky, it could be time to rethink your approach. ASX ETFs offer a simple, stress-free way to build wealth — no crystal ball required.

The post Nervous about stock picking? Here's why ASX ETFs are a smart and simple way to invest appeared first on The Motley Fool Australia.

Rising over 13% in 2024, the Dow Jones Industrial Average lagged the S&P 500, which soared 23%. But the diversity among the performances of the individual Dow Jones stocks was considerable.

While Boeing dragged the index down last year, Nvidia (NASDAQ: NVDA) took up the slack and was the best-performing Dow Jones stock of 2024. Let's take a look at the other names that rounded out the top-performing Dow Jones stocks.

1. Nvidia (up 171%)

From consistently surpassing analysts' expectations when it reported quarterly financial results to proclaiming that it continues to benefit from enthusiasm surrounding artificial intelligence (AI), Nvidia -- a new addition to the Dow Jones -- provided investors with plenty to get excited about last year.

2. Walmart (up 72%)

Walmart (NYSE: WMT) management had recognised the importance of expanding its e-commerce business to remain competitive, and its initiatives showed success in 2024 -- highlighted in the third quarter of fiscal 2025, ended October 25, 2024, when the company reported comparable sales growth of 22% and 43% for U.S. and international businesses, respectively.

3. American Express (up 58%)

Apple may be the largest holding in the Berkshire Hathaway portfolio, but American Express (NYSE: AXP) holds a prominent spot as the second-largest position. While Warren Buffett sold other financial stocks in 2024, he remained committed to American Express, a financial stalwart that provided investors with plenty of reasons to click the buy button last year.

4. Goldman Sachs (up 48%)

Goldman Sachs (NYSE: GS) achieved consistent year-over-year earnings-per-share (EPS) growth when it reported quarterly financial results last year, one of many reasons why investors chose to buy the banking stock.

5. Amazon (up 44%)

Failing to match its 167% gain in 2023, Amazon (NASDAQ: AMZN) stock still rose notably last year as investors chose it for its prominent position in AI as well as its commanding e-commerce presence.

Should you buy these Dow Jones darlings now?

While the top-performing Dow Jones stocks of 2024 are worthy of serious consideration, potential investors should certainly perform their due diligence to ensure that the stocks match their individual investing goals.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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These days the answer to that question is actually quantifiable by seeing which stocks have the most engagement on social media.

Of course, popularity on social media means nothing about whether those shares are worth investing in.

But it's still fascinating to see what the average person on the street is interested in.

Online broker City Index recently conducted research to come up with the 10 most popular stocks on Instagram and TikTok.

Here is what the team found:

People start investing in names they're familiar with

Predictably the list is dominated by US companies:

Funnily enough, Instagram's parent company Meta Platforms Inc (NASDAQ: META) does not make the cut. TikTok owner ByteDance is privately owned.

Even though the business and the stock have endured tough times the past couple of years, Visual Capitalist strategist Marcus Lu noted Disney had the highest social media engagement of any stock via hashtags like #disneystock, #disneystocks, and #disneyshares.

"Amazon comes in second in hashtags, with 1,384 videos regarding its financial performance accompanied by hashtags such as #amazonstock, #amazonstocks, or #amazonshares," Lu wrote on VisualCapitalist.

"In its most recent earnings report, the company disclosed the addition of 5.9 million new subscribers in the second quarter of this year."

The top 10 shows potentially how a person who has never invested starts becoming interested in buying stocks.

"The companies at the top of the list — all American — are some of the biggest brands globally," said Lu.

"This underscores how the general public is most comfortable approaching the stock market through businesses and brands they are most familiar with."

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There are few, if any, people whose names are associated with success in the stock market quite like Warren Buffett, and for good reason. With a net worth of more than $100 billion, Buffett has rightfully earned his spot among investing royalty. And one of the best things about his success is that it didn't take some extravagant strategy to do it.

As we endure a bear market that has shrunk the value of many investors' portfolios, here are some gems from Buffett that can help you better handle it and, indeed, use it as an opportunity.

There's value to be found

Warren Buffett is the poster child for value investing, which is a strategy by which investors look to find stocks trading at prices lower than their intrinsic (true) value. Value investors aim to buy undervalued stocks and profit from the increase in their intrinsic value eventually. For example, if a stock is trading at $100, but an investor believes the intrinsic value is $120, they'd invest, hoping to, at minimum, profit from the 20% increase once the market realizes its true value.

During bear markets, investors can find many great companies trading at a 'discount' or whose stock price may have overcorrected. Let's take Walmart, for example. From early April to mid-June 2022, Walmart's stock price dropped by well over 20% to around $120 per share, which many investors would agree was below its intrinsic value. Investors who took advantage of that dip have made more than 25% returns since then.

Generally, when a stock's price drops significantly, you must ask yourself why it's happening. But, during a bear market, when prices are dropping across the board, many of these declines are just a byproduct of the greater economy and not an indication of something fundamentally changing with the business.

Don't follow the crowd

There are many great investing quotes credited to Buffett, but none may be as relevant to today's environment as: "Be fearful when others are greedy, and greedy when others are fearful." Stock prices decline because investors begin selling more shares than people are buying, and demand drops. This is usually a sign that investors are fearful. Instead of following suit, it could be time to get greedy and turn it up a notch if you have the financial means.

History has shown us that bear markets are inevitable, and often necessary. The sooner you learn that the better because it helps you tune out the short-term noise and focus on the long term. It's easy to invest consistently when prices are rising, but not so much when prices are seemingly dropping before your eyes. Slowing or stopping investing can set back your financial progress.

Since going public in December 1980, Apple's stock price has increased well over 100,000% yet during that span, it's had negative returns in one-third of those years (including 2022 so far). Down years happen to even the best of companies; it's virtually inevitable. However, if you're focused on the long term, it shouldn't matter too much if your portfolio fluctuates weekly, monthly, or yearly as long as the results are there in the long run.

Utilize dollar-cost averaging

Buffett has long been a proponent of dollar-cost averaging, stating, "If you like spending six to eight hours per week working on investments, do it. If you don't, then dollar-cost average into index funds." To dollar-cost average, you pick your stocks, determine how much you can invest, and then invest on a set schedule no matter what. The frequency isn't as important as sticking to your preset schedule.

Dollar-cost averaging is good because it keeps you consistent as well as prevents you from trying to time the market -- which investors tend to do during bear markets more so than bull markets. Think about it: If prices are dropping, why buy today when you can get it cheaper later on, right? In theory, yes. But the problem is that's trying to time the market, which is essentially impossible to do consistently over the long run.

Dollar-cost averaging makes it easier to focus on the end goal without getting distracted.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The stock market built up some positive momentum last week, but it's unclear whether the good times will last. At the market open on Monday morning, the Dow Jones Industrial Average (DJINDICES: ^DJI) had given back a tiny portion of its substantial recent gains, trading down about 0.25%.

Even though this earnings season is starting to wind down, some key components of the Dow Jones Industrials are set to report their latest results in the coming week. What Walmart (NYSE: WMT), Home Depot (NYSE: HD), and Cisco Systems (NASDAQ: CSCO) say about the conditions of their respective businesses will play a key role in determining whether last week's rally continues through this one, or whether the bear will growl once again.

Getting ready for retail

Tuesday morning will bring two key reports from the retail sector. Department store giant Walmart is set to release its results at around 7 a.m. ET, while Home Depot has historically gotten a slightly earlier start, having published its press release last quarter at 6 a.m. ET.

Walmart's numbers for its fiscal 2023 second quarter, which ended July 31, showed considerable strength amid a tough economic environment. Revenue rose 8.4% to $152.9 billion, and although operating income sagged 7% year over year due to higher costs, its net income of $5.15 billion was up 20% from year-earlier levels. However, the retailer warned at the time that conditions could continue to worsen for the rest of the fiscal year. Management projected that its fiscal 2023 sales would rise by about 4.5%, but forecast that adjusted earnings per share would fall by between 9% and 11% 

Home improvement specialist Home Depot also held up well in its fiscal 2022 second quarter, posting revenue of $43.8 billion for the period that ended July 31. That top-line figure was up 6.5% year over year. Earnings of $5.05 per share compared favorably to year-earlier profits of $4.53 per share, and Home Depot was able to confirm that it still sees its fiscal year sales climbing 3% on mid-single-digit percentage gains in earnings per share.  

Investors will be watching closely to see if ongoing macroeconomic pressures start to have bigger impacts on these companies' financials. Most analysts following Walmart's stock expect the company to post a year-over-year decline in earnings, albeit with continuing revenue growth. Meanwhile, Home Depot is expected to keep boosting its bottom line. Any disappointments on those fronts could put the Dow stocks' prices back on a downward slope, although investors will hope for better news to support the recent positive momentum.

Cisco looks to keep inching ahead

Meanwhile, Cisco Systems is set to announce its financial results after the closing bell on Thursday. Investors are hopeful that the networking giant will be able to keep bouncing back during what has been a tough year for tech stocks generally.

In Cisco's fiscal fourth quarter, which ended July 30, showed the pressures hitting the company. Revenue was down 0.2% year over year to $13.1 billion, with declines in internet-related revenue offsetting gains in the security and application optimization areas. Adjusted earnings dropped by 1% to $0.83 per share. However, annualized recurring revenue rose 8% to $22.9 billion, and Cisco continued to make headway in its transition toward getting more of its overall sales from subscription-based sources.

Investors are hopeful that its fiscal 2023 first-quarter report will show modest strength. Those following the networking giant anticipate sales growth of around 3% and a similarly small rise in earnings.

It's easy to overlook Cisco within the crowd of disruptive companies competing against it. However, the tech giant has a long legacy of success, and whatever it says Thursday has the  potential to ripple across the entire technology sector. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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We won't officially be in a recession until the National Bureau of Economic Research says so. However, you can nearly throw a rock in any direction and find an economist who thinks a recession is probably on the way.

For example, Johns Hopkins economics professor Steve Hanke stated a month ago that he believes there's at least an 80% chance of a recession. Non-profit research group The Conference Board recently pegged the probability at 96%. The latest Bloomberg economic model projects a 100% chance of a recession by October 2023. 

These forecasts don't guarantee that a recession is coming. But it's possible that the current bear market will continue for a while longer. That doesn't mean that every stock will be a big loser, though. Which stocks are most likely to thrive in a recession? Here's what history shows.

Some bad news

The SPDR Select Sector exchange-traded funds (ETFs) are good proxies for gauging how different sectors perform during recessions. One primary downside of using them is that most of these ETFs have only been around since the late 1990s. However, the U.S. has experienced three recessions during that period, so the SPDR Select Sector ETFs should be able to help in determining which stocks historically thrive in a recession.   

I've got some bad news, though. None of the SPDR Select Sector ETFs performed well in all three recessions that occurred over the past 25 years. 

The Consumer Staples Select Sector SPDR Fund (NYSEMKT: XLP) held up well during the recession of 2001. However, it still slid a little. The Materials Select Sector SPDR ETF (NYSEMKT: XLB) performed similarly during the first recession of this century. (The shaded area in the charts below indicates the period when the U.S. economy was in recession.)

XLP data by YCharts

However, both of these ETFs plunged during the Great Recession that began in late 2007 and went through mid-2009. So did every other sector ETF -- including (perhaps surprisingly) the Utilities Select Sector SPDR Fund (NYSEMKT: XLU). 

XLP data by YCharts

All of the sector ETFs also tanked during the brief coronavirus-fueled recession of 2020. However, the Consumer Staples Select Sector SPDR Fund didn't fall nearly as much as the others did.

Looking for exceptions

The cold, hard truth is that no category of stocks thrives in all recessions. But it's clear from examining the past that consumer staples stocks tend to perform better than most. Your best bet, though, is to look for exceptions. I'm referring to stocks that have factors working to their advantage so much that investors want to buy them even when the overall economy stinks.

Johnson & Johnson (NYSE: JNJ) stood out as this kind of stock during the recession of 2001. The healthcare giant continued to deliver revenue and earnings growth throughout the period. It completed the $10.5 billion acquisition of ALZA Corporation. The blue-chip stock was also viewed as a safe haven for investors worried about the dot-com bubble bursting.

JNJ data by YCharts

Walmart (NYSE: WMT) performed exceptionally well during the Great Recession, especially considering how most stocks plunged. Investors realized that the serious economic downturn would mean that consumers would have to tighten their purse strings. That worked to the advantage of the big discount retailer.

WMT data by YCharts

Moderna's (NASDAQ: MRNA) share price skyrocketed during the quick recession of 2020. That's not surprising. The company was one of the early leaders in developing coronavirus vaccines. Moderna was a natural choice for investors to flock to during the uncertain times at the beginning of the COVID-19 pandemic.

MRNA data by YCharts

Likely outliers in the next recession

Which stocks might be outliers in the next recession, assuming it isn't too far off? I think we can learn from history. 

Walmart could again defy gravity if the U.S. economy enters into a recession. My view is that another discount retailer, Dollar General (NYSE: DG), should do so as well.

Dollar General is outperforming Walmart so far this year. The company continues to build new stores. It's also expanding its frozen and refrigerated goods offerings. Dollar General should benefit as consumers increasingly try to stretch their dollars.

Just as Johnson & Johnson and Moderna performed well during two previous recessions, I suspect another drug stock will do so during the next recession -- Vertex Pharmaceuticals (NASDAQ: VRTX). Vertex's revenue and earnings will almost certainly grow robustly even amid an economic downturn. 

The big biotech also has a pipeline with multiple potential blockbusters likely on the way. Vertex expects to file for regulatory approvals for one of them (gene-editing therapy exa-cel) before year-end. With fears of a recession increasing, I think that Vertex is arguably the best stock to buy right now.  

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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A five-year chart of The Kraft Heinz (NASDAQ: KHC) stock offers a near-perfect reversed reflection of the S&P 500 index's performance over the same time frame. Share prices of the food product giant have declined nearly 57% over the last five years, underperforming the 46% gain from the index. But Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A)(NYSE: BRK.B) has held to its shares in the company throughout that half-decade.

Berkshire is one of the company's largest shareholders. As of March 2022, Berkshire owned 26.6% of Kraft Heinz. 

Why has Buffett continued to hold an underperforming stock? Well, for one thing, it's not like there haven't been any good reasons to sell. Here are a few things that went wrong following the merger between Kraft Foods and H.J. Heinz:

• Kraft saw its market share erode against the growth of private-label brands, leading to a decline in sales.
• In 2018, the company disclosed an SEC investigation into its accounting policies over supplier agreements.
• Kraft also cut its quarterly dividend to address more than $30 billion of long-term debt it held as of 2018. 

Most investors would have sold Kraft Heinz long ago, but not Buffett. In early 2019, Buffett told CNBC he would be happy to own the stock 10 years from now. 

Buffett has cut loose several stocks over the past several years that failed to perform to his expectations. He closed Berkshire's position in IBM in 2017, after he bought $10.8 billion worth of shares in the computer hardware maker in 2011. But there is clearly something about Kraft Heinz that he values. Let's look at three possible reasons why he has remained patient with this one.

1. Buffett likes to do business with people he trusts

Buffett admitted in 2019 he misjudged the competitive position of packaged food brands against Wal-mart Stores, Inc. (NYSE: WMT) and other retailers' efforts to promote their own private labels. That was a big reason why Kraft saw its sales and profits decline through 2019. 

However, Buffett went into the Kraft Heinz merger in 2015 with a valued partner. Berkshire and 3G Capital own a combined 42% of Kraft Heinz. Buffett has been friends with 3G founder Jorge Paulo Lemann for many years. He first met Lemann while serving on the board at Gillette before it was acquired by Procter & Gamble. 

3G Capital has a long record of doing deals across industries and improving performance at the businesses it controls. The Brazilian investment firm famously orchestrated the combination of Anheuser-Busch Inbev in 2008. Buffett has always believed in doing business with people you trust, and that certainly applies to his investment in Kraft Heinz.

2. Kraft has "very, very strong brands"

While certain Kraft brands, such as Oscar Mayer, Jell-O, and CapriSun, no longer have the competitive edges they did many years ago, brands like H.J. Heinz, Kraft Mac & Cheese, Lunchables, and Philadelphia cream cheese still generate strong sales. Buffett has called these "very, very strong brands." 

Indeed, these products have remained immune to the pull of private labels. Over the last three years, they delivered annualized growth in adjusted sales of 8%. 

3. Sales are growing under Kraft Heinz's new CEO

To turn things around starting, Kraft Heinz turned to 3G's farm team. In 2019, Kraft appoint former Anheuser-Busch Inbev's Chief Marketing Officer, Miguel Patricio, as CEO. The results have been outstanding.

Patricio sold off underperforming brands, made improvements to Kraft's packaging, marketing, and operating efficiency, and paid down debt. Not only have adjusted sales improved, but Kraft demonstrated excellent pricing power in this inflationary environment.

One reason Buffett favors investing in top brands is the ability to raise prices over time to offset the long-term erosion to shareholder returns caused by inflation. In the second quarter, Kraft reported a 10% year-over-year increase in adjusted sales, completely driven by higher selling prices. 

Kraft Heinz stock has outperformed the S&P 500 in 2022

Kraft appears to be finally performing to Buffett's expectations. Under Patricio, Kraft stock is up 28% since the end of June 2019, including dividend reinvestment. That puts Kraft stock just ahead of the S&P 500's 23.4% return over that three-year period. 

Kraft stock is outperforming the market year-to-date, down 6.6% compared to the S&P 500's decline of 23.3%. Given Kraft's improved business performance, Buffett probably won't be selling out anytime soon. 

It's not too late to buy Kraft Heinz stock. The business is positioned for more growth under Patricio. The stock also pays a dividend yield of 4.77%, and trades at a delicious price-to-earnings ratio of 12.6 based on this year's earnings estimates, which is a discount to the S&P 500's forward P/E of 17. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Amazon (NASDAQ: AMZN) is no stranger to antitrust lawsuits. Just the other day, California filed a suit against Amazon alleging anticompetitive pricing policies. This filing isn't the first time these allegations have come up, and it likely won't be the last.

Because of the current environment, it's not a far-fetched idea that Amazon could be split up voluntarily or by the government. It's a worthwhile exercise to value each business segment of the company separately for two reasons. First, it could prepare investors for a split. Second, it also serves as a method to value the company and determine if it's worth an investment today.

Let's see how each segment is valued and if Amazon is worth your investment dollars.

A large business with multiple segments

Amazon's business can be split into two main segments: commerce and cloud computing. Commerce is much broader than the website you order items from. It also includes advertising, third-party seller services, and subscription products. Cloud computing, better known as Amazon Web Services (AWS), provides the infrastructure to process workloads through the cloud.

The commerce segment also generates the bulk of Amazon's revenue. Over the past 12 months, the company brought in $485.9 billion in sales overall, and 85% of that came from commerce. However, that segment hasn't made any money over the past year. It lost $7.1 billion; whereas, AWS made $22.4 billion in operating income.

Those figures group all of the many commerce segments together. Amazon doesn't break out its expenses for each segment, but it does break out its sales.

Source: Amazon. YOY = year over year.

This table provides valuable insights. First, its online-store segment didn't grow its sales but is still the largest. Second, AWS is the fastest-growing segment (the "other" segment is volatile, so growth likely isn't sustainable) and the second largest. Lastly, advertising services still grew 21% year over year during a difficult ad environment.

Overall, Amazon's quarter was strong; it was just dragged down by its largest segment having difficult comparisons, because 2021's second quarter was still during the height of COVID-19. But should the company need to be split, it's challenging to determine which segments would go where.

AWS would likely need to be its own entity because it is unrelated to commerce. Advertising could be seen as a conflict of interest, as it should theoretically be a neutral marketplace. One seller could pay Amazon to place its product above other similar ones, even if it is lower rated or more expensive. The rest of the divisions -- online stores, physical stores, third-party services, and subscriptions -- could remain a separate company.

That leaves three separate businesses: cloud computing, advertising, and commerce. Now it's time to determine what each business is worth.

Valuation by parts

To determine what each entity is worth, I'll apply a valuation comparable to companies that perform services similar to the newly formed Amazon businesses. While this approach has flaws, it's a good way to estimate a valuation for each business.

First, investors could compare the commerce business to retail giants like Target Corporation (NYSE: TGT) or Wal-mart Stores, Inc.(NYSE: WMT). These two trade for 0.7 and 0.6 times sales, respectively. While these two companies have a more expensive physical footprint, Amazon has to pay for delivery. However, unlike Amazon's commerce business, Walmart and Target are consistently profitable. Because of this, I will apply a valuation of 0.5 times sales to Amazon's commerce business.

For advertising, The Trade Desk (NASDAQ: TTD) is a similar business. Its ad-tech platform connects buyers to sellers to ensure advertisers get the best results. Amazon's platform has similar capabilities but also deals directly with ads, unlike The Trade Desk. Because of this, I'm going to discount this business significantly. The Trade Desk is valued at 22 times sales, but I'm going to cut that in half for Amazon's ad business to 11 times sales.

Lastly, AWS is likely the most valuable. It's growing quickly and is highly profitable. Its two main competitors, Microsoft's (NASDAQ: MSFT)Azure and Alphabet's (NASDAQ: GOOGL)(NASDAQ: GOOG)Google Cloud, aren't stand-alone companies, so a valuation can't be deduced from them.

There aren't many businesses like it, but Adobe Inc.(NASDAQ: ADBE) comes close. The product isn't close to AWS, but its subscription revenue stream and high operating margins (35%) are similar to AWS. Adobe trades at 8.5 times sales, which is influenced by recent acquisition news. Before then, it traded at 11 times sales. I'll apply a valuation of 13 times sales to AWS to adjust for this drop and account for AWS' faster sales growth.

Now, let's see the value of all three businesses.

Source: Amazon. P/S = price to sales. TTM = trailing 12 months.

Now, let's add up those three segments. Using this method, Amazon's entire business is worth $1.5 trillion. However, its current market cap is $1.26 trillion. That means, according to my valuation method, the company's stock is currently undervalued by 19%. 

So, if Amazon gets broken up by regulators or through its own decision, investors will likely make a quick profit through a split. But that action might not happen.

One thing that is certain is that investors can purchase Amazon's stock today. With its recent price movement, it looks undervalued, and investors should consider establishing a position and holding it for an extended period, even if it gets broken up.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRKB) has long taken an interest in retail stocks and has often succeeded in the sector. One example is Costco Wholesale Corporation (NASDAQ: COST), which he bought more than 20 years ago and sold last year for a massive gain.

Today, Buffett holds positions in retailers such as Amazon.com, Inc. (NASDAQ: AMZN) and RH (NYSE: RH), formerly Restoration Hardware. Still, given the state of the companies and current conditions, only one of these Warren Buffett investments is likely to be more suitable for new buyers.

The state of Amazon

Amazon pioneered the e-commerce industry, eventually developing a reputation for "selling everything." However, with the development of Amazon Web Services (AWS), it also established the cloud computing industry, making this company a conglomerate.

Buffett took an interest in Amazon in 2019, buying roughly 10.6 million shares in two different lots. Soon after, the company prospered during the pandemic. Locked-down consumers preferred shopping online, while more remote business activity increased the demand for cloud services. But its retail operations experienced slower growth as consumers returned to more offline activities.

Amazon reported $222 billion in revenue in the first half of 2022, a gain of 7% versus the same time frame in 2021. It made modest gains in North America, though international revenue fell. Still, AWS continued to prosper as its revenue surged 35% over the same time frame to $38 billion, about 16% of Amazon's total.

Also, AWS was the only segment to report positive operating income. It earned $12 billion in operating income in the first two quarters of 2022 versus $7 billion for the company. Higher operating expenses led to a combined operating loss of $5 billion for the North America and international segments. Such results could partly explain why Amazon stock has fallen by nearly one-third from its 52-week high.

However, its price-to-sales (P/S) ratio is less than 3. While it is still pricier than Wal-mart Stores, Inc. (NYSE: WMT)at 0.6 times sales, it is near multiyear lows for the company, which could still make Amazon a buy.

How RH fares

Buffett began buying RH stock in November 2019. He started with about 1.2 million shares. The stock surged amid the pandemic, and early in 2022, he added another 1 million shares.

Unlike Amazon, RH is primarily a luxury retailer, selling furnishings and décor. In many respects, this looks more like a traditional Buffett investment than Amazon. He tends to like products that are always in demand, and his ownership of NFM (once known as the Nebraska Furniture Mart) gives him direct experience in that business.

Still, luxury furnishings might not hold as much appeal in a time of high inflation and sluggish economic growth. RH's recent performance seems to reflect that softness.

Revenue of about $1.95 billion in the first half of the year rose 5% compared to the same period last year. Still, most of that gain came in the first quarter as second-quarter revenue grew by under 1% year over year. Net income fell 10% during that time frame to $323 million. Higher selling, general, and administrative expenses, as well as losses on the extinguishment of debt, lowered profitability.

Investors have also heavily sold off RH. It has fallen by more than 60% since peaking in August 2021. Nonetheless, Buffett still holds a profit on his original positions in RH. Also, its P/E ratio of 9 is down from more than 75 early last year. That gives it a valuation that could draw the Oracle of Omaha to buy more shares.

Amazon or RH?

In the current environment, Amazon seems like a more profitable choice for investors. It is a more expensive stock by any measure and has not fallen by as much as RH. These two factors might make it seem like less of a Buffett stock.

However, unlike RH, it sells items that tend to appeal to consumers in a struggling economy. Moreover, its fast-growing AWS could still perform well since it cuts costs for its clients. That diversity and appeal in a variety of economic circumstances make it a more suitable choice.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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