The Smartest Stocks to Buy With $2,000 According to Buffett's Core Principles

Warren Buffett stepped down as chief executive of Berkshire Hathaway (NYSE: BRKB)(NYSE: BRKA) on Jan. 1 of this year, handing the job to Greg Abel, the executive who spent years running Berkshire's energy and non-insurance businesses. Buffett is still chairman at 95 and still writing his annual letters, but the decisions belong to someone else now. That makes it a good moment to think about what the man taught rather than what he happens to own.

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His ideas get repeated so often that they turn into wallpaper and clickbait social media posts from financial gurus. Buy what you understand. Look for a moat, which just means something that stops competitors from stealing your customers. Pay a fair price. All are true, but all can be somewhat vague. The version I find more useful is narrower.

Buffett likes businesses that could grow without constantly asking shareholders for more cash, and he likes managers who say what they will do and then do it. Two companies fit that today, and neither of them are exciting, which is sort of my point.

Casey's General Stores is boring on purpose

This ticker is about as Buffett-friendly as they get. I've been seeing it pop on social media recently as a "don't overthink" kind of boring investment. Casey's General Stores (NASDAQ: CASY) operates nearly 3,000 convenience stores, mostly in small Midwestern towns, and is also the fifth-largest pizza chain in the country. In June, the company laid out a three-year plan to add at least 400 stores and grow profits 8% to 10% a year.

Casey's had just wrapped up its previous three-year plan and beaten it, adding more than 500 stores along the way. There is also a neat trick in how it grows: When it buys someone else's stores, it remodels them into Casey's, and food sales at those remodeled locations run roughly 30% higher than before the work, according to company leadership.

This is an everyday, boring Buffett-style stock to consider, but the risk-reward became more interesting for me this week. Shares fell about 14% after earnings on Sept. 9, largely because all the construction is temporarily weighing on sales at existing stores, and management does not expect much relief until next spring. I like buying stocks when they are out of favor, so to me, buying now means stepping in during the messy part rather than waiting for everything to look better.

Church & Dwight adopts small brands and raises them

Church & Dwight Co. (NYSE: CHD) owns Arm & Hammer, OxiClean, and Trojan, with seven brands generating about 75% of sales and profits, according to company leadership. Its real skill is finding tiny brands and scaling them through the shelf space it already controls. In leadership's own words, they have an "acquisition strategy that focuses on adding No. 1 or No. 2 brands in a proven category with strong margins that are asset-light, and that can take advantage of our global sales, distribution, innovation and operations platforms."

In May, it paid roughly $325 million for Miss Mouth's Messy Eater, a stain remover, and management noted that hardly any households own it yet. That gap is the reason they bought it.

Church & Dwight has that Buffett-style appeal because it sells simple, everyday products that people buy again and again. Its leading market positions and customer loyalty create a durable moat, giving the business steady cash flow. A $2,000 chunk here is one of the safest investments if you are looking to follow Buffett's principles.

Feel free to split the $2,000 however you think makes the most sense. Casey's is the most interesting to me right now. I like buying into fear and red days, and if you look at Casey's six-month chart, there's a pretty enticing entry point after the recent pullback. It's also becoming a favorite among social media investors, which adds another interesting layer to the story (this can be risky!) Long-term, I think the ticker will be fine because the stock dropped due to a problem that I believe can fix itself.

Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Casey's General Stores. The Motley Fool has a disclosure policy.