Nabbing an idea or two from a top-notch investor like Warren Buffett is never a bad move, especially if you want to nail down the best stocks to buy and keep for the long haul. Buffett, famously dubbed the Oracle of Omaha, runs Berkshire Hathaway, which has consistently outperformed the S&P 500 over the years, proving his investing prowess time and again.
Let’s dive into three of the most promising Warren Buffett picks that you might want to consider, especially while they’re still reasonably undervalued.
### Coca-Cola
Coca-Cola needs no introduction. It’s the undisputed leader in the beverage world, boasting a lineup that includes everything from Gold Peak tea to Minute Maid juices, Dasani water, and of course, its signature cola.
Generating about $46 billion in revenue annually, Coca-Cola has a knack for growing both its sales and profits consistently. It’s famous for upping its dividend every single year for the last 62 years, which is a big part of why Buffett has been a fan since he first invested in 1988.
What’s intriguing about Coca-Cola is how it operates differently from its competitor, PepsiCo. Coca-Cola focuses on selling its branded concentrate to franchise bottlers who are responsible for production and distribution. This approach might lower revenue relative to consumption but is far more profitable because bottlers handle most of the risk. These higher margins lead to better earnings per share, supporting those reliable dividends investors love.
Berkshire Hathaway holds a whopping 400 million shares of Coca-Cola, valued at nearly $26 billion, making it the fourth-largest holding in the Berkshire portfolio. That’s a serious endorsement.
### Apple
Apple has become Berkshire Hathaway’s largest holding, even as Buffett or his team have been carefully trimming the stake in recent times. With 300 million shares still in the portfolio, worth about $69 billion, Apple remains a standout investment.
When Berkshire first acquired Apple shares back in 2016, it raised some eyebrows, primarily because Buffett has typically stayed away from tech stocks. His reasoning has been that understanding and valuing tech companies can be complex, given their often intricate technologies.
Yet, Apple’s value has become increasingly clear over time. The company’s customers are incredibly loyal, and it continuously delivers innovative products. Its foray into services — like apps and digital content — has created a dependable revenue stream, making up nearly a quarter of Apple’s income.
While Berkshire has sold half of its shares in the tech giant this year, this isn’t cause for concern. Buffett isn’t afraid to invest heavily in companies he believes in, but Apple had grown to represent nearly half of Berkshire’s publicly traded investments, so some trimming was prudent.
For the average investor, Apple’s strengths remain compelling: unmatched leadership in the smartphone market and the growing income from services driven by the iPhone. Last year, Apple’s services business grew by 12%, clearly continuing an established growth pattern.
### Berkshire Hathaway
It’s worth noting that while Buffett is credited with these savvy stock picks, he personally owns a considerable stake in Berkshire Hathaway itself, not necessarily the individual stocks within its portfolio.
Buffett holds roughly 15% of Berkshire, which boasts a market cap of around $1 trillion, and about a third of the company’s voting rights. Essentially, he’s aligned with the shareholders, backing his strategies with his own investment.
While cherry-picking Buffett’s picks might be exciting, the real focus of investing should be on results, and Berkshire Hathaway has proven its merit repeatedly. Although it doesn’t outperform the market every single year, over time, it showcases a consistent winning formula.
This success can largely be attributed to Buffett’s patience and the strategic management of Berkshire’s diverse holdings. Most of its worth isn’t from its public stock holdings, but rather its fully-owned businesses, like Shaw flooring, Duracell, Pilot travel centers, Clayton Homes, and Geico insurance, among others. You can’t access these powerhouses any other way.
Keep in mind, Berkshire doesn’t pay dividends. Instead, it hoards cash, ready to pounce on the next worthwhile investment — a testament to Buffett’s remarkable patience and strategic foresight.
Currently, Berkshire’s cash reserves are at a record-breaking $325 billion. But don’t let this deter you. When the ideal opportunity comes knocking, you can bet Buffett will act swiftly, well before any public announcement.
In the end, leaning on Buffett’s tried-and-true picks could be a rewarding strategy for any investor looking to reap long-term gains.
