Warren Buffett’s investment moves always stir interest, especially when his company, Berkshire Hathaway, updates its extensive equity portfolio. The recent changes have sparked a wave of speculation, as investors eagerly analyze what Buffett is buying or selling. However, despite these shifts, certain stocks in his portfolio remain solid choices for any investor, regardless of what Buffett himself might do next. Two such stocks are Apple and Coca-Cola.
Apple
Apple has long been a dominant presence in Berkshire Hathaway’s portfolio. At one point, the tech giant’s stock accounted for over half of the total value of Berkshire’s equity holdings. However, recent months have seen Buffett and his team selling off portions of their Apple shares, causing some concern among investors. The sales pushed down Apple’s stock price, leading to speculation that Buffett might be losing confidence in the company.
Yet, it’s more likely that Berkshire is merely adjusting its position to reduce Apple’s weight in the portfolio, making it more balanced. Despite these sales, Apple still represents less than 30% of Berkshire’s total portfolio, and recent comments from Buffett suggest that Berkshire intends to maintain a substantial stake in the company.
When Buffett sells, many investors follow suit. Since Berkshire’s second-quarter earnings report revealed the Apple divestments in early August, Apple stock has underperformed compared to both the S&P 500 index and Berkshire’s B shares. Apple’s stock has grown 18%, while the S&P 500 has seen 23% growth, and Berkshire’s B shares nearly 26%.
This dip in Apple’s stock price presents a rare opportunity for investors to buy the stock at a slight discount. Apple remains a highly profitable company, consistently finding ways to grow despite its immense size and global reach. In its third quarter, Apple reported a 5% year-over-year increase in total net sales, reaching $85.8 billion. This growth was largely driven by record quarterly services revenue, which rose by 14%.
Looking ahead, Apple’s growth prospects remain strong. The company plans to incorporate artificial intelligence (AI) capabilities into its upcoming phone models, which should boost demand for hardware and open new revenue streams. Analysts predict that Apple’s annual revenue will increase by 9% this fiscal year and 8% next year. Meanwhile, earnings per share are expected to rise by nearly 6% in fiscal 2024 and by almost 7% in 2025.
Coca-Cola
Another stock that investors should consider buying without hesitation is Coca-Cola. This company has been a staple in Berkshire Hathaway’s portfolio for longer than many investors have been alive, and for good reason. Coca-Cola not only owns one of the most iconic brands in history, but it has also been a reliable income stock for decades.
Coca-Cola’s business model is simple yet effective. The company focuses exclusively on beverages, with a diverse portfolio that ranges from traditional sodas like Coca-Cola to trendier options like BodyArmor sports drinks, Dasani water, and Topo Chico hard seltzers.
Despite the variety of its product offerings, Coca-Cola has consistently maintained high profit margins. The company’s second-quarter results highlighted this strength, with total revenue of $12.4 billion translating into a non-GAAP (adjusted) net income of just over $3.6 billion—a nearly 30% net margin. Both of these figures represented year-over-year growth, with revenue up 3% and adjusted profitability increasing by nearly 7%.
High margins and steady growth make Coca-Cola an attractive stock for any investor. Additionally, the company offers a generous and steadily increasing dividend. Coca-Cola is a Dividend King, meaning it has raised its dividend at least once a year for a minimum of 50 consecutive years. In fact, Coca-Cola’s dividend increase streak now stands at an impressive 62 years.
Coca-Cola’s management understands the importance of its dividend to shareholders and ensures that it continues to grow. Currently, the quarterly dividend is just under $0.49 per share, resulting in a dividend yield of 2.8%. This is more than double the average dividend yield of S&P 500 stocks, which currently stands at 1.3%.
It’s no surprise that Buffett has been a long-term supporter of Coca-Cola. The company controls one of the most powerful brands in the world, operates a highly profitable and growing business, and consistently rewards shareholders with increasing dividends. Coca-Cola remains a stock with few downsides, making it a strong choice for investors.
