Warren Buffett’s Stock PicksWarren Buffett’s Stock Picks Warren Buffett, renowned for his exceptional investment acumen, has built an impressive portfolio over his illustrious career. By analyzing his picks, investors can gain valuable insights into potential opportunities. 1. Coca-Cola (KO) * Buffett’s unwavering belief in Coca-Cola’s consumer brand has led him to hold the stock for over 3 decades. * The company’s vast global reach and consistent sales provide stability and dividend income. * With a forward P/E ratio of 22 and an attractive dividend yield of 3%, Coca-Cola offers a balanced investment. 2. Apple (AAPL) * Buffett sees Apple as a superior company with ample growth prospects. * Its large customer base and strong brand loyalty drive sales of devices, while its services segment continues to grow. * The upcoming iOS update featuring AI capabilities is expected to boost iPhone demand. * Despite its premium valuation, analysts anticipate strong earnings growth, justifying the investment. Investing with $500 For investors with limited capital, purchasing one share of Apple and investing the remainder in Coca-Cola provides a diversified portfolio: * Apple: Share price around $228 * Coca-Cola: Share price around $62 This allocation meets the investor’s $500 budget while providing exposure to two of Buffett’s top stock picks. Coca-Cola offers passive income through dividends, while Apple has the potential for capital appreciation. Disclaimer The provided information does not constitute financial advice. Investors should conduct thorough research and consult with financial professionals before making any investment decisions.
These top stocks are poised for even more gains.
Warren Buffett is one of the best investors of all time. His investing skills have produced incredible returns for Berkshire Hathaway shareholders over the past 50 years, so it’s a smart idea to think about what he’s buying (or selling).
Let’s look at two of Buffett’s largest stock portfolios that an investor with $500 could buy right away.
1. Coca Cola
One of the common themes in Buffett’s stock picks throughout his career has been a preference for profitable companies that benefit from strong consumer brands, and Coca Cola (KO 0.95%) is a good example. People consume 2.2 billion servings of one of the company’s beverage products every day. For this reason, Buffett has not sold a single share of Coca-Cola in over 30 years.
Investors aren’t buying Coke stock for high growth. The stock has returned 105% over the past 10 years (including dividend reinvestment), behind the S&P 500‘s return of about 240%. Buffett has stuck with Coca-Cola because it is a profitable company that generates consistent sales every year, and more importantly, the stock pays a dividend that provides Berkshire with $776 million in passive income per year.
However, there are a few reasons why Coca-Cola could see accelerating growth. The company has been experiencing momentum in international markets. Management is investing more in marketing, innovation and digital initiatives to capture this substantial growth opportunity. Statista predicts that global soft drink revenue will grow 9.5% annually through 2029.
Another factor that can boost shareholder returns is margin expansion. Coca-Cola has been refranchising its bottling operations, which has helped reduce operating costs and boost margins and profit growth. Last year, the company’s adjusted earnings grew by a solid 15% on a currency-neutral basis.
Wall Street analysts expect Coke’s earnings to grow at a 6% annual rate, but that may be conservative. If Coke continues to report earnings growth above those estimates, the stock could offer attractive returns.
The shares are very reasonably priced with a forward price-to-earnings (P/E) ratio of 22, and with a share price of around $62, Coke stock is affordable for any investor to buy today. Add to that an above-average dividend yield of 3%, and shareholders could be looking at a nice return on their investment.
2. Apple
Apple (AAPL 1.30%) should be considered one of the best Buffett stocks to buy right now, as Buffett said at the 2023 annual shareholder meeting that Apple was a better company than any Berkshire, and that it has no shortage of growth opportunities. Berkshire reduced its position in the stock in the first quarter, but still owned a massive $135 billion stake based on Apple’s stock price at the end of March.
With the upcoming iOS update, Apple is finally bringing substantial artificial intelligence (AI) features to its devices, which could lead to strong growth and great returns for shareholders.
Buffett likes Apple for the same reasons Coca-Cola does. Apple is a powerful consumer brand with more than 2.2 billion active devices in the hands of customers. This gives Apple a large base of customers to which it can cross-sell additional services, such as apps and subscriptions. Services revenue grew 14% year over year in the most recent quarter to nearly $24 billion, accounting for a quarter of revenue.
With so many customers spending money on device upgrades and services each year, Apple has become a very profitable company. It generated $101 billion in free cash flow last year and should continue to grow that total over time. The upcoming Apple Intelligence feature for iOS could help boost iPhone sales, as the stock recently soared to new highs following the announcement.
Buffett is also naturally drawn to companies with shareholder-friendly capital return policies. Free cash flow growth paves the way for years of dividend payments to shareholders. Apple offers a small yield of just 0.43%, but based on Apple’s current payout, Berkshire should receive $789 million in dividend payments over the next year.
Apple shares trade at an expensive price-to-earnings ratio of around 35, but analysts expect accelerating earnings growth in the coming years on the back of growing demand for AI devices. With shares currently worth $228, an investor with less than $500 could buy one share of Apple stock and invest the rest in Coca-Cola for more passive income.
John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool has a disclosure policy.
