Every time Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) updates its considerable equity portfolio, the master investor is a hot watercooler topic for days. Much ink has been spilled, and breath expended, about the additions and subtractions with the portfolio. We’re still just after the latest update, hence the considerable speculation lately.
As ever, though, there are numerous gems in the portfolio that are worthwhile for any investor to own no matter what the master is doing with them now. In that spirit, I’m highlighting two of the very best Buffett stocks at the moment: Apple (NASDAQ: AAPL) and Coca-Cola (NYSE: KO).
1. Apple
Recently, it seemed as if Apple was threatening to take up all the oxygen in Berkshire’s equity portfolio. After all, the hugely popular tech stock’s market value had expanded to more than half of the total for the entire collection. That percentage began to obey gravity when Buffett and his team enacted a series of sell-offs in recent months.
The sales pushed the tech giant’s stock down, which is understandable — Buffett no longer believes in Apple! I, for one, don’t think those divestments mean the wily investor has lost his faith. Rather, it feels to me that the Berkshire crew is trimming the fruity stock if anything, significantly lowering its weight in the portfolio so it’s more reasonably proportional. It’s now under 30% of the total. The recent pronouncements by Bufffett appear to signal Berkshire’s intention to hold on to a large stake.
Regardless, when Buffett sells, many investors do the same. Since news first broke of the Apple divestments with the publication of Berkshire’s second-quarter earnings report in early August, Apple stock has underperformed both the S&P 500 index and Berkshire’s B shares. The scores are, respectively, 18% growth versus 23% versus nearly 26%.
This has left Apple shares slightly below their one-year maximum price, and anytime that happens I think it’s a rare window of opportunity to own the shares at a bit of a discount. The company continues to be a high-margin behemoth, and as ever it’s devising ways to keep growing despite its monster size and global prominence. In its third quarter, total net sales rose by almost 5% year over year to $85.8 billion, driven in no small part by record quarterly services revenue that raced 14% higher.
I believe the company’s got a very long growth runway. It’s going to start packing artificial intelligence (AI) capabilities into its upcoming phone models, which should bolster demand for hardware and create yet more revenue streams for the company. Analysts agree with me that Apple will grow ever fatter; collectively they’re predicting annual revenue increases of 9% this fiscal year and 8% next. Per-share earnings should advance by nearly 6% for the entirety of fiscal 2024, meanwhile, and by almost 7% in 2025.
2. Coca-Cola
The other company I think everyone should consider buying without hesitation is Coca-Cola. It’s been in Berkshire’s portfolio longer than many investors have been alive, and for good reason — Coke not only owns one of the most powerful anchor brands in history; it has been a model income stock for decades.
Like the familiar taste of its signature drink, Coca-Cola doesn’t change much as a company, nor does it need to. It’s a pure-play beverage company with a portfolio that really runs the gamut. It has traditional sodas like the company’s namesake, to offerings aligning with current trends like the BodyArmor line of sports drinks, Dassani water, and Topo Chico’s hard seltzer selection.
Even the trendiest drinks aren’t overly expensive or involved to manufacture, which is why Coke’s margins have traditionally been high.
The company’s second-quarter results were illustrative of this, with total revenue of $12.4 billion filtering down into a non-GAAP (adjusted) net income of just over $3.6 billion. That’s a nearly 30% net margin. Also, by the way, both headline figures rose year over year. The top line by 3% and adjusted profitability at an almost 7% clip.
High margin and continued growth are a combination of factors attractive enough for any stock. Coke sweetens the deal with a relatively generous shareholder payout that’s always on the rise. The company is a Dividend King, that tiny group of stocks that have enacted dividend raises at least once annually for a minimum of 50 years in a row. In fact, the company is high on the leader board, with a dividend raise streak that’s now reached an almost-inconceivable 62 years.
Management is acutely aware of how much of an attraction the dividend is on its own, so they make sure to keep it on the rise. These days, its quarterly distribution is just under $0.49 per share for a nice, thick dividend yield of 2.8%. That’s more than double the percentage rate of the average S&P 500 stock payout, which currently sits at 1.3%.
So it’s little wonder Buffett is a long-term fan of Coke. The beverage giant controls the strongest brand imaginable, its business is highly profitable and growing, and those constant dividend raises are good for any shareholder’s wallet. There’s little not to like about this stock.
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Eric Volkman has positions in Apple. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool has a disclosure policy.
2 No-Brainer Warren Buffett Stocks to Buy Right Now was originally published by The Motley Fool
