Two Shares of Warren Buffet's Portfolio Currently Offer Compelling Buying Opportunities
For enthusiasts of Berkshire Hathaway, its quarterly submissions to the Securities and Exchange Commission, like legislative acts, are virtually obligatory reading for comprehending its investment portfolio. Legendary figure Warren Buffett has steered the company for many years, albeit with some assistance in decision-making now.
Buffett, admittedly, doesn't boast a flawless investing track record. This emphasizes the significance of conducting your individual study. When examining his investments, two striking possibilities emerge: Coca-Cola (KO 0.16%) and Moody's (MCO 0.92%), despite divergent explanations.
Let's delve into why these two long-time Berkshire Hathaway holdings persistently captivate attention.
1. Coca-Cola
Coca-Cola predominantly markets carbonated beverages globally, notably under its signature brand and others like Sprite and Fanta. Despite carbonated drinks representing the majority of their volume (69% last year), they also sell water, juices, and plant-based drinks. The consumer shift towards healthier diets benefits this variety.
Established towards the end of the 1800s, Coca-Cola sells its products in over 200 nations, though its growth spurt might have dwindled. Yet, it continues to enhance sales and earnings. Adjusted revenue, excluding factors such as foreign currency exchange adjustments and mergers/divestitures, expanded 11%, while operating income rose 13%.
This revenue uptick was attributed to price hikes. However, Coca-Cola continued expanding its market share, reflecting its brands' strength and appeal.
Investors seeking dividends might find Coca-Cola an appealing choice. The company's profitability spawned abundant free cash flow (FCF). Last year's FCF totaled $9.7 billion, with a substantial portion allocated to dividends.
The board of directors boosted the quarterly dividend by more than 5% earlier in the year. After augmenting dividends for sixty-two consecutive years, the stock has earned the title of Dividend Kings. Coca-Cola's stock carries a 3.1% dividend yield, double the S&P 500's 1.3%.
2. Moody's
Moody's encompasses two prosperous, well-positioned sectors. Its ratings division assesses the creditworthiness of various bond issuers, including corporations and governments. It boasts a sizeable market share, with S&P Global and Fitch Ratings serving as its primary contenders. Additionally, the analytics division employs data to analyze risk.
Both divisions exhibit strength. The ratings division saw a remarkable 35% revenue surge, while analytics experienced an 8% improvement. Moody's adjusted diluted earnings per share (EPS) increased 13%. Management estimates this year's adjusted EPS to expand between 5% and 11%.
Moody's shares might appear costly, with a price-to-earnings (P/E) ratio of 44 against the S&P 500's 27. However, assessing its robust businesses, including the ratings' dominant market share, the elevated valuation seems justified.
Coca-Cola and Moody's both boast sturdy brands. Their allure as an investment hinges upon your objectives. If you're aiming to buy a dividend-paying stock, Coca-Cola, with its substantial cash flow and commitment to increasing distributions, fits the criterion. Moody's ratings division possesses cyclicality, but its limited competition and the analytics division's steadfast demand for its products assure bright long-term prospects.
An investment in Coca-Cola and Moody's unquestionably necessitates patience. However, patience, as per Warren Buffett, is not only a virtue, but a means to cultivate wealth.
- When considering potential investment opportunities, analyzing Buffett's choices, such as Coca-Cola and Moody's, can provide valuable insights. This process involves understanding their financial performance and the reasons for their continued inclusion in Berkshire Hathaway's portfolio.
- For individuals looking to invest money wisely, they might consider following Buffett's example and investigating the financial health and performance of companies like Coca-Cola and Moody's, which have shown resilience and strong financial metrics.
