Two Straightforward Stocks to Invest in Immediately, Recommended by Warren Buffett
Warren Buffet has accrued substantial wealth for Berkshire Hathaway shareholders, and his career has incited numerous investors to monitor his every move in the stock market. By the third quarter, the company had a stock portfolio valued at $271 billion. Here are two stocks Berkshire has held for years that are worth considering as purchases now.
1. Coca-Cola
Coca-Cola (KO -1.13%) has been a staple in Berkshire Hathaway's stock portfolio for decades. Buffett initially invested in the company in the 1980s, and despite it not being a rapid growth business today, it's a well-established brand capable of delivering returns equivalent to market averages while also providing a substantial dividend yield.
This is a straightforward business with a robust business model that creates substantial margins and free cash flow. The company earns a significant portion of its revenue by selling concentrate to bottlers who produce the final product. Being a relatively capita-light business facilitates a high profit margin of 22%.
The consumer spending environment has been challenging for numerous brands, but Coca-Cola has displayed resilience. Although sales volumes slightly decreased in Q3, adjusted revenue increased by 9% year over year as a result of higher pricing. Morgan Stanley recently reaffirmed a buy rating for the shares, as they anticipate Coca-Cola's adjusted revenue to expand faster than competitors' as economic inflation headwinds diminish.
Beyond its iconic brand, Coca-Cola gains from a substantial collection of beverage brands that can generate sales based on changing consumer preferences. The company also utilizes artificial intelligence (AI) to improve marketing, which management forecasts will result in heightened retail sales.
The stock currently offers a captivating dividend yield of 3.13% at the time of writing, based on a quarterly payout of $0.485 per share. The high yield in combination with possibilities for market share acquisition in a growing $235 billion beverage industry, according to Statista, makes Coke stock an unmissable purchase at present.
2. Amazon
Berkshire Hathaway has held a position in Amazon (AMZN -0.66%) for more than five years. It maintained a 10 million shareholding in Q3. Amazon shares have produced colossal wealth for investors over the previous 20 years, but the company still retains a wealth of opportunities in e-commerce and cloud computing to continue rewarding shareholders.
Amazon stock surged to new heights following its third-quarter earnings report, revealing a solid 11% year-over-year rise in total revenue, but remarkably, a substantial jump in profits as a result of management's cost-saving initiatives.
Amazon reported an impressive 55% year-over-year increase in net income in Q3, despite continuing its pursuit of profitability in the retail sector. Recently, it inaugurated a new fulfillment center in Shreveport, Louisiana, using advanced robotics to streamline picking, packing, and shipping orders. This facility can decrease processing time by 25% and, consequently, reduce costs.
Meanwhile, Amazon's cloud computing business is flourishing. Revenue growth accelerated once more to 19% year over year, as more businesses move their data from on-premise servers to the cloud. Since Amazon Web Services contributes approximately 60% of the company's operating income, further growth in this division is also a major catalyst for Amazon's improving profitability.
Amazon appears to be an unbeatable enterprise. It generated $49 billion in trailing-12-month net income. It is delivering profitable growth while investing in AI technology to drive demand in cloud services and also improve the shopping experience in the online store.
The stock still trades within its historical valuation range, either by looking at price-to-sales, price-to-earnings, or price-to-free-cash-flow ratios. Investors can expect exceptional returns reflecting the underlying growth in the business over the long term.
- Given Warren Buffet's investment strategy in stable, reliable companies with strong returns, it's no surprise that Berkshire Hathaway has also invested heavily in money-making ventures like Coca-Cola.
- Over the years, Berkshire Hathaway's investment in Amazon has proved to be a lucrative one, with the company leveraging its e-commerce and cloud computing platforms to generate substantial income and continue rewarding shareholders with significant returns on their investment.