Saying Goodbye to An Era: The 3 Stocks Buffett Will Be Best Known For

view original post

For long-term investors, Berkshire Hathaway (NYSE:BRK-B) has been one of the truly rare unicorns that’s been worth holding onto for the very, very long-term. The company’s CEO Warren Buffett, perhaps the greatest investor of all time, will be stepping down from the helm after 60 years as the company’s chief executive. He’s tapped Greg Abel to be his successor. And while that’s a move that Buffett has been choreographing for some time, it’s also one which many investors have been begrudgingly preparing for.

That said, as we turn the page on what’s been an absolutely incredible era for Buffett and the investors who have followed him into Berkshire Hathaway, I thought it would be a good exercise to dive into some of Buffett’s best all-time picks.

Here are the three companies I think most investors will remember Warren Buffett for.

Coca-Cola (KO)

At every Berkshire Hathaway meeting, investors can expect to see cans of Coca-Cola (NYSE:KO) on the desk in front of Mr. Buffett (and his long-time partner Charlie Munger as well). This company is more than just any old company, it’s a world-class brand that can be found in essentially every country in the world.

Coca-Cola continues to rank among the most influential and important brands globally, and for good reason. More than a century of market share leadership in the carbonated beverages market and leveraging one of the best marketing systems that’s ever been developed, Coca-Cola has become one of the preeminent blue chip giants on the NYSE investors look to for consistent total returns over the long-term.

With a dividend yield of 3% and an incredible track record of 62 consecutive years of dividend increases, Coca-Cola accounts for more than $800 million a year in dividend income annually for Berkshire Hathaway. For dividend investors who want to create a passive income stream that’s a tiny fraction of that, it’s possible when holding a gem like KO stock in your portfolio for a few decades.

American Express (AXP)

For investors who have followed Warren Buffett for any extended period of time and/or read his biographies, American Express (NYSE:AXP) holds an important place in the story of how Buffett rose to prominence and grew his fortune in the 1960s.

The Oracle of Omaha began accumulating American Express stock initially in the 1960s, building an iron-clad position in the insurer in the 1990s. Over time, American Express has become one of the most reliable drivers of Berkshire’s earnings and return profile. As Buffett continues to talk about as his annual meetings and in his shareholder letters, the company’s insurance holdings are central to Berkshire’s ability to continuously invest fresh capital into the stocks he likes. His long-term strategy of investing the “float” (excess capital held on insurance companies’ books) that’s just sitting there, and earning above average returns in the market, has worked wonders.

American Express currently trades

Apple (AAPL)

One of Berkshire Hathway’s more recent investments, in the tech sector nonetheless, is Apple (NASDAQ:AAPL). What’s interesting is that Buffett began buying Apple stock in 2016, and that’s almost 10 years ago. But it still feels just like yesterday, given how long he’s held positions in other world-class companies.

Buffett has generally steered clear of technology companies, citing the reality that he doesn’t understand the underlying business models of many companies in this space. However, Apple’s incredibly loyal customer base and the fact the company sells more hardware than software as a percentage of its overall business (at least, for now) means that Buffett is able to relatively easily assess the underlying fundamentals Apple brings to the table.

With incredible pricing power and one of the best brands I’ve seen in my lifetime, Apple seems like an easy pick to understand. I’d contest that Buffett’s willingness to change over time, and consider companies in the tech sector he can try to understand, is evidence that it’s never too late for any of us to change or alter the way we think about certain problems or paradigms.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.