Warren Buffett’s Favorite Stocks: A Closer Look
A Shift in Berkshire’s Portfolio
Warren Buffett, the chairman of Berkshire Hathaway, has been making significant changes to his company’s equity portfolio. For eight consecutive quarters, he has sold more stock than he bought, including shares in some of its most profitable positions. This trend has sparked curiosity among investors, who are eager to know which stocks Buffett plans to hold onto.
Three “Wonderful” Businesses
Buffett has identified three top stocks that he intends to hold indefinitely. These companies possess unique competitive advantages, making them attractive long-term holdings.
American Express: A Payment Network Powerhouse
Buffett started building a position in American Express in the early 1990s and hasn’t touched it in over two decades. As its own payment network operator, American Express generates billions in revenue from swipe fees. In the last quarter, these fees amounted to $8.8 billion, up 4% year over year. The company’s shift towards premium cards with high annual fees is a significant competitive advantage, attracting more merchants and increasing the value of holding an Amex card.
Coca-Cola: A Global Icon
Coca-Cola is another longtime Buffett holding, established in the late 1980s and early 1990s. The company’s iconic brand and global scale have enabled it to increase pricing amid rapid inflation. Its ability to maximize the value of its supply chain and distribution deals has also helped it dominate the market. With shares trading at a reasonable 22 times forward earnings estimates, Coca-Cola is an attractive long-term holding.
Occidental Petroleum: A Permian Basin Powerhouse
Occidental Petroleum is a relatively new addition to Berkshire’s portfolio. Buffett took a significant stake in the business when he acquired $10 billion worth of preferred shares in 2019. The energy company’s position in the Permian Basin gives it a relatively cheap source of U.S. oil production. Although the price of oil has dropped, Occidental’s current share price of about $50 gives it an attractive enterprise-value-to-EBITDA multiple of just 5.3. If oil prices rebound, Occidental should see substantial benefits to its free cash flow and share price.
These three stocks have demonstrated their resilience and competitive advantages, making them attractive long-term holdings for Buffett and potentially for your portfolio as well.
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