Warren Buffett’s Berkshire Hathaway has been busy selling stocks this year, with a staggering $133 billion in sales through the first three quarters of 2024. The sales included portions of its two largest investments: Apple and Bank of America. But amidst this activity, two stocks stand out for not being sold even once in over 25 years—Coca-Cola and American Express. What makes these investments so special? Let’s find out.
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What Are Berkshire Hathaway’s Top Holdings?
At the end of Q3 2024, Berkshire’s top four stock holdings by market value were:
- Apple: $69.9 billion
- American Express: $41.1 billion
- Bank of America: $31.7 billion
- Coca-Cola: $28.7 billion
While Buffett has reduced holdings in Apple and Bank of America, Coca-Cola and American Express have remained untouchable. Why does Buffett consider these two stocks worth keeping through decades of market ups and downs?
Why Does Buffett Still Trust Coca-Cola?
Coca-Cola has been a key part of Berkshire Hathaway’s portfolio since the late 1980s. Today, Berkshire owns 400 million shares valued at $28.7 billion. Despite changing consumer preferences, Coca-Cola’s strong brand and global reach make it a reliable investment. Over 2 billion servings of Coca-Cola products are consumed daily, spanning water, tea, coffee, energy drinks, and, of course, soda.
Recently, Coca-Cola shares pulled back from a 52-week high of $73 to about $64, which has pushed its forward dividend yield to an attractive 3%. The company’s dividend history is even more impressive—it has raised its payout every year for the last 62 years. At its current rate of $0.485 per share, Berkshire earns an estimated $776 million annually in dividends from its Coca-Cola investment.
Even though recent economic pressures caused a slight 1% decline in sales volumes, Coca-Cola has weathered similar challenges in the past. Its ability to adapt and sustain growth solidifies its reputation as a stock for all seasons.
What Makes American Express a Long-Term Favorite?
Berkshire Hathaway has held American Express stock for over three decades, last adding to its position in 1998. Today, Berkshire owns over 151 million shares worth $41.1 billion. Like Coca-Cola, American Express benefits from its strong brand and a unique business model that aligns closely with economic growth.
American Express earns most of its revenue from cardholder spending. Its cardholders tend to spend more than those of other brands, creating consistent growth opportunities. In Q3 2024, the company recorded an 8% year-over-year increase in revenue, setting a new financial milestone.
The company’s ability to innovate has also contributed to its success. Recently, American Express refreshed 40 products, including the U.S. Consumer Gold Card, which now offers enhanced dining perks. This helped boost restaurant spending by 7% compared to last year. Additionally, it added 3.3 million new customers in Q3 2024, up from 2.9 million in the same quarter of 2023. What’s even more promising is the high retention rate among younger customers, signaling long-term growth potential.
Although the stock currently trades at a premium valuation of 22 times its 2024 earnings estimate, the company’s strong financials and steady expansion explain why Buffett continues to hold it.
What Do Coca-Cola and American Express Have in Common?
Both Coca-Cola and American Express share qualities Buffett admires: a strong brand, consistent growth, and the ability to generate reliable cash flow. These companies are built to thrive in good times and bad, making them cornerstone investments in Berkshire’s portfolio.
Coca-Cola’s global reach ensures steady sales, even during economic slowdowns, while American Express benefits from the growth of consumer spending. Both stocks also offer Berkshire substantial returns through dividends and business performance, showcasing their long-term value.
Final Thoughts
While it’s always important to do your own research before investing, Coca-Cola and American Express exemplify how focusing on well-established companies with strong fundamentals can lead to long-term success. Buffett’s unwavering confidence in these stocks serves as a reminder of the value of patience and strategic thinking in investing. Could these timeless companies be the kind of investments that align with your financial goals?