Warren Buffett's investing prowess, which predates his time running Berkshire Hathaway, has become legendary. He's not infallible, but looking at his list of stocks provides a good starting place for investors seeking inspiration.
Three of Berkshire Hathaway's holdings have been long-term success stories and still offer compelling opportunities.
Let's turn to each to find out why investors should consider buying.
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1. Coca-Cola
Coca-Cola (KO) has worldwide brand recognition. It's known for selling soda under popular brands like Coca-Cola, Sprite, and Fanta. Importantly, given consumers' constantly changing tastes, the company isn't solely reliant on soda. It sells other beverages such as water, juice, sports drinks, coffee, and plant-based beverages.
The company has been in existence since the 1800s and sells products in more than 200 countries. With such a major presence in so many markets, it's difficult to achieve high growth rates.
Nonetheless, it's encouraging that Coca-Cola generated 12% sales growth last year after removing foreign currency translation effects and the impact of acquisitions and divestitures. Higher prices and increased volume were key to the growth.
Coca-Cola offers investors attractive dividends. The board of directors has increased payouts for more than 60 straight years, making the stock a Dividend King. That includes last month's announcement that it would hike the quarterly payment by 5.4% to $0.485.
The company also has ample free cash flow (FCF) to support the higher dividends. Last year's FCF was $9.7 billion compared to $8 billion in dividends.
Coca-Cola's stock has a 3.2% dividend yield, more than double the S&P 500's 1.4%.
2. Moody's
Moody's (MCO 0.25%) consists of two strong businesses. The company has a well-known ratings business and an analytics unit.
The ratings business analyzes various debt securities. While this division's results fluctuate somewhat based on bond issuance, it faces limited competition and has a large market share. S&P Global and Fitch Ratings are the other two major companies in this space.
Moody's analytics business helps customers manage risk through its data, analytics, and software tools. With companies increasingly relying on data, Moody's appears well positioned to take advantage of this demand.
Both businesses continue to thrive. Moody's revenue grew 8% to $5.9 billion, and its earnings per share (EPS) under generally accepted accounting principles (GAAP) increased 17% to $8.73. Management expects EPS to rise 8% to 17% this year.
It's hard to characterize Moody's shares as a bargain. The stock has a price-to-earnings (P/E) ratio of 44. That's much higher than the S&P 500's 28 P/E multiple. But with attractive businesses, good prospects, and strong market positions, it's worth paying a higher valuation.
3. DaVita
DaVita (DVA 0.56%) is one of the largest providers of dialysis in the U.S. Treating kidney disease, it has an enviable market position.
There were 556,000 U.S. patients with end-stage kidney disease in 2021, according to the United States Renal Data Systems. This grew at an over 3% annualized rate during the previous decade.
DaVita has positioned itself well to help these people. It treated about 7.3 million patients, or nearly 93,000 a day, in the fourth quarter. Revenue in the period revenue grew 7.8% to $3.1 billion.
Management expects adjusted operating income, which excludes certain costs related to items such as closures, to increase 5% to 14% this year. DaVita's adjusted operating income was $1.7 billion in 2023.
While the stock has had a nice run, gaining more than 77% over the last year, the valuation remains reasonable. The 18 P/E ratio remains well below the S&P 500's multiple.
With long-term prospects that appear bright, DaVita provides a nice investing opportunity.
As Warren Buffett has stated, it's important to remember that you're buying a piece of a business. Coca-Cola, Moody's, and DaVita each are strong in their respective markets, providing compelling long-term investments.
