If you ever find yourself struggling to find a great idea for a stock to add to your portfolio, here's a simple solution -- borrow an idea from a proven stock picker.
Warren Buffett is one such stock picker who might be just what you need. After all, his Berkshire Hathaway portfolio regularly outperforms the S&P 500 index. He's clearly doing something right.
Here's a rundown of three Buffett picks currently held by Berkshire that would be at home in most anyone else's portfolio. In no particular order...
1. Coca-Cola
Is Coca-Cola (KO 0.49%) predictable to the point of being boring? Probably. But that doesn't make it a bad pick. This predictability makes it a great stock pick, in fact, specifically because it supports the top bullish argument for owning a stake in the drinks giant.
You know the company. This organization is of course parent to its namesake (and highly popular) cola, as well as other beverage brands ranging from Gold Peak tea to Sprite to Powerade to Minute Maid juices, just to name a few. It's a great business to be in even if it's not a high-growth market. These are products consumers purchase in any and all economic environments; loyalty to these well-developed brand names is strong, too.
Coca-Cola's actual business, however, may not be quite what you think it is.
See, the organization does very little of its own bottling these days. Rather, its core business model is selling concentrated flavor syrups to localized bottlers and then marketing the daylights out of the products that someone else ultimately manufactures. This defers much of the work and cost-based risk of the business to these bottlers, who pay Coca-Cola royalties for these consumer goods. This royalty-collection model is very consistent and predictable. It's so consistent, in fact, that Coca-Cola's been able to raise its dividend payment every year for the past 62 years with no real fiscal strain.
Berkshire Hathaway currently holds 400 million shares of Coca-Cola, which yields 3.26%.It's a position Buffett's been sitting on since late 2006.
2. Amazon
Warren Buffett's decision to steer Berkshire Hathaway into a position in e-commerce behemoth Amazon (AMZN 0.75%) turned more than a few heads back in 2019. Buffett's never been a big fan of technology stocks. He thinks they're too difficult to understand, leaving their shareholders at something of a disadvantage.
Even the Oracle of Omaha, however, can't deny it's been a fruitful holding even if it was most likely a pick from one of his acolytes. Amazon shares are up 70% since Berkshire bought them four years ago.
His willingness to jump into and stick with the unlikely pick is rooted in the same reasons most other shareholders own a piece of the e-commerce powerhouse. That is, it's outgrowing its rivals in a market that it dominates. Its fiscal fourth-quarter top line improved 14% year over year, capping off 12% growth for the full year and overcoming economic malaise in the process. Sales growth should top 11% this year as well as next year, pumping up the bottom line even more.
The thing is, Amazon actually does check off several of the criteria Buffett uses when choosing a stock. Chief among these rules is that "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." Amazon stock has never been cheap by marketwide standards. But there's no arguing it hasn't been a wonderful company since shortly after its inception. The stock's never really been held back by its historically rich valuation.
3. Chevron
Last but not least, add oil and gas name Chevron (CVX 0.27%) to your list of Warren Buffett stocks to buy right now. Shares are still down 13% from their all-time high hit in 2022, pushing the dividend yield up to 4%.
It's not that Berkshire Hathaway hasn't bought and held energy stocks before. But as time has marched on and renewable energy sources have finally started threatening to displace fossil fuels, Buffett's interest in these tickers has seemingly waned. That's why the fund's foray back into the business with its 2020 re-entry into Chevron was eye-opening. Since then it's grown into Berkshire's fifth-biggest position, making the stake even more curious. What does Buffett see here?
The dividend helps, to be sure. As it turns out, however, the world's not nearly as ready to make the shift to carbon-free energy as was hoped would be the case by this point. Given the ever-growing need for energy (linked to the planet's ever-growing population), the United States Energy Information Administration predicts that petroleum and related liquids will still be the planet's top source of energy production as far down the road as 2050. And that's not counting natural gas, which should be the world's third-biggest energy source by then, right behind renewables.
The bigger takeaway here, however, is that the world will still likely be burning more oil then than it's burning now.
It's a scenario that clearly bodes well for Chevron even if crude oil is politically, socially, and culturally unpopular at this time. Just keep in mind that -- like Coca-Cola -- Chevron is more of an income holding than a growth holding.
