For some investors there's a certain thrill in finding your own stocks to buy. For other investors, punting this duty to a proven expert is not only smart, but a time-saver too. And if you're part of this latter group, Warren Buffett's Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) is as good of a place as any (if not better) to poach some picks. There's a reason Buffett's called the Oracle of Omaha, after all.
With this as the backdrop, here's a rundown of three current Buffett/Berkshire holdings that would be at home in almost any investors' portfolio.
It's one of Berkshire Hathaway's newest additions, but Verizon (NYSE:VZ) is one of those names Buffett could have added to the mix long ago. Not only is it a quality name within the wireless arena, but it's a cash-generating machine that passes along a nice chunk of its recurring quarterly profits to shareholders in the form of dividends. The company managed to produce per-share operating profits of $4.90 last year, up from 2019's $4.81 despite the pandemic headwind. That was more than enough to fund the full-year dividend of $2.48 per share and still leave plenty behind to reinvest in its own growth.
By the way, Verizon has upped its annualized dividend payment every year since 2007. That makes the current yield of 4.45% all the more attractive.
Moreover, while it superficially doesn't appear Verizon has a competitive advantage over rivals like AT&T and T-Mobile -- one of the factors Buffett considers before making an investment -- in reality this telecom giant isn't like other names in the wireless business. Whereas AT&T spent big bucks on a DIRECTV business it's now partially exiting and T-Mobile is cancelling its nascent alternative to streaming cable, Verizon has directed the bull of its capital expenditures on a fiberoptic network that's needed to support 5G wireless connections.
It appears to be paying off. Verizon swept RootMetrics' first-ever assessment of the nation's 5G networks, winning top honors for all seven criteria RootMetrics considered.
This superior technology will help the telecom name attract and retain wireless subscribers.
Those who know AbbVie (NYSE:ABBV) well may be surprised to learn it was another major addition to the Berkshire portfolio just late last year. The drugmaker's biggest moneymaker is Humira, accounting for nearly half of last year's top line of $45.8 billion. But the patent protection for the popular therapy for arthritis, Crohn's disease, and ulcerative colitis is already deteriorating, and its pivotal U.S. patent will expire in 2022. Biosimilar alternatives are expected to become widely available by 2023, posing a threat to a huge chunk of AbbVie's business.
There's more method to the madness than there seems to be on the surface, however.
While there's no drug that will single-handedly be able to replace Humira's annual revenue of $22 billion, AbbVie may be able to do it in the aggregate. That is to say, a combination of therapies in its pipeline or already approved might grow by $20 billion in the foreseeable future. The company believes combined sales of Rinvoq and Skyrizi could swell to $15 billion by 2025, up from their current combined annual sales of just a little over $2 billion now.
Vraylar's revenue could expand from its current annual figure of less than $1 billion to near $4 billion without being approved for any new uses. Sales of Ubrelvy, a migraine drug that's currently up for FDA approval, are expected to eclipse $1 billion at their peak.
The point is, there's life after Humira for AbbVie -- life that can maintain the stock's Dividend Aristocrat status. Buffett simply stepped in while the yield was above average.
3. The Bank of New York Mellon
Finally, The Bank of New York Mellon (NYSE:BK) is a Buffett pick that probably makes sense.
There's no denying the COVID-19 pandemic created a tough environment for banks. Mellon's 2020 top line slumped by 4%, and net income tumbled to the tune of 19%. First-quarter results released earlier this month were similarly lackluster, with sales and earnings both falling year over year.
Take a closer look at the numbers, however, and you'll find that fee revenue actually improved slightly last year and last quarter. The soft spots have been the bank's net interest revenue and issuer service fees. The former reflects an abnormally low interest rate environment, and the latter is linked to a depository receipt business that became complicated in the midst of the coronavirus pandemic. Meanwhile, profit-eating expenses were the result of increased spending on software and services. These are arguably smart investments in long-term growth, even if they created short-term pain.
Ultimately, though -- like Verizon and AbbVie -- Bank of New York Mellon's chief appeal to Berkshire Hathaway is its resilient business model and its subsequently resilient dividend. The current yield of 2.6% isn't exactly thrilling, but the company hasn't failed to pay a quarterly dividend since the late 90s. Mellon doesn't raise its payout every year either, but when it does, it does so in a big way. The current quarterly payout of $0.315 per share is more than twice the dividend of $0.13 per quarter from just a decade ago.