Warren Buffett, the legendary investor from Omaha, is widely respected by Wall Street and Main Street alike. The popular stock picker who runs holding company Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) has put up an impressive track record of choosing companies that deliver excellent returns to shareholders like himself and his company. 

For that reason, the portfolio of nearly 50 stocks and exchange-traded funds that his company manages is closely watched for clues on what this investing veteran and his team at Berkshire think could be long-term winners. Interestingly, Berkshire Hathaway owns a significant number of shares in these three popular stocks: Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), and Coca-Cola (NYSE:KO).

Let's take a closer look at these three companies and try to understand why Warren Buffett might love them. 

Warren Buffett.

Image source: The Motley Fool.

1. Amazon 

In addition to delivering goods to people's homes, Amazon is delivering excellent returns for investors. The stock is up by 394% over the last five years, and Amazon's core business has the fundamentals to back it up.

Cash flow from operations has more than quintupled from $12 billion in 2015 to $66 billion in 2020. The company was already on a rapid growth path, and the pandemic put fuel on the fire.

Amazon has established itself with consumers as the most convenient retail company with the fastest and lowest-cost shipping. It also has the widest selection of items. The company has invested over $100 billion during decades to achieve this feat, giving it a strong and defensible moat. This is a quality that Warren Buffett likes when looking at an investment.

Amazon is one of the more recent additions to Berkshire's portfolio (it was added in 2019). Despite missing out on Amazon's early gains, Buffett's company was not afraid to add the e-commerce giant to the fold. Buffett's team knows that if a company has long-term growth prospects, it can never be too late to get in on the investment action.

2. Apple 

Berkshire Hathaway's largest holding, by far, is Apple. The share count now stands at more than 907 million and it's valued at about $120 billion. The fact that Apple became Berkshire's largest holding is a surprise considering Buffett shied away from tech stocks for so long. Apple's competitive moat and its ability to throw off billions in cash flow eventually convinced Buffett of its value.

What's not to love about Apple? In January, more than 1 billion people were using the company's iPhone, and over 1.6 billion Apple devices are in use overall. 

The $2.2 trillion company not only makes a handsome profit when it sells a device, but it also generates cash when individuals purchase services through Apple's app store. If a developer wants to list an app there, it has to pay the company a percentage of its sales for the privilege -- sometimes up to 30%. 

That's helped Apple generate a massive amount of cash from operations. Indeed, since 2015, Apple has earned an incredible $797 billion in cash from operations.

3. Coca-Cola

The international manufacturer and distributor of liquid refreshments is another one of Warren Buffett's favorite stocks. His portfolio holds $21.7 billion of Coca-Cola shares. Coca-Cola is one of Buffett's longtime favorites, in part because he loves drinks its namesake beverage. That's also one of Buffett's popular investing adages -- to invest in what you know and never invest in a business you cannot understand.

Coca-Cola has been delighting customers with its beverages for decades. Management knows what its doing and proves that year in and year out. The iconic company may be experiencing a slowdown in sales as consumers' tastes have moved away from sugary beverages to healthier alternatives. However, it's still sustained a healthy gross profit and operating profit margins of 60.7% and 24.2%, respectively, over the last decade.

The profits allow Coca-Cola to pay and increase its dividend steadily. In fact, Coca-Cola is one of only 27 companies considered Dividend Kings, stocks that have raised the dividend annually for 50 years in a row. A steady cash flow fits right into Buffett's investment philosophy.

Moreover, as of 2019, Coca-Cola was the market leader in carbonated soft drinks, with over 43.7% of the market.

Investor takeaway

Together, these three stocks make up nearly 40% of Buffett's $300 billion portfolio. Each of these companies is near the top of its market, generates lots of cash, and has a defensible moat that was built over decades. It's no wonder Warren Buffett loves them.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.