If you want to identify companies that can provide the foundation for an investment portfolio, a great place to start is by looking at the selections of Warren Buffett.
Buffett is arguably one of the most knowledgeable and savvy investors of all time. Two of the holdings in his Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%) portfolio are companies in very different businesses, but each with the potential to provide investors big gains for years to come.
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A beverage king in more ways than one
Coca-Cola (KO) may not be a flashier, larger Buffett holding like Apple, with innovative devices that our daily lives depend on; but what it does have to its credit is that of being the fourth largest in value ($21 billion) and longest-held stock in the Berkshire Hathaway portfolio -- dating back to 1988. And it is a key part of many people's days, not unlike the iPhone, being that the company's beverages are consumed at a rate of 1.9 billion servings each day.
Coca-Cola boasts 500 brands and 3,500 beverages worldwide, including sodas, juices, energy drinks, specialty waters, hard seltzers, and dairy drinks. Third-quarter revenue grew 16%, to $10 billion, and earnings per share jumped by 41% as a result. Its growth during the quarter was driven by a strong pipeline, expanding new brands into Japan and China, and an improved version of Coca-Cola Zero Sugar, which contributed 25% of the Coca-Cola's Q3 growth. Investors have been believers, helping the stock shoot up to an all-time high over $61 this month, and analysts think it could go more than 10% higher.
An expansion in China, Latin America, and Europe markets through juices and dairy brands, along with the success of sparkling flavors -- spurred by country-specific campaigns -- are areas experiencing market share gains. And its dairy brand, fairlife, acquired in 2020, is set to become the company's first billion-dollar dairy brand.
Coca-Cola is the definition of consistency, building its brand for over 100 years, accompanied by its status as a Dividend King -- increasing annual dividends for investors for 59 consecutive years. Is it any wonder that Buffett once stated, "We've never sold a share, and I wouldn't think of selling a share."
Visit a McDonald's, grocery store, or anywhere with a soda vending machine. You'll be hard-pressed not to see a Coca-Cola product. Maybe it's time this top Buffett stock gets stored in your investment portfolio.
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DaVita: expanding its footprint and making dialysis more comfortable
Sometimes finding investment ideas isn't as easy as identifying iconic brands with excellent track records. DaVita (DVA 0.56%) is a name lesser known to the general public than Coca-Cola, but it provides critical services to patients suffering from kidney disease -- a market projected to grow at a 4.7% compound annual growth rate through 2028.
Berkshire has owned DaVita shares since 2011, becoming its largest shareholder with a 32% stake. And although Berkshire trimmed its holdings in 2020 by 6% after scoring $2 billion in gains during the previous 12-month period, it still holds over 36 million shares valued at $4.2 billion. So it's not like the sale was an act of run and hide by any stretch of the imagination.
As of September, DaVita provided dialysis services to over 241,000 patients through care centers across the U.S. and 10 other countries. Q3 revenue of $2.9 billion grew for the third year in a row and was its highest single-quarter revenue since Q1 2018. Twenty-year DaVita veteran and current CEO Javier Rodriguez has been named one of Modern Healthcare's 100 Most Influential People in Healthcare and one of Fierce Healthcare's Most Influential Minority Executives in Healthcare. DaVita has also received notable recognition as one of Fortune magazine's World's Most Admired Companies. Rodriguez is leading the company into the future of social and technological changes, making at-home dialysis and building a full complement of solutions an area of growth for the company.
Through DaVita's innovative platform and expanded telemedicine, at-home dialysis allows for improved remote monitoring, immediate response, and solutions to clinical issues patients may face. It can also help coordinate dietary needs and grocery orders to support a better lifestyle. Combined with augmented reality, 5G connectivity, and advanced technology such as wearables, at-home dialysis will become commonplace by 2030, believes DaVita's vice president of research and development, Mahesh Krishnan. This should drive the number of DaVita patients currently using home dialysis -- 15% -- higher and lead to an increased number of medical partners and dialysis patients turning to DaVita products and services, generating new revenue.
To bolster DaVita's complement of solutions, it acquired MedSleuth in January, giving DaVita a connectivity platform to match transplant candidates with care centers and physicians. MedSleuth's software is designed to streamline the process that comes with evaluating candidates, matching them with donors, and performing follow-up. The acquisition rounds out DaVita's production solution set to build out additional partnerships, expand its technology, and provide its patients with a consistent care journey.
Though Buffett trimmed his holdings, other investors don't appear fazed. The stock has gone from Berkshire's $88 sale price to over $110, peaking at $136 this past August. The company is showing confidence in its continued growth path, as represented by a 3 million share purchase of its own stock at an average of $123 per share, suggesting it believes the stock is worth a price north of that. Combined with an average analyst price target of $134, it represents a 17% premium over the current $110 share price.
The impact of the coronavirus has weighed on the share price, but maybe not so much as the recent overall market downturn has. As the market finds its feet and COVID-19 treatments progress, the stock should find solid ground on which to build. This presents investors with an opportunity for the long haul.
