There's no question what Warren Buffett's most successful investment is. Berkshire Hathaway (BRK.A 1.18%) (BRK.B 1.30%) delivered a jaw-dropping gain of 3,641,613% between 1964 and the end of 2021. That gain has grown even higher since then, with Berkshire's shares jumping more than 12% year to date.
But Berkshire's success is partially due to Buffett's investments in other companies. The legendary investor has made 1,725% to 2,985% gains on these three stocks.
Image source: The Motley Fool.
Massive gains
Buffett loves Coca-Cola (KO 2.14%). The company makes two of his favorite beverages -- Diet Coke and Cherry Coke. Buffett has even stated that he regularly drinks five cans per day. But the stock holds a special place in his heart -- and wallet.
Berkshire owns 9.2% of Coca-Cola. The stock has handed Buffett a gain of 1,725% as of March 16, 2022.
American Express (AXP 6.22%) runs neck-and-neck with Coca-Cola as the third-largest holding in Berkshire's portfolio. Buffett probably doesn't use an AmEx card as often as he drinks a Coke. However, the financial stock has been a huge winner for Berkshire, racking up a total gain so far of 2,031%.
But neither American Express nor Coca-Cola has generated the biggest returns for Buffett. That honor goes to Moody's (MCO 0.02%). Berkshire owns 13.3% of the financial services giant. The value of its position in Moody's has skyrocketed 2,985% through the years.
Buffett's secrets to success
There are two key secrets to Buffett's tremendous success with these three stocks. First, he bought businesses that he understood. Second, he held onto the stocks for the long term.
It's hard to overstate the importance of the first secret to Buffett's success. In his latest letter to Berkshire Hathaway shareholders, Buffett wrote about the mindset that he and his longtime business partner Charlie Munger have:
Whatever our form of ownership, our goal is to have meaningful investments in businesses with both durable economic advantages and a first-class CEO. Please note particularly that we own stocks based upon our expectations about their long-term business performance and not because we view them as vehicles for timely market moves. That point is crucial: Charlie and I are not stock-pickers; we are business-pickers.
Investing in companies that have the "durable economic advantages" and "first-class" executives at the helm requires that Buffett and Munger understand their underlying businesses. Check out comments that Buffett has made about Coca-Cola, American Express, and Moody's in the past. It's abundantly clear that he has a deep understanding of their businesses.
Just as important, though, Buffett has held onto all three stocks for a long time. He first invested in Coca-Cola in 1988. The purchase of the stock (along with shares of Federal Home Loan Mortgage) prompted Buffett to write to Berkshire shareholders soon afterwards, "We expect to hold these securities for a long time. In fact, when we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever."
Buffett's history with American Express dates back all the way to the early 1960s. Berkshire first invested in Moody's in 2000.
Buy these big winners now?
Are American Express, Coca-Cola, and Moody's still great stocks to buy now for investors who aren't multi-billionaires? They're certainly not as attractive as they once were. Berkshire bought seven stocks in the fourth quarter of 2021 -- and none of these three stocks were on the list.
However, Buffett isn't scrambling to dump his shares in any of these companies. All three could continue to deliver solid gains for years to come. But for investors looking to buy stocks in the current market downturn, I think there are even better picks that hold the potential to outperform American Express, Coca-Cola, and Moody's.
