Got an extra $1,000 you'll not be needing for a while? It's understandable if you're not too eager to invest it. Stocks have been wobbly of late, and given all the economic uncertainty, there's no assurance a rebound is coming anytime soon.
On the other hand, there are some stocks offering so much reliable value that there's never a bad time to buy them. A bunch of these tickers are found in value investor Warren Buffett's Berkshire Hathaway's (BRK.A 0.64%) (BRK.B 0.54%) portfolio of investments right now. Here's a closer look at three of his current picks that you can feel good about buying sooner rather than later, regardless of the current market environment.
1. Coca-Cola
Berkshire Hathaway stake: $24.8 billion/400 million shares
It's easy to assume our current bout of rampant inflation is taking a bite out of Coca-Cola's (KO 0.68%) bottom line. Beverages are a low-margin business to begin with, and rising shipping prices along with higher commodity costs are further squeezing already-thin profits. That makes freight-intensive businesses like drinks a particularly challenging industry.
Except that Coca-Cola -- parent to Minute Maid, Dasani, Powerade, and other drink brands -- isn't exactly a beverage bottler, although it still does a bit of its own bottling. Over the course of several years leading right up to the pandemic, it was selling many of its bottling operations back to franchisees so it could better focus on licensing its brand(s).
The end result was ultimately lower revenue, but higher earnings. As it turns out, licensing and royalty revenue is much higher-margin revenue than bottling itself. That's particularly true when input costs and delivery expenses are sky-high, as they are now.
To this end, during the first quarter of this year, the company turned 33%, or $3.5 billion, of its $10.5 billion top line into operating income. Its first-quarter operating margin from just five years back was closer to a considerably less impressive 15%.
The real upside to would-be buyers is how well these bigger profits support the dividend. Coca-Cola's first-quarter dividend of $0.44 per share is easily covered by the fairly typical bottom line of $0.64 per share. That's a dividend, by the way, that's been raised every year for the past 60 years.
2. U.S. Bancorp
Berkshire Hathaway stake: $6.9 billion/144 million shares
It seems to be the wrong time to own banking stocks. While rising interest rates do help banks earn more on the spread between the interest they offer savings account holders and what they charge for loans, they also give rise to concerns about a recession which crimps interest in borrowing. Worries about this and the potential for increased loan defaults put pressure on these bank stocks, which push their dividend yields higher.
In this vein, the Mortgage Bankers Association reports that demand for new mortgage loans fell to a 22-year low last week. And there's the prospect of a deteriorating value of the industry's collective loan portfolio if strapped consumers start struggling to make loan payments -- which they already are, particularly when it comes to auto loans.
But regional bank U.S. Bancorp (USB -0.20%) -- you know it better as U.S. Bank -- is largely sidestepping this headwind for a couple of reasons.
As a smaller organization, it is well equipped to handle localized community needs rather than catering to massive corporations. Generally speaking, its base of consumers and small-business borrowers tends to be at lower risk of defaults. That's why the bank's charge-off rate has remained just a tad above 0.2% of its loan portfolio of late.
The other (and perhaps bigger) reason U.S. Bancorp doesn't pose the same sort of risk that bigger names like Bank of America or Wells Fargo do is that lending was never a huge piece of its revenue and earnings mix to begin with. While it's a part of it, payment services and fee revenue also make up a significant piece of its top and bottom lines. That's largely why this year's revenue is still projected to grow by nearly 9%, accelerating to 18% in 2023 to drive a record-breaking profit of $5.14 per share. Not many other banks are expected to do that well here.
3. Kroger
Berkshire Hathaway stake: $2.7 billion/58 million shares
Finally, add Kroger (KR 0.56%) to your list of Buffett-owned stocks you can buy now.
Kroger is the country's biggest pure-play grocer, although you might know it by one of its other store banners like Harris Teeter, Fred Meyer, Fry's, or Pick 'n Save, just to name a few. All told, the chain's 2,723 stores produced $33 billion worth of sales last year, turning $965 million of it into an operating profit. By grocery standards, that's rock-solid.
As was the case with Coca-Cola, it would be easy to assume the inflation bug has bitten Kroger. But such an assumption misses an important reality regarding the grocery business: People have to eat regardless of the cost.
The evidence? Last quarter's top-line grew 8% and same-store sales improved 4.1%, both of which were more than matched by the 22% uptick in adjusted per-share earnings. Its gross margin fell only slightly, by 26 basis points.
Much of this profit resilience can be attributed to Kroger's Our Brands category of private label merchandise, like its Simple Truth organics or Private Selection brands. Store chains tend to turn bigger profits selling their own goods, and Kroger's private-label brands (and packaging) stand shoulder to shoulder on store shelves with better-recognized national names. The company's house brands saw a 6.3% increase in sales last quarter, outpacing its overall same-store sales growth.
The current yield of 2.25% isn't exactly thrilling, even by Buffett's deep-value standards. With its amazingly resilient business supporting 16 consecutive years of annual dividend increases, though, Kroger is a low-risk holding that works in almost anyone's portfolio.
