When it comes to investing, there are few names as synonymous with success as Warren Buffett. Since taking the reins at Berkshire Hathaway in 1965, Buffett has delivered mind-blowing returns. In fact, a $100 investment in Berkshire Hathaway when he took over would have turned into $2.4 million today.
While we can't say why Buffett and his team select the stocks they do, we know that several factors drive their decisions. They look to invest in quality companies at good prices with strong brands while having a long-term mindset. If you're looking to Buffett's wisdom on what no-brainer stocks are a good buy today, three companies you should consider are Apple (AAPL 0.51%), Coca-Cola (KO 0.63%), and American Express (AXP 0.85%).
1. Apple
First added in 2016, Apple stock is the No. 1 holding for Berkshire Hathaway, making up 40% of its portfolio. What makes Apple special is the dominance of its iPhone and other hardware products and the premium prices customers pay.
Apple can command a premium because of its strong brand. According to Interbrand, Apple is the most valuable brand in the world, with a brand value of over $483 billion. Customers are willing to pay up for its products, and over the past decade, Apple's gross profit margin has been just under 40%.
AAPL Gross Profit Margin (Quarterly) data by YCharts
Its free-cash-flow numbers are staggering. Free cash flow is the cash a company has left over after paying for operations and capital assets. This cash can be reinvested in the business, used to pay down debt, or paid out to shareholders -- which Apple has done considerably. Since 2013, Apple has paid its investors $550 billion in stock buybacks.
Apple has done an excellent job with its hardware products and expanded its services revenue, which includes the App Store, Apple TV, and others, with even higher gross margins of 70%. The tech giant sits on a healthy balance sheet with over $165 billion in cash and marketable securities, and its recognizable brand and strong cash flows make this Buffett stock a no-brainer buy and hold for the long haul.
2. Coca-Cola
Coca-Cola is a longtime Buffett stock, in Berkshire Hathaway's portfolio since 1988. Like Apple, Coca-Cola is a leading brand in its industry. According to Interbrand, it is the seventh most recognizable brand in the world, with an estimated brand value of $57 billion.
Brand recognition is another crucial part of Buffett's success. Strong brands give companies a robust economic moat or an ability to maintain a competitive advantage over rivals. As a result, Coca-Cola has brand loyalty that gives it pricing power, which was on full display last year.
Last year its gross profit was $25 billion, up 7.3% from the year before. Despite inflationary pressures in the economy, its net income of $9.5 billion was only down slightly from the year before.
Coca-Cola has done an excellent job of diversifying its product offerings into energy drinks, coffee, and a new sector known as "ready-to-drink," which includes alcoholic beverages in things like seltzer and tea. It's also an excellent dividend stock, raising its payout for 61 consecutive years while yielding investors 3.06%.
3. American Express
Like Apple and Coca-Cola, American Express has carved out a recognizable brand name. Its high-end card products set it apart from competitors and attract premium customers.
In an interview with Bloomberg, Buffett said:
You can't create another American Express. I could create another shoe store. I could create another business publication. I could do all kinds of things with hundreds of billions of dollars, but I can't put in the minds of people what is in their minds about American Express.
Last year American Express added 12.5 million new cards, with millennials and Gen Z making up 60% of its acquisitions.
American Express' high-end customers could prove to be more resilient than others with their ability to better withstand inflationary and recessionary pressures. The company also has a quality loan book, with net write-offs of 1.1% and 1% of member loans 30 days past due, which remains below pre-pandemic levels. With its strong brand and premium customer base, American Express is another no-brainer Buffett stock to buy today.
