Among the list of top Warren Buffett investments at Berkshire Hathaway is Coca-Cola. The stock has been a massive winner since the Oracle of Omaha first established his position in 1988 and has returned nearly 3,100% (including dividends), compared to the S&P 500's 2,500% return.
It's still a massive part of Berkshire's portfolio, holding the title of fourth-largest position. This makes it an obvious choice for Buffett-like investors to purchase. However, they're missing one glaring point: Coca-Cola stock has been a terrible investment in this millennium. Had you invested in the S&P 500 and Coca-Cola at the start of any year beginning in 2000 and held shares until now, you would have underperformed the S&P 500 every single year.
That's not great investing performance. Such followers are holding onto past performance and Buffett's steadfastness with the stock as an excuse for underperformance. However, other Buffett investments look primed now for market-beating growth. Let's consider three of them.
Amazon
Although it's a small part of Berkshire's portfolio (0.4%), Amazon (AMZN 3.43%) is among the company's investments. Berkshire trimmed some of its Amazon position in the third quarter, which may be a mistake.
Amazon is in a turnaround phase of its business as it emerges from a heavy spending phase and returns to a cash-generative stage. In Q3, Amazon's free cash flow (FCF) was $21.4 billion, compared to a $19.7 billion outflow last year. Additionally, its revenue continues to grow at a healthy rate, increasing by 13% to $143 billion.
With strong growth and improving margins, Amazon seems like a clear candidate for a turnaround investment. Furthermore, although the stock has performed well in 2023, it's significantly down from where it was valued just a few years ago. Amazon is in the early phases of becoming a top-tier cash-generating business.
AMZN PS Ratio data by YCharts.
Visa
Visa (V -0.23%) is another long-term Buffett holding, and its toll-booth model fits his investing philosophy perfectly. The credit card issuer only processes the transactions -- it doesn't take on the lending risk. As a result, Visa is a high-margin business that produces incredible results almost every quarter.
The fourth quarter of its fiscal 2023 (ended Sept. 30) was no exception as revenue rose 11%, with earnings per share (EPS) rising 18%. Management is choosing to repurchase shares and pay a modest dividend with its cash flow, and its board authorized a new $25 billion repurchase program in October.
One thing that isn't Buffett-like is its price-to-earnings (P/E) valuation, which is a bit pricey at 30 times trailing and 25 times forward earnings. However, a top-end company like Visa is rarely cheap, and these metrics represent levels not seen in nearly a decade.
Visa is a company that's here to stay and looks like a fantastic investment right now.
American Express
Similar to Visa, American Express (AXP -0.62%) is also a credit card issuer, except it issues cards for its own lending program. This can work out great for American Express if it manages its lending side well, which it has.
Despite credit card debt rising to record levels, American Express has seen delinquency rates below pre-2020 levels, meaning its portfolio is quite strong. Regardless, management beefed up its loan loss reserves in Q3 in case this trend reverses. Despite increasing this figure (which puts a drag on earnings), American Express still grew EPS by 34% in Q3, a new record high.
Revenue also grew by 13% and notched a new record high of $15.4 billion. This company is hitting its stride right now, yet the stock is valued at a fairly cheap level.
AXP PE Ratio data by YCharts.
This low valuation is much less than Coca-Cola's 23 times trailing-earnings price tag despite growing more slowly than American Express.
All three of these companies look set to outperform the market over the next few years for patient investors with long-term time horizons.
