Warren Buffett once shared his thoughts on the most important investing rules: "The first rule of an investment is don't lose money. And the second rule of an investment is don't forget the first rule." For investors looking to become richer, sometimes it's best to keep it simple and lean on proven blue chip stocks in their quest to follow the first rule.
Coca-Cola (KO 0.49%), Berkshire Hathaway (BRK.B -0.28%), and Microsoft (MSFT -1.00%) operate in different sectors but are all prime examples of what sustained success looks like. They won't make you rich overnight, but when you look back a decade from now, $100 investments into each will most likely have improved your portfolio.
Coca-Cola is focused on being shareholder-friendly
Coca-Cola has been around since 1892, so it's safe to say it's not a spring chicken. You don't stay in business that long by getting complacent, either. It takes a strong brand that can adapt to changing times -- and that's exactly what Coca-Cola has done.
Coca-Cola's flagship soda is one of the most recognizable products in the world, and this is a testament to the company's massive distribution. Its products are sold in more than 200 countries and territories, which isn't easy to do, especially profitably.
The strict focus on beverages instead of diving into food, like its main competitor PepsiCo, has allowed Coca-Cola to operate more efficiently and with higher margins. Although PepsiCo's revenue was almost double Coca-Cola's in the third quarter of 2023, its net income was comparable. This has allowed Coca-Cola more financial flexibility to focus on returning shareholder value.
KO Revenue (Quarterly) data by YCharts.
You can't predict how a stock will move, but you can be confident about Coca-Cola's dividend. The company has increased its yearly dividend for 61 consecutive years, and I'll bet my last two quarters it will keep the streak going for the foreseeable future. The stock yields around 3.1%, so a $100 investment would pay out $3.10 annually.
Berkshire Hathaway benefits from the growth of others
Buffett and his team have turned Berkshire Hathaway into the conglomerate of conglomerates with their astute investments throughout the years. Berkshire Hathaway is one of the few blue chip stocks that doesn't pay a dividend but has more than made up for it with stock-price growth.
Berkshire Hathaway owns a large stake in some of the world's best companies, including Coca-Cola. This allowed Berkshire Hathaway to benefit from the growth of other businesses and put it in a position to reap billions in dividend payments annually. In 2023 alone, it stands to make more than $6 billion in dividends -- more than Starbucks' combined net income over the past four quarters.
Aside from its investment income, Berkshire Hathaway's operating earnings -- which come from its wholly owned businesses like Geico, Pilot Travel Centers, and McLane -- continue to trend in the right direction despite Berkshire Hathaway posting a loss in the latest quarter. It's also the metric Buffett said investors should focus on in its latest earnings call.
Berkshire Hathaway has routinely outperformed the S&P 500, which has averaged 10% annual total returns over the past 30 years. Nobody can guarantee that it will continue, but outperforming the S&P 500 should be the minimum investors expect from their Berkshire Hathaway stakes.
Microsoft is the tech Swiss army knife
Microsoft may not have a product as popular as Apple's iPhone or dominance in an industry like Alphabet's Google search, but it's a top player in many tech industries. From software (Office) to hardware (PCs, tablets), to gaming (Xbox) to cloud services (Azure) to enterprise services (Microsoft 365), Microsoft's ecosystem covers a lot of ground.
Since it's one of the older tech companies, Microsoft doesn't commonly get talked about as a growth stock, but it's stock price has outperformed tech giants like Apple, Alphabet, and Amazon over the past decade.
There's still lots of room for growth, too. Segments like cloud and gaming will be key areas because they're on the earlier end of what they can be for Microsoft. Cloud is growing rapidly, and it recently closed its $68.7 billion Activision Blizzard deal.
Microsoft Azure is the second-largest cloud infrastructure provider worldwide as of Q2 2023,with a 22% market share behind Amazon Web Services' 32%, but it's gained market share over the years. The global cloud market size is expected to have a 20% compound annual growth rate (CAGR) until 2030, giving Microsoft lots of opportunities to expand its presence. Its partnership with OpenAI should also enhance its artificial intelligence (AI) capabilities and give it a competitive edge.
Financially, Microsoft is in as good shape as it's ever been. Its revenue and net income increased more than 12% and 26%, respectively, in its latest quarter, capping off a good run for the company over the past five years.
MSFT Net Income (Quarterly) data by YCharts.
Microsoft is a multifaceted tech powerhouse built to return great value over time.
