Do you have some idle cash on your hands but don't want to do anything too crazy with it? The smart, relatively safe play is to borrow a stock idea or two from Warren Buffett's Berkshire Hathaway holdings. The Oracle of Omaha has a great track record when it comes to finding long-term value, after all. You'd do well to follow the lead of Buffett and his acolytes.
With that as the backdrop, here's a closer look at three Buffett picks that would easily be at home in your portfolio as well. Note that none of the picks are named Apple, either. While the maker of the iPhone is Berkshire's single-biggest holding (by far) at this time, it's also become an expensive stock thanks to this year's firm bullishness. If you're looking for a Buffett pick worth stepping into right now, you're better off with other options.
In no particular order...
American Express
Credit card company American Express (AXP 0.55%) certainly isn't as big as Visa or Mastercard, both of which are also found among Berkshire Hathaway's holdings. But there's a reason Buffett's holding a far bigger stake in American Express than he is in rivals Mastercard and Visa. That reason is arguably the strength of AmEx's perks program.
See, Visa and Mastercard are merely credit card payment network operators, issuing and managing cards on behalf of banks and other companies with access to lots of would-be borrowers. American Express is different, however. It's a soup-to-nuts outfit, not only handling payment and merchant logistics, but managing its own expansive perks and rewards programs that encourage the use of its cards.
For instance, consumers with an American Express Platinum card are reimbursed up to $20 per month on select streaming services, enjoy access to hundreds of private lounges at airports, and get hundreds of dollars worth of yearly credit toward services like hotel stays, airline tickets, and rides provided by Uber. That's why cardholders are willing to pay an annual fee of $695 for their Platinum American Express card.
Of course, the company also gets a small piece of the amount of each purchase made by its cardholders.
NYSE: AXP
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None of this is to suggest Visa or Mastercard aren't worth owning, or that AmEx simply shrugs off any and all trouble (like economic malaise). It poses predictable risks too. Worries about these risks are why American Express shares haven't made any net progress since the middle of 2021.
But the company itself is still doing just fine. This year's top line is on pace to grow by 15%, with more than a 9% improvement predicted for next year. Profits are growing accordingly, underscoring the argument that a well-managed card rewards program is marketable in almost any economic environment.
Coca-Cola
You won't find quite as much revenue and earnings growth with Coca-Cola (KO 0.28%) as you will with American Express. But what Coca-Cola lacks in growth firepower, it more than makes up for in reliable dividends and dividend growth. The company's not only been able to pay a dividend every quarter for the past several decades, but it's been able to raise its per-share dividend payout every year for the past 61 years. This year's increase raised it from $0.44 per share every quarter to $0.46 per share -- a 4.5% year-over-year increase that's in line with the dividend growth seen over the course of the past couple of decades.
You of course know Coca-Cola is the parent to its popular namesake beverage. What you may not realize is that Minute Maid juices, Powerade sports drinks, Gold Peak tea, and Dasani water are just some of the other brands that are part of the company. The diversity of its portfolio is part of the reason for the company's dividend-supporting cash flow; it's got something to sell to everyone at any given time.
NYSE: KO
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That's only part of the reason shareholders can expect more of the same into the indefinite future. Just as important (if not more so) is the recent evolution of Coca-Cola's business model.
The company spent the better part of the past several years backing away from being in the bottling business, punting that work back to localized bottlers so it can better focus on what it does best. That's marketing and licensing, and then collecting royalties from the bottlers using its flavors and brand names. While this has ultimately meant less revenue, it also means more net profits.
Investors getting into a position in Coca-Cola today will be stepping in while the dividend yield is a respectable 3.1%. You can find bigger yields. You'd be hard-pressed, however, to find a yield this strong from shares of a company with this much reliable dividend growth.
Kraft Heinz
Last but not least, add Kraft Heinz (KHC 1.16%) to your list of Warren Buffett stocks you might want to scoop up for yourself.
Some investors may recall this Berkshire holding has a bit of a checkered past. Buffett was one of the key orchestrators of 2015's merger of then-separate Kraft and Heinz companies, with Berkshire kicking in several billion dollars of its own to see the deal all the way through. By 2019, the combined companies were suffering regular write-downs, however, taking a toll on Berkshire Hathaway's bottom line as well. As Buffett bluntly conceded at the time, "I was wrong in a couple of ways on Kraft Heinz ... We overpaid for Kraft."
The market doesn't seem to disagree. Kraft Heinz shares are still trading right around where they were in 2019 immediately after several of the challenges linked to the melding of the two food giants were fully exposed.
NASDAQ: KHC
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We're now nearly five years removed from the realization of that debacle, however. Not only are those problems now fully in the past, the inflation that was so troubling last year and early this year is also abating.
The evidence? Last quarter's modest top-line growth of 1% was paired with a 21.2% improvement in gross profits, extending trends that got going early this year. Overall net income and per-share profit growth are also consistently outpacing sales growth this year, reflecting the strength of all the company's brand names that extend far beyond well-known Kraft and Heinz. Maxwell House, Jell-O, Ore-Ida, and Oscar Mayer are just a sampling of the other names in The Kraft Heinz Company's portfolio.
More and more investors are seemingly starting to see this company's finally working its way out of its funk; shares have soared since its third-quarter results were released early last month.
At a trailing price-to-earnings ratio of only 15.1 and a dividend yield of 4.4%, there's plenty more room for Kraft Heinz shares to continue marching higher.
