Billionaire investor Warren Buffett values a company that has a strong brand. Brand power can help a business rely on customer loyalty to generate recurring revenue, and it can also give a business the ability to raise prices amid inflation. By investing in businesses with strong consumer brands, investors can put themselves in great positions to achieve excellent returns in the long run.
In Buffett-led company Berkshire Hathaway, the following three stocks account for over 61% of the portfolio: Apple (AAPL -0.35%), American Express (AXP -0.62%), and Coca-Cola (KO). And they all have one important thing in common: strong consumer brands.
1. Apple
Apple has long been a favorite company of Buffett's, and it's the top holding in Berkshire Hathaway, accounting for 47.1% of the portfolio. The company has built a strong brand over the years through its iPads and iPhones, and expanded that into other services, such as music and streaming.
By growing its ecosystem, it becomes easier for the business to grow its top line, even while other companies may be struggling. In its most recent fiscal year, which ended Sept. 30, 2023, Apple's net sales totaled $383.3 billion, which were down a relatively modest 2.8% year over year. But services revenue, which makes up 22% of the top line, rose by more than 9%.
It has been an impressive performance for Apple given the financial pressure on consumers over the past few years. The stock has been an outstanding buy over the past decade, generating returns of over 850% for investors. And that's a trend that's not likely to subside anytime soon. Apple remains a good option for long-term investors.
2. American Express
Credit card giant American Express is another strong brand that resonates with consumers. The brand is particularly popular with affluent customers, which can help add some safety to the business by potentially reducing the risk of default.
The business has been doing well of late, which is further evidence of its customers resiliency; revenue net of interest expense through the first nine months of 2023 totaled $44.7 billion and was up 16% year over year, while net income of $6.4 billion jumped by 8%. The company is also showing strong growth among younger customers -- Millennial and Gen Z customers remain its fastest-growing cohorts.
American Express stock's returns over the past decade aren't nearly as impressive as Apple's, with gains of around 109%, but this is another example of a solid consumer brands stock that investors can build their portfolios around. It accounts for 7.6% of Berkshire's portfolio today.
3. Coca-Cola
Another beloved Buffett stock is Coca-Cola. It accounts for 6.7% of Berkshire's portfolio, and is yet another example of a versatile consumer brand. Through its strong branding power, Coca-Cola has been able to lean on price increases over the past year to help grow its business and offset the impact of inflation.
For 2023, the company is expecting its organic revenue growth rate to come in between 10% and 11%. That's an impressive growth rate for the business given the current macroeconomic challenges all over the world. During the first nine months of the year, changes in pricing and product mix have generated 10% revenue growth for Coca-Cola. Meanwhile, there has also been a 1% increase in volume (concentrate sales), which is impressive given the company's price hikes.
Coca-Cola's strong brand has enabled the company to weather the storm over the past year by relying on price increases. Although the stock's 10-year returns of 52% may appear unimpressive, risk-averse investors will love the stock for the safety it offers, plus its high dividend, which yields over 3%.
