Got some extra cash you won't be needing anytime soon, but don't know what to do with it? Maybe you just don't have time to ferret out your portfolio's next pick? Whatever the case, there's a simple solution -- borrow an idea from one of the world's most proven investors, Warren Buffett. Or, more specifically, buy one of the names Buffett's Berkshire Hathaway already owns.
Here's a rundown of three Buffett-approved picks Berkshire Hathaway is currently holding that would also be at home in most investors' portfolios.
Coca-Cola
To say Coca-Cola (KO 0.91%) is a well-known brand somehow seems like a serious understatement. It's a market-share leader, domestically as well as internationally. Indeed, now well over 100 years old, the company's become a cultural icon.
It's not just its namesake cola anymore, of course. The Coca-Cola Company is also parent to Dasani water, Gold Peak tea, Minute Maid juice, Powerade sports drink, and Sprite just to name a few of its other beverage brands. This wide range of products is a big reason Coca-Cola's been able to maintain its revenue and earnings growth for so long even though the beverage marketplace is constantly evolving. (Namely, consumers are drinking less sugary soda and drinking more water and tea.) It's always got something to sell someone.
NYSE: KO
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More important to investors, this steady flow of sales and profits is why the company's dividend history is nothing less than stellar. Not only has Coca-Cola been reliably paying dividends every year for decades, but it's also raised its dividend payment every year for the past 61 years. Only nine other companies in existence today boast a longer track record of annual dividend growth.
Don't look for any dividend disruption anytime soon either. Aside from being one of the world's most memorable, loyalty-inspiring families of beverage brands, it's also earning more than enough to fund its current and future payouts. Only about two-thirds of its profits are paid out in the form of dividends. The difference provides a cushion against any fiscal turbulence and allows the company to reinvest in its relatively simple business's own growth.
Apple
There was a time when Berkshire Hathaway simply wouldn't have owned a stake in Apple (AAPL 0.01%). See, for most of his stock-picking life, Buffett's steered clear of technology stocks, explaining he doesn't invest in companies he doesn't fully understand. That's why Berkshire's 2016 purchase of Apple shares came as such a surprise.
Even more surprising is that Buffett has added to the trade in the meantime, as Apple's stock price has grown. The 915 million-share holding is not only about 5% of Apple itself, but now also accounts for roughly half of Berkshire Hathaway's stock portfolio. That's a lot by both measures.
The decision probably wasn't all Buffett's. Younger managers Todd Combs and Ted Weschler arguably better understand Apple's strengths and weaknesses, and as such were in a better position to suggest the pick.
NASDAQ: AAPL
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That being said, it's not as if the position is misaligned with Buffett's usual stock-selection regimen, nor is it out of place within the Berkshire Hathaway portfolio. The company's business is actually quite easy to understand, for example -- Apple makes smartphones, and supports their sales by providing a robust ecosystem of apps that extract every ounce of functionality from the device.
There's another detail about Apple, however, that that arguably even better qualifies it as a Buffett pick. That is, it's a strong business with clear competitive advantages. Underscoring this claim are numbers from market research outfit Bionic, which reports 92.6% of iPhone users intend to buy another one in the future while only 74.6% of current Android smartphone users say they'll buy another Android phone when the time comes. Meanwhile, mobile app consultant Asymco's Horace Dediu says iPhone users spend on the order of 7 times more on apps and digital content than Android users do. That's a clear, significant edge.
Bank of America
Last but not last, add Bank of America (BAC 0.32%) to your list of Warren Buffett stocks to consider if you've got a few extra thousand bucks to work with at this time. Berkshire Hathaway's holding a little over 1 billion shares of the megabank right now, making it the fund's second-biggest holding.
Boring? A little. But that's kind of the point. Owning stocks as a form of entertainment can often work against you. Like Buffett, you want to hold stocks that dish out superior long-term rewards without a bunch of drama in the short run. BofA does exactly that.
OK, there's been one exception to this reliable progress. That's the stock's sizable pullback in 2008 following the subprime mortgage meltdown.
Like so many other banking stocks around that time, this one was riding high on a movement that would eventually -- and abruptly -- be undermined. In fact, Bank of America shares have yet to reclaim their 2006 high. That's mostly because abnormally low interest rates in the meantime have crimped lending's profit margin rates.
NYSE: BAC
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That collapse and the subsequent several years' worth of low interest rates are the exception to the norm, however. Things are easing back to normal now. And, having remembered the harsh lessons taught by 2008's mortgage market collapse, it's unlikely BofA is going to put itself in a similar situation again in the near future.
The real appeal to investors here, however, is the dividend. Bank of America shares' current dividend yield stands at a healthy 2.9%, based on a quarterly payment that's grown from $0.12 per share in 2017 (when the banking industry finally and fully shook off the impact of 2008's nightmare) to $0.24 per share now. That's a compound annual growth rate of more 9%, far outpacing inflation's growth during that stretch. And that doesn't even count the stock's price growth of 40% during that pandemic-mired turbulent period.
