Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%) is one of the world's most closely followed companies because CEO Warren Buffett handpicked most of its top investments. Following its portfolio has helped many investors stay ahead of the market.
But with the S&P 500 currently hovering near its all-time high, investors might be a bit wary of loading up on the Oracle of Omana's top stocks. However, I believe it's still safe to buy Apple (AAPL -0.35%), Coca-Cola (KO), and Kraft Heinz (KHC -0.55%), which together account for approximately 54% of Berkshire Hathaway's portfolio. Let's find out a bit more about these three no-brainer Buffett stocks.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
1. Apple
Apple's stock price is down about 5% this year as investors fret over its slowing iPhone sales, declining Mac shipments, and a lack of near-term catalysts. It still generates over half of its revenue from the iPhone, the Vision Pro remains a pricey niche gadget, and it recently ditched its plans to build an electric car.
As a result, analysts expect Apple's revenue and earnings to only grow 1% and 7%, respectively, in fiscal 2024 (which ends this September). Those growth rates seem tepid for a stock that trades at 28 times forward earnings.
Berkshire Hathaway notably sold about $2 billion of its Apple shares in the fourth quarter of 2023, but the tech giant still accounts for 44.5% of its portfolio. During Berkshire's annual meeting last year, Buffett praised Apple as a "better business than any we own" and said that if its customers "had to give up a second car or give up their iPhone, they'd give up their second car."
Buffett is still bullish on Apple because it has tremendous pricing power, it's bought back 36% of its shares over the past 10 years, and it ended its latest quarter with $173 billion in cash and marketable securities, which gives it plenty of room to expand its ecosystem with fresh investments and acquisitions. All of those strengths should justify its higher valuation and make it a great safe-haven stock to own in this volatile market -- even if it doesn't blast off over the next few quarters.
2. Coca-Cola
Berkshire Hathaway has owned Coca-Cola's shares since the late 1980s. Buffett once claimed to drink at least five 12-ounce cans of Coke each day, and the world's largest soda maker still accounts for 6.5% of Berkshire's portfolio.
Coca-Cola might seem like a risky stock to buy as soda consumption rates decline across the world, but it's diversified its portfolio with more brands of bottled water, fruit juices, teas, sports drinks, energy drinks, coffee, and even alcoholic beverages over the past few decades to curb its long-term dependence on sugary sodas. It's also refreshed its carbonated drinks with healthier versions, smaller serving sizes, and new flavors.
In 2023, Coca-Cola's organic revenue and adjusted earnings per share (EPS) rose 12% and 8%, respectively. For 2024, it expects its organic revenue to rise 6% to 7% as its adjusted EPS increases 4% to 5% -- even as tough currency headwinds throttle its overseas growth. It's also raised its dividend annually for 61 consecutive years, pays a forward yield of 3.2%, and looks reasonably valued at 21 times forward earnings. Those qualities make it a great stock to buy and forget for long-term investors.
3. Kraft Heinz
Berkshire Hathaway and 3G Capital drove Kraft Foods to merge with Heinz to become Kraft Heinz in 2015. The newly formed packaged foods giant initially struggled with sluggish organic sales growth for years as healthier products and private label brands lured away its core consumers. It also focused too much on cutting costs instead of expanding its business.
Despite those challenges, Kraft Heinz still accounts for 3.1% of Berkshire's portfolio. Under Miguel Patricio, who took the helm as its new CEO in 2019, it gradually turned around its business by launching fresh marketing campaigns for its classic brands, divesting its weaker brands, acquiring growing brands, and raising its prices to offset its slower shipments.
In late 2020, it launched a cost-cutting plan to reduce its total expenses by $2 billion over the following five years to stabilize its EPS growth. That ambitious turnaround strategy paid off. In 2023, its organic sales rose 3% as its adjusted EPS grew 7%. In 2024, it expects its organic sales to grow 0% to 2% and for its adjusted EPS to increase 1% to 3% -- even as it faces tough currency headwinds. Those steady growth rates, along with its low forward price-to-earnings ratio of 12 and its high forward dividend yield of 4.5%, make it a reliable income play for conservative investors.
