Professional investors aren't quite like professional athletes, where the top players in the game often become household names, but every so often, there are exceptions to this. The biggest exception may be Warren Buffett, arguably the most well-known investor in today's investing world.
Many folks far removed from Wall Street know Buffett's name, and it hasn't been by accident. Because of his personal success and the success of his company, Berkshire Hathaway, many investors watch his investing moves, hoping to replicate his returns.
While this may not be the best option for all investors, there's nothing wrong with looking to the Oracle of Omaha for guidance. Below are two Buffett stocks that investors can feel comfortable holding on to forever.
1. Coca-Cola
Coca-Cola (KO 0.20%) is one of the oldest stocks in Berkshire Hathaway's portfolio and its fourth-largest holding, accounting for more than 6% of its stock portfolio.
Investors shouldn't look to Coca-Cola to have growth-stock-like revenue or profit growth, but the company has been consistent with its growth over the years. Coca-Cola's revenue for 2023 was $45.8 billion, up 6% year over year. Its revenue growth outpaced its global case volume (up 2% year over year), which points to the company's pricing power.
Coca-Cola's brand in the beverage world is unrivaled, and the company does a good job of leveraging that when it experiences stagnant periods. Operating only in the beverage industry ensures Coca-Cola doesn't spread itself too thin and can focus on running its business as efficiently as possible. That's partly why Coca-Cola's net income is often higher than PepsiCo's, despite its revenue falling far below the snack and beverage company's.
KO Revenue (Annual) data by YCharts
The main reason I'd argue for holding on to Coca-Cola's stock forever is its dividend. The company is a Dividend King, having increased its yearly dividend for 62 straight years, and there are no signs of that stopping. Only a handful of companies have a longer streak of yearly dividend increases.
Coca-Cola's quarterly dividend is $0.485, with a trailing-12-month yield of around 3.2%. That's more than double the S&P 500's average and good enough to boost investors' total returns if the stock's price hits a stagnant period.
2. Apple
Apple (AAPL 2.75%) is by far Berkshire Hathaway's largest holding, accounting for close to 43% of its stock portfolio. A huge concentration in Apple stock has done wonders for Berkshire Hathaway over the years, but this year hasn't been the best for the iPhone maker. Apple stock is down close to 5% year to date.
Much of Apple's stock price struggles have been caused by investors worrying about the company's recent lack of growth. In the first quarter of its fiscal year 2024 (ended Dec. 30, 2023), Apple made $119.6 billion in revenue, but it was only up 2% year over year. This is continuing a worrying trend, too.
AAPL Revenue (Quarterly YoY Growth) data by YCharts
Despite this trend, I believe some concerns about Apple are warranted yet overblown. The iPhone accounts for a large portion of Apple's revenue (surpassing 58%), and the slowdown in smartphone sales over the past few years has taken its toll. In October 2023, global smartphone sales grew 5% year over year, marking the first positive growth in 27 months leading up to that point. Investors shouldn't overlook that.
Slow revenue growth aside, the company's services segment growth is a sign of optimism. Below is how product versus service revenue has played out over Apple's last five fiscal years:
| Fiscal Year | Product Revenue Percentage | Services Revenue Percentage |
|---|---|---|
| 2019 | 82% | 18% |
| 2020 | 80% | 20% |
| 2021 | 81% | 19% |
| 2022 | 80% | 20% |
| 2023 | 78% | 22% |
Data source: Apple.
Services are higher-margin businesses than products and can provide Apple with more reliable income via subscriptions. Apple is smart to focus on building its services ecosystem to complement its hardware.
Apple definitely has some kinks to work out, but it has consistently shown that it's one of the world's greatest companies for a reason. Buffett famously said, "Be fearful when others are greedy and greedy only when others are fearful," and now seems to be a time when investors are fearful of Apple. Now seems like a great time for long-term investors to scoop up Apple shares.
