Warren Buffett-led Berkshire Hathaway surpassed $1 trillion in market capitalization earlier this year for the first time. For decades, investors have tracked the Oracle of Omaha's holdings for high-conviction ideas. However, Berkshire has been trimming several top positions this year, including Apple and Bank of America.
Berkshire now has just $320 billion in public equity holdings and has amassed a staggering $276.9 billion in cash as of June 30. The rest of Berkshire's value comes from its insurance businesses, ownership of BNSF railroad, Berkshire Hathaway Energy, and other private companies.
However, Berkshire continues to be heavily invested in the market and has used excess earnings to repurchase its own stock -- a testament to its confidence in its long-term strategy. Here's why Coca-Cola (KO +0.32%), Visa (V 1.40%), and Chevron (CVX +0.19%) stand out as three top Buffett stocks to buy through 2025 and hold for at least three to five years.
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1. Coca-Cola
Berkshire owns 400 million shares of Coca-Cola -- which is 9.3% of the company. Worth around $28 billion, Coke is Berkshire's fourth-largest public equity holding.
Berkshire has owned Coke for over 30 years. During that time, Coke's industry leadership hasn't wavered, and its portfolio of beverage brands has gotten even stronger. Its flagship Coca-Cola brand headlines its soft drink lineup, along with Sprite, Fanta, and Barq's Root Beer. Simply and Minute Maid are the standout juices. Sparkling water and tonics include Schweppes and Topo Chico. Bodyarmor and Powerade round out the energy drink/ sports drink lineup. Coke also owns Costa Coffee, Gold Peak Tea, and other brands.
Time and time again, Coke has demonstrated a rare ability to get the most out of its beverage brands through global distribution and marketing without overexpanding past its core competencies. With 62 consecutive years of dividend increases, Coke has increased its payout no matter what the economy is doing -- a testament to its consistency and the strength of its balance sheet.
NYSE: KO
Key Data Points
In past shareholder letters and annual meetings, Buffett has praised Coke for expanding its international brand, growing profits, and returning a ton of value to loyal shareholders through buybacks and dividend raises. Over time, Berkshire has grown to own a higher percentage of the business because buybacks reduce the outstanding share count. Pair that strategy with dividend raises, and Coke is one of the safest and most reliable dividend stocks out there.
The only real bad thing about buying Coke stock now is its valuation. Coke has a price-to-earnings (P/E) ratio of just over 28, which is relatively expensive for a low-growth business. But as Buffett has famously said, "You pay a very high price in the stock market for a cheery consensus." This means investors will have to pay a premium price for Coke, given its impressive track record for dividend growth and a 2.8% yield.
2. Visa
Buffett was an early believer in credit card companies -- building up a sizable position in American Express in the 1990s. Berkshire owns over 21% of American Express -- making it Berkshire's second-largest public equity holding behind Apple. Berkshire also owns Mastercard and Visa -- although much smaller stakes in each. But Visa is arguably the best credit card company to buy now.
NYSE: V
Key Data Points
Visa has a simple yet effective business model that is easy to understand and benefits from network effects. Its international ecosystem of credit and debit cards makes it easy to process transactions quickly and safely in different currencies. The ecosystem has grown to become more reliable and globally recognizable. Visa acts as a middleman between the transacting parties and banks. It doesn't bear the risk of someone defaulting on their credit card debt.
Visa makes money every time a card is swiped, tapped, entered online, or used as a mobile payment. It makes more money on larger transactions, but it can still do well in a recession.
The biggest risks to Visa are antitrust lawsuits limiting its fees and reducing its margins or another payment processor coming along and disrupting its network. Visa is no stranger to antitrust lawsuits and has overcome them with relative ease in the past. And while competition is always a risk, Visa has a virtual oligopoly with the other major players. The pie is large enough so that they can all win and grow over time.
Despite trading around an all-time high, the stock still doesn't look overpriced. Visa's shares only yield 0.7%, but that's mainly because the company spends several times more capital on buybacks than on dividend payments. The aggressive buybacks have been highly effective, reducing Visa's share count by 21% over the last decade, and Visa's stock price has soared 367% during that period.
Visa has a long runway for growth, making it a top stock to buy and hold for years to come.
NYSE: CVX
Key Data Points
3. Chevron
Berkshire began building a stake in Chevron in late 2020 as Buffett looked at the oil patch as a rare value pocket amid an uncertain market. Then, in 2022, Berkshire went big into the integrated oil major, with the stake peaking at about 165 million shares in third-quarter 2022. Since then, Berkshire has adjusted the position, trimming and adding here and there. However, overall, Berkshire still owns 6.5% of the company, making it the fifth-largest public equity holding with a value of around $18 billion.
Given that its profits are heavily tied to the ebbs and flows in the price of oil and natural gas, Chevron may not seem like a reliable dividend stock at first glance. But it has paid and raised its dividend for 37 consecutive years, which is impressive considering that there have been multiple oil and gas downturns during that period.
After soaring in 2021 and 2022, Chevron's stock price has cooled off. But Chevron has continued to make sizable dividend increases, which have pushed its yield up to 4.4%. That's well above the 1.3% yield of the S&P 500 or the yield an investor can get from a low-cost energy sector exchange-traded fund (ETF) like the 3.3% yield from the Vanguard Energy ETF.
With a diversified business and a rock-solid dividend, Chevron offers investors a compelling blend of value and income, which can be especially attractive for bargain hunters.
