Warren Buffett has gained the reputation of a buy-and-hold investor, but he has bought and sold many stocks over the years as CEO of Berkshire Hathaway. In 2024, for instance, he pulled a lot of money out of stocks Berkshire owned. Through the third quarter, Berkshire had sold $133 billion worth, including a majority of its Apple position. This is up from $33 billion of equity sales during the same period in 2023.
Buffett is raising cash as valuations become more expensive across the stock market. The S&P 500's price-to-earnings multiple is currently 30, which is double its historical average.
However, it's very telling that Berkshire's large stakes in Coca-Cola (KO 0.34%) and American Express (AXP 0.55%) were completely untouched, which says a lot about Buffett's long-term outlook for these businesses. These stocks also trade at 21 times 2025 earnings estimates, which offers better value than the average S&P 500 company.
If you're going to select stocks to buy from Berkshire's portfolio, you might as well start with those that Buffett is not selling. Here's why Coke and American Express are solid buys right now.
1. Coca-Cola
Berkshire has held Coca-Cola stock for over 35 years and continues to hold 400 million shares as of the 2024 third quarter. The company benefits from tremendous brand power, and it distributes most of its profits to shareholders through dividends. It's a grocery store staple that can generate high sales volumes throughout the economic cycle, which makes it a good all-weather investment.
NYSE: KO
Key Data Points
In the third quarter, adjusted revenue grew 9% year over year, mostly driven by price. Unit case volumes were down 1%, but the last few years haven't been a normal operating environment due to higher inflation. The stock has held up well but should hit new highs when consumer spending is stronger.
Coca-Cola has powerful brands, including juices and teas, which allows it to meet demand for different occasions. It should continue growing on pace with the beverage industry, which is projected to increase 8% annually through 2029, according to Statista.
Management is using innovation to continue building brand awareness and spark demand. Sometimes new products don't work out, such as the recent Coca-Cola Spice that was discontinued. But other products like Coca-Cola Zero Sugar and Fuze Tea can turn into multiyear growth opportunities.
The company's brands created $11 billion in incremental sales for retailers in the past year. This is far more than its competitors. This success incentivizes retailers to give Coca-Cola plenty of shelf space, which helps sustain its leading position in the industry.
This is a solid stock to hold for the long haul. While it may not outperform the broader stock market, Coke is a great option if you want to boost your passive income. The combination of single-digit annual earnings growth and an above-average dividend yield of 3% should deliver satisfactory returns for years to come.
2. American Express
Buffett originally bought American Express stock for his investment partnership in the 1960s before buying the stock again at a far higher share price for Berkshire 30 years ago. He places a high value on the credit card company's brand and reputation for delivering quality financial service to banks and consumers.
NYSE: AXP
Key Data Points
American Express' competitive advantage is built on trust. Consumers trust the company to securely process payments and provide excellent customer service, which has given the brand a solid reputation.
Banks and merchants depend on American Express to efficiently handle large transactions and properly manage credit risk. It has executed well on all these fronts, and the company has delivered profitable growth over decades.
The business is currently performing well in a challenging consumer spending environment. Billed business, or card member spending, grew a solid 6% in 2024. It's showing great momentum heading into the new year, with billings up 8% in the fourth quarter.
Although the company can experience lower revenue and earnings during recessions, the recent growth in card spending can be attributed to the company's high-spending customer base.
American Express continues to see momentum in attracting younger customers to its products, including Gen Zers and millennials. Given that card members tend to upgrade to more-premium card products over time, which carry higher annual fees, these trends bode well for the company's long-term prospects.
Management believes at the current rate of card member spending and card acquisition, it can deliver mid-teens annualized growth in earnings. The stock's valuation is not cheap for a financial services company but should allow long-term investors to see returns consistent with earnings increases.
