Why should you care what stocks Warren Buffett and his company, Berkshire Hathaway, currently own? Well, here's why: Buffett has been an amazing investor, and has grown his company to a massive size. It has recently reached the No. 6 spot in the Fortune 500.
Berkshire today is a conglomerate with a recent market value of $1 trillion. That reflects the value of the businesses Berkshire owns entirely, such as GEICO, Benjamin Moore, See's Candies, and the entire BNSF railroad, and of the various stocks it owns.
Under Buffett's watch, Berkshire Hathaway's value has increased by 5,500,000% (nearly 20% annually) over 60 years. In contrast, the S&P 500 index of 500 of America's biggest companies gained about 39,000% (10.4% annually, on average, which is still a solid result).
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Given all that, it's more than reasonable to at least consider some Buffett- or Berkshire-owned stocks for your portfolio. Here are three.
1. Amazon
That's right -- Berkshire Hathaway owns shares of Amazon (AMZN -0.43%), and a lot of them: 10 million shares, per the last disclosure. That is a lot, but it's only about 1% of Amazon, and it was the 17th-biggest position in Berkshire's portfolio.
Why might you invest in Amazon? Well, for starters, it's appealingly valued at recent levels with a forward-looking price-to-earnings (P/E) ratio of 33, well below the five-year average of 48. It's also a powerful diversified business -- with most of its revenue coming not from its dominant online marketplace, but from its dominant cloud computing platform, Amazon Web Services (AWS). It's true that the marketplace generates the most revenue, but that's relatively low-margin revenue. Its AWS and digital advertising operations, to name a few, are higher-margin enterprises.
Amazon is huge, but with the potential to grow much huger. Most things are not bought online yet, for one thing. As more businesses do more online and artificial intelligence requires more infrastructure, AWS can grow briskly, as well.
2. Coca-Cola
Coca-Cola (KO -1.09%) might seem like a sleepy stock, but it has gained about 18% over the past year and has averaged annual gains of around 9% over the past 15 years. It's also a dividend-paying stock, recently yielding 2.8%. (It has boosted its payout for 63 consecutive years, by the way, so future annual increases are very likely.)
The company was actually a slower grower not that long ago, but it has recently picked up speed, shedding some less profitable beverages, acquiring newer and faster-growing brands, and upping its earnings. If you're worried about any kind of global economic slowdown, defensive businesses like Coca-Cola should draw your attention. In, say, a recession, people might put off buying big appliances or going on costly vacations, but they'll likely keep buying their medicines, paying for electricity, and buying their favorite little treats, such as Coke beverages.
Berkshire Hathaway owns about 9.3% of Coca-Cola, and the stock makes up the third-biggest position in Berkshire's portfolio. With a recent forward P/E ratio of 24 -- a smidge above the five-year average of 23 -- Coca-Cola stock isn't a screaming buy, but it's not wildly overvalued, either. Buying now could pay off well over many years -- though if you're able to buy at a lower price, you'll do even better. So consider buying now, waiting, or perhaps buying in increments.
3. Bank of America
Bank of America (BAC -0.29%) is another roughly fairly valued stock, with a recent forward P/E of 12, a bit above the five-year average of 11. Berkshire has recently sold off 7% of its position in Bank of America, but that still left the stock as its fourth-biggest holding and left Berkshire owning more than 8% of the company. The stock is a dividend payer, too, recently yielding 2.3%.
There's a lot to like about Bank of America as a long-term investment, such as its diversification. The company is not only involved in retail banking, but also in investment banking and wealth management, among other things. In its last quarter, revenue (net of interest expense) was up 6% year over year, and net income was up by 10%.
CEO Brian Moynihan noted: "Though we potentially face a changing economy in the future, we believe the disciplined investments we have made for high-quality growth, our diverse set of businesses, and the team's relentless focus on Responsible Growth will remain a source of strength."
Give these three Berkshire-Hathaway-owned stocks some consideration for your long-term portfolio.
