There’s a reason individual investors look to investing guru Warren Buffett for advice, and it’s as simple as his outstanding long-term gains. His holding company, Berkshire Hathaway, has massively outperformed the market over the past 30 years.
As you can see in the chart above, Berkshire’s gains over the broader market grow over time, which is why keeping high-conviction stocks for a long period is such as an important element of a strong investment portfolio.
Even Buffett sells stocks sometimes. He closed out a long-term position in Costco Wholesale in 2020, and he trimmed his position in Apple. But he has said that his favorite holding period is “forever,” and his portfolio stays close to intact from quarter to quarter. And while individual investors shouldn’t necessarily try to copy his exact moves, it makes sense to see which Buffett stocks could enhance your portfolio.
Two major Buffett holdings, Amazon (NASDAQ: AMZN) and Coca-Cola (NYSE: KO), could be a great addition to anyone’s portfolio. Let’s see why.
No peers in e-commerce
Amazon is the largest e-commerce company in the world by far. According to Statista, it accounts for around half of all U.S. e-commerce volume. Product sales fell slightly year over year in the 2022 first quarter after a 44% increase last year, and costs ballooned as a result of inflation, increased wages, and supply chain issues. But management is closing down some of the added infrastructure it built to handle the extra demand last year, and as it gets costs under control and the market balances out, it has a long growth runway ahead.
Prime members continue to be a significant growth generator; the company added millions of them in the first quarter. As they engage with Amazon and rely on it for everything from diapers to patio furniture, Amazon will continue to maintain its hold on e-commerce. It’s also working on improvements in delivery time, making it even more essential and harder to compete with in this way.
With all the challenges facing retail today, Amazon has a pressure valve in Amazon Web Services (AWS). AWS is still posting fabulous growth with a 37% increase in revenue in the first quarter as well as a 55% increase in operating income. That picked up some of the slack from operating losses in the other segments. AWS is developing new technology in an increasingly competitive environment for cloud computing, and it’s winning over new clients as well as inking deals for expanded partnerships with clients such as MongoDB.
The e-commerce market is expected to continue growing, and Amazon is well-positioned to keep its top spot and widen its presence. It also has AWS to pad sales and help with profitability along the way, and it’s entering new businesses such as healthcare and physical grocery stores. This is a no-brainer forever stock that should reward shareholders for many years.
Dividends and security are a great combination
Coca-Cola isn’t known as a great dividend stock just because of its high yield. It’s as reliable as any dividend gets, which becomes important in tough times. Other companies suspended their dividends, such as Walt Disney, which still hasn’t reinstated it. Coca-Cola management made it clear that keeping the dividend was a priority despite declining sales, and it raised it during that time as well. In fact, the company has raised its dividend annually for the past 60 years, making it a Dividend King with one of the longest streaks of dividend raises that exists. The stock typically yields around 3%.
After posting declines for several quarters in the early stages of the pandemic, Coke’s sales growth has returned with a vengeance. Net revenue increased 16% in the first quarter (ended April 1) to $10.5 billion, and earnings per share increased 23% to $0.64. That was despite inflationary pressures and the company halting operations in Russia.
Volume was up in all segments, not just the away-from-home business that suffered when people were staying home during the lockdown phase of the pandemic. Management restructured for improved efficiencies when sales were decreasing, and that has led to an overall stronger business even now that it’s eased up.
As the largest beverage company in the world, with plenty of cash coming in, it’s able to pour money into growth ventures even as it pays its dividend, keeping its top spot. For safe growth and a strong dividend, it’s hard to beat Coca-Cola stock.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has positions in Walt Disney. The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway (B shares), Costco Wholesale, MongoDB, and Walt Disney. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long January 2024 $145 calls on Walt Disney, long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), short January 2024 $155 calls on Walt Disney, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.