Feel free to borrow a few of the small number of picks the Oracle of Omaha feels confident enough to own at this time.
Berkshire Hathaway‘s (BRK.A 1.00%) (BRK.B 0.79%) annual shareholder meeting took place this past weekend. As usual, investors are gleaning all they can from the comments made by chief Warren Buffett during the event. And well they should. He may be 93 years old, but he’s still one of the world’s sharpest stock-pickers.
However, copying every trade Berkshire Hathaway makes probably isn’t feasible for most investors. If you only want to poach a few picks from the Oracle of Omaha, here are three of your best bets at this time.
Coca-Cola
It’s a painfully predictable pick. That doesn’t mean The Coca-Cola Company (KO 0.60%) isn’t a great company for most investors, though. In fact, it’s a commonly suggested stock specifically because it’s such a great one to own.
The company is, of course, the name behind the world’s single most popular soda. Coca-Cola is only part of its soda lineup, however. The Coca-Cola Company also owns carbonated beverage brands Sprite, Schweppes ginger ale, and Barq’s root beer. Its non-carbonated drinks include Minute Maid juice, Golf Peak tea, and Dasani water, just to name a few. It’s got a product for every consumer preference, explaining its relatively consistent top- and bottom-line results… and its reliable growth.
KO Revenue (TTM) data by YCharts
The familiarity of Coca-Cola’s brand names isn’t the ultimate reason investors should consider owning a stake in the company. The crux of the bullish argument here is the underlying reason the company is a beverage behemoth. That is, The Coca-Cola Company is a brilliant marketer and advertiser. It’s not simply selling drinks. Its brands are a lifestyle choice, and in some ways they’re woven into the fabric of our culture.
Don’t see it? Consider this: How many other brand names and logos do you see incorporated into fashion, holiday ornaments, home décor, and outright art? Older investors can probably even still remember all the lyrics to the “I’d like to teach the world to sing” song written specifically for one of the company’s branding campaigns. It became a conventional hit song after it was a Coca-Cola TV commercial jingle.
Songs don’t directly generate revenue, of course, and even great advertising jingles eventually get tired. This is the sort of marketing magic The Coca-Cola Company’s been able to successfully replicate for decades.
The kicker: In February the company raised the stock’s annualized dividend payment for a 62nd consecutive year. Better still, despite Coke stock’s recent strength, the dividend yield still currently stands at a compelling 3.1%.
Occidental Petroleum
Many investors may feel that one energy company is just as good as another. To be fair, that’s not an entirely misguided assumption — oil and gas are oil and gas, after all. All energy companies are seemingly exploring, drilling, extracting, and refining it in the same basic way.
There are distinct differences between these companies, though. They’re just different in ways that aren’t necessarily easy to see.
Enter Occidental Petroleum (OXY -1.04%)… one of only two oil and gas businesses Warren Buffett likes well enough right now to leave parked in Berkshire Hathaway’s portfolio. The fund owns a little over 248 million shares of Oxy collectively worth nearly $16 billion. That’s roughly one-fourth the entirety of the energy company.
It’s also one of a handful of companies specifically mentioned by name in Buffett’s annual letter to Berkshire shareholders penned and posted in February of this year. Buffett said of the pick he’s been holding since 2019:
Under [CEO] Vicki Hollub’s leadership, Occidental is doing the right things for both its country and its owners. No one knows what oil prices will do over the next month, year, or decade. But Vicki does know how to separate oil from rock, and that’s an uncommon talent, valuable to her shareholders and to her country.
Warren Buffett adds of Oxy: “We particularly like its vast oil and gas holdings in the United States, as well as its leadership in carbon-capture initiatives.”
And he’s right. While it’s often difficult to see, Hollub is investing in the right exploration and production projects, and divesting the ones that don’t quite fit. For example, in December Occidental announced it would be acquiring CrownRock to expand its exposure to the Permian Basin, but it’s also already looking to sell the Barilla Draw (Texas) sliver of that purchase.
Even less obvious is the fact that Hollub is one of the few energy chiefs who recognizes that the industry is underinvesting to meet the world’s oil and gas needs just a couple of years from now. Seeing an opportunity, she’s positioning Occidental Petroleum now to be able to meet that demand then.
If you can be as patient as Buffett is, you should be well rewarded for it.
Kraft Heinz
Last but not least, add The Kraft Heinz Company (KHC 1.48%) to your list of no-brainer Warren Buffett stocks to buy right now.
It’s an eyebrow-raising suggestion. This is one of Berkshire Hathaway’s rare misfires, after all, leading Buffett to admit in 2019 that “we overpaid for Kraft” when melding it with Heinz in 2015.
Many of the operational and fiscal kinks linked to the deal are now being worked out, but new challenges have surfaced in the meantime. Inflation is the biggest of these headaches. Kraft Heinz’s revenue fell slightly last quarter, largely because people are balking at the company’s most recent round of price hikes. The total volume of food sold during the three-month stretch in question fell a little over 3%. Shares fell — again — on the alarming implications of the report.
There’s something not being considered by the majority of investors, though. That is, inflation is cooling off, and the economy is still growing… even if at a snail’s pace. The U.S. Department of Agriculture believes overall food price growth within the United States will decelerate to a modest 2.2% this year, making food at least seem more affordable to buy and sell. To this end, The Kraft Heinz Company’s 2024 revenue-growth guidance of between nil and 2% still holds water, as does its comparable outlook for profit growth. After that, the organization can really begin flexing its brands’ marketing muscles again.
Or, think about Buffett’s sage advice to “buy unpopular stocks” while they’re unpopular. Said another way (again in Buffett’s words), “Be fearful when others are greedy and greedy when others are fearful.” There’s certainly plenty of fear surrounding Kraft Heinz stock right now.
Whatever your motivation is, newcomers will be stepping into this stock while the dividend yield’s a healthy 4.4%. That’s based on a dividend payment, by the way, that’s still more than easily covered by real, actual earnings.