Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) has an equity portfolio that typically features around 50 stocks, but CEO Warren Buffett definitely plays favorites. There are a select few stocks that he has praised over and over again and that he said he'd never sell while he was in charge, including Apple, Coca-Cola(NYSE: KO), and American Express(NYSE: AXP).
Berkshire Hathaway has already sold around half of its position in Apple over the past year or so, although it's still the largest position by far, accounting for around 22% of the total. He hasn't touched a share of Coca-Cola or American Express, though. With Buffett stepping down and Greg Abel taking over, could these stocks be on the chopping block?
Image source: Getty Images.
Why Buffett loves Coca-Cola and American Express stocks
Coca-Cola and American Express are Berkshire Hathaway's longest-held equity positions. It first bought Coca-Cola stock in 1988 and American Express in 1991, and it finished buying them in 1994 and 1995, respectively.
Over the years, Buffett has singled out these two stocks by name in many instances. There are some specific characteristics he loves about them:
Their dividends. "These dividend gains, though pleasing, are far from spectacular. But they bring with them important gains in stock prices," Buffett said in his 2022 letter to shareholders. Together, Coca-Cola and American Express write a check to Berkshire Hathaway for more than $1 billion annually just in dividends, while their combined stocks have increased from a total investment of $2.6 billion to around $50 billion.
Their global brand names. "Crucially, their products 'traveled,'" Buffett wrote about them in 2023. "Both Coke and AmEx became recognizable names worldwide, as did their core products, and the consumption of liquids and the need for unquestioned financial trust are timeless essentials of our world."
Their profits. "We own a small percentage of a dozen or so very large and highly profitable businesses with household names such as Apple, American Express, Coca-Cola and Moody's. Many of these companies earn very high returns on the net tangible equity required for their operations," he wrote in 2024. Buffett often says that a feature of an excellent business is being able to operate and make a profit without having to invest significantly in the business.
Will Greg Abel change things up at Berkshire Hathaway?
The market doesn't know so much about Abel right now because he mostly stays under the radar. Although he's been a part of Berkshire Hathaway for 25 years, he was brought on board as a vice chairman in 2018 and named Buffett's successor in 2021.
On the one hand, Abel has been in charge of all non-insurance businesses for several years, and that management style is already being implemented. However, the equity portfolio is in the hands of Todd Combs and Ted Weschler, while Abel and Ajit Jain have run the owned-business side of things. If that business setup stays in place, Abel may not take a big stance on investing decisions, leaving it to the current duo. As it stands today, they may be making more calls than Buffett on equity positions. Buffett told investors that it was one of his managers who made the decision to purchase Amazon stock in 2019, not his, and that probably applies to a lot of the company's recent trades. Without Buffett in the picture, or at least without him on top, since he said he'll still stick around, the investing team may be more comfortable making other bold stock trades that are slightly outside of Buffett's box.
Buffett has said several times recently that as Berkshire gets bigger, it's harder to move the needle. When asked at the meeting last week how he would spend $10 billion in today's market, he brushed it off, saying it wouldn't do much. Abel could make some macro decisions that guide the investing team differently than how they handle the stock portfolio today, and is likely to develop his own leadership style.
However, I wouldn't expect anything revolutionary at Berkshire Hathaway. Buffett's investing has made Berkshire Hathaway into what it is today, and the current team, who have been trained under his watch, isn't changing.
So will the new management sell Coca-Cola or American Express? Both of these companies have been performing fabulously right now, for all the reasons Buffett loves them, so it doesn't seem likely in the near term. But Abel hasn't committed to them the way Buffett has, and it's certainly a possibility at some future time.
Should you invest $1,000 in Coca-Cola right now?
Before you buy stock in Coca-Cola, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Coca-Cola wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider whenNetflixmade this list on December 17, 2004... if you invested $1,000 at the time of our recommendation,you’d have $623,103!* Or when Nvidiamade this list on April 15, 2005... if you invested $1,000 at the time of our recommendation,you’d have $717,471!*
Now, it’s worth notingStock Advisor’s total average return is909% — a market-crushing outperformance compared to162%for the S&P 500. Don’t miss out on the latest top 10 list, available when you joinStock Advisor.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. American Express is an advertising partner of Motley Fool Money. Jennifer Saibil has positions in American Express and Apple. The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway, and Moody's. The Motley Fool has a disclosure policy.
