Since assuming control of Berkshire Hathaway in 1965, Warren Buffett has remarkably enhanced shareholder value through strategic investment decisions. His approach has involved acquiring a diverse portfolio of robust businesses across various sectors, including insurance, railroad, energy, and mortgage. Alongside these acquisitions, Berkshire manages an extensive equities portfolio, wherein Buffett and his dedicated team invest the firm’s capital in a select group of high-potential stocks. As of now, this portfolio boasts a staggering value of over $278 billion. Even as the Oracle of Omaha prepares to step down as CEO at the year’s end, certain holdings within the portfolio will undoubtedly be recognized as quintessential Buffett stocks. Here are two compelling Buffett stocks worth considering for investment today.
Invest in Coca-Cola: A Resilient Brand During Economic Challenges
Buffett’s investment philosophy is characterized by discipline and thorough research. He meticulously evaluates stocks before making purchases and favors long-term holdings. This approach necessitates investing in companies capable of weathering entire business cycles, encompassing both prosperous and challenging times. Coca-Cola (KO 1.03%) exemplifies such a company, having been a staple in Berkshire’s portfolio since 1988. While it may not present the explosive growth potential of a rapidly advancing artificial intelligence stock, Coca-Cola remains a reliable investment, particularly in turbulent market conditions.
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This year, despite a challenging macroeconomic landscape where various sectors have faced difficulties, Coca-Cola has shown remarkable resilience, with shares increasing by over 15%. As a leader among consumer staple stocks, Coca-Cola tends to perform well even during economic downturns, as consumers continue to purchase everyday products regardless of financial constraints. This consistent demand creates a stable revenue stream, making Coca-Cola a dependable investment choice during uncertain times.
Moreover, Coca-Cola has demonstrated its ability to withstand the pressures of high tariffs. Following solid first-quarter earnings results, the company reaffirmed its full-year guidance, projecting 5% to 6% organic revenue growth. While Coca-Cola is not entirely insulated from tariffs—especially the significant 25% tariff on aluminum—it possesses the flexibility to pass on some of these increased costs to consumers. Additionally, the company is exploring options to shift more production towards plastic packaging if aluminum prices remain elevated, showcasing its adaptability in the face of market challenges.
Another appealing aspect of Coca-Cola is its dividend policy, which currently offers a yield of 2.8% based on present share prices. The company has a remarkable history of raising its dividend for 63 consecutive years, reflecting its commitment to returning value to shareholders. For the current year, Coca-Cola anticipates generating approximately $9.5 billion in free cash flow, which exceeds its projected dividend obligations, further solidifying its appeal as a solid investment.
Invest in Visa: Capitalizing on a Dominant Payments Network
Although Berkshire Hathaway hasn’t held a stake in Visa (V -1.05%) for as long as Coca-Cola, the conglomerate first added Visa’s stock to its portfolio in 2011, marking the beginning of a fruitful relationship. Visa operates the largest card network globally, and in its fiscal 2024, which concluded on September 30, the company processed an astonishing $13.2 trillion in total payment volume, highlighting its vast scale and influence in the financial sector.
Visa possesses an exceptional competitive advantage, often referred to as a “moat,” which protects its market position. Think of Visa as a toll bridge on a highway, essential for the credit and debit card ecosystem. For every transaction processed, Visa collects a fee, allowing the company to dictate many of the operational rules within its network. This unique business model aligns perfectly with Buffett’s investing strategy, which favors companies with robust competitive advantages.
While Visa does face competition from other companies, such as Mastercard, the barriers to entry for new competitors are formidable. Establishing a payment processing network of Visa’s magnitude is no small feat. Numerous aspiring competitors have attempted to introduce alternative payment systems, only to either fail or ultimately partner with established players like Visa and Mastercard. Furthermore, Visa has significant resources at its disposal to invest in innovative payment technologies, having already made substantial investments in areas such as cryptocurrency and stablecoins.
In its earnings report for the second quarter of fiscal 2025, released in late April, Visa’s management reiterated previous guidance, indicating that consumer spending remains robust and resilient. Although Visa is not entirely insulated from economic fluctuations and may face challenges if consumer spending dramatically declines, the company has a proven track record of successfully navigating past economic downturns, demonstrating strong operational resilience.
Additionally, Visa’s business model contains a natural hedge against inflation. As consumer prices rise, the transaction fee percentages that Visa charges remain consistent. Consequently, as prices increase, Visa’s fee income also rises, further enhancing its profitability in inflationary environments.
Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Mastercard, and Visa. The Motley Fool has a disclosure policy.
