If you're on the hunt for some top-notch stocks to add to your portfolio, you might want to take a page out of Warren Buffett's book. Known as one of the most successful investors of all time, Buffett's portfolio is a treasure trove of long-term, value-oriented picks. Many investors try to emulate his strategy by keeping tabs on his favorite stocks, which he's been holding onto for years - as well as his latest buys and sells.
Here, we'll take a look at three high-quality, Buffett-approved stocks worth adding to your portfolio for the long haul. Together, these names offer a mix of growth, dividends, and diversity that can capably weather whatever ups and downs the market might bring in 2024 and beyond. Here's what investors need to know.
AAPL: The $3 Trillion Tech Giant
Apple (AAPL), with its whopping market cap of over $3 trillion and enterprise value of $382 billion, is a titan in the tech world. Known for its game-changing products like the iPhone, iPad, Mac, Apple Watch, and accompany subscription services like Apple Music and iCloud, it's got a fan base that's not just loyal but also growing.
As of the end of 2023, Apple boasts over 1.65 billion active devices and more than 700 million paid subscribers. Apple is a classic example of a Warren Buffett stock, combining growth, dividends, and quality consumer goods. It's also the single largest equity holding for Buffett's holding company, making up about 48% of its equity portfolio.
Apple's stock rallied about 48% in 2023, edging past the performance of the broader Nasdaq Composite ($NASX) - and comfortably outpacing the S&P 500 Index's ($SPX) annual performance.
Despite concerns about slumping revenue growth, Apple is still beating the Street on earnings - and delivering regular dividends for its shareholders. For the fiscal fourth quarter of 2023, the company reported record revenue of $89.5 billion and earnings of $1.46 per share, beating analysts' estimates and showing a year-over-year increase of 29% and 38%, respectively.
Apple also upped its quarterly dividend by 7% to $0.24 per share and announced a new $90 billion share repurchase program. With a low dividend payout ratio of 15%, Apple should have no problem maintaining and increasing its dividend in the future. Currently, the stock yields 0.50%.
Looking ahead, analysts are projecting that Apple will grow its earnings per share by 7% in fiscal 2024 and 8% in FY 2025, reaching $6.56 and $7.10, respectively. Revenue is expected to grow at 3.57% in fiscal 2024, followed by 5.79% growth in FY 2025 to $419.96 billion.
Analysts have a mean target price of $204.79 for Apple, suggesting 6.3% upside potential from current levels.
With a consensus “Moderate Buy” rating from 28 analysts covering the stock, 17 call AAPL a “Strong Buy,” 3 have a “Moderate Buy” rating, and 8 have a "Hold" rating.
KO: The Undisputed Dividend King
Coca-Cola Company (KO), with its iconic branding splashed across over 200 countries, isn't just one of Buffett's favorite beverages - it's one of his favorite stocks, too. Churning out everything from fizzy sodas to water, juice, coffee, and sports drinks, the consumer goods behemoth boasts a portfolio of brands like Coca-Cola, Sprite, Fanta, Dasani, and Powerade.
The company sports a market cap of around $254 billion and an enterprise value close to $281 billion. Coca-Cola is a gold-standard Buffett stock, blending steady income with sustainable growth, and offering nearly unparalleled brand recognition. KO makes up around 6.4% of Berkshire Hathaway's equity portfolio, and is the fourth-largest holding.
Like many dividend-paying stocks, KO sat out the stock market rally in 2023, and ended the year down by 7.4%.
Despite the lackluster share price performance last year, Coca-Cola has been serving its shareholders well with a steady stream of dividends. The company has raised its dividend for 59 years straight - good enough to land KO a spot among the S&P 500's longest-running Dividend Aristocrats, and also to earn the title of Dividend King. Today, KO pays a quarterly dividend of $0.46 per share, for a 3.13% yield. With a 68% dividend payout ratio, the company hangs onto enough profit to keep investing in growth.
Coca-Cola has kept its revenue and earnings on a growth trajectory, despite shifting consumer preferences. For Q3 2023, it posted revenue of $11.95 billion, up 16% year-over-year, and earnings per share of $0.74, up 7% from the year-ago quarter. Both figures exceeded Wall Street's forecasts. Coca-Cola also lifted its full-year guidance, now expecting organic revenue growth of 12-14% and comparable EPS growth of 13-15%.
Analysts predict 8% EPS growth for this fiscal year, followed by 4.5% growth in 2024 to $2.80.
Analysts give Coca-Cola a mean target price of $65.33, implying 10.8% upside potential. Out of 15 analysts covering the stock, 11 have a “Strong Buy” rating, 1 suggests a “Moderate Buy,” and 3 say “Hold” for a consensus rating of “Strong Buy.”
BRK.B: Tap Into the Full Buffett Portfolio
Berkshire Hathaway Inc. (BRK.B), run by Chairman and CEO Warren Buffett, is a behemoth holding company that offers exposure to the legendary investor's full equity portfolio, along with subsidiaries like GEICO, BNSF Railway, Dairy Queen, Duracell, and many more. With a market cap of $774.5 billion and an enterprise value around $861.4 billion, Berkshire is a heavyweight in the investment world.
Berkshire Hathaway's B shares gained about 15.5% in 2023 - not quite keeping pace with the broader market's performance.
Notably, Berkshire Hathaway doesn't dish out dividends, but it does funnel earnings back into its businesses and stocks - and Buffett is big on share buybacks, when the price is right.
For Q3 2023, Berkshire reported earnings of $4.96 per share, topping analysts' predictions and marking a 41% jump year-over-year. The company also bought back $1.1 billion of its shares during the quarter, totaling $7 billion for the year.
Looking ahead, Berkshire is expected to keep growing. After an expected 17% earnings per share increase in 2023, Wall Street is looking for 11% EPS growth in 2024 to $18.17.
Analysts have set a mean target price of $414 on Berkshire's B shares, which would be an approximately 16% jump from current levels. Three analysts tracking the shares call them a “Moderate Buy,” with 2 “Strong Buys” and 1 “Hold” rating.
The Best Buffett Stocks to Buy and Hold
Wrapping up, we've zeroed in on three standout Warren Buffett stocks for buy-and-hold investors: AAPL, KO, and BRK.B. These tried-and-true names are ideal for long-term investors looking to benefit from the steady growth these companies are known for, as well as their commitment to returning value to shareholders via dividends and buybacks.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
