Warren Buffet became the world’s richest man through investing in companies.
So I think it’s fair to say the American, with his estimated $106bn net worth, knows how to find stocks that offer incredible returns.
Best of all, his entire portfolio is public information through his company Berkshire Hathaway. There are some great companies in there, and one in particular stands out to me as his best stock right now.
Coca-Cola
Coca-Cola (NYSE: KO) won’t just go down as one of Buffett’s best moves, but perhaps one of the best-returning stocks of all time. Since 1983, the share price is up over 60 times in value.
Sadly, lacking access to a time machine as I am, those past returns don’t help me now. And focusing on the present, a couple of issues make me think the Coke manufacturer won’t continue to offer this kind of return on investment.
The first problem is that revenue and profits have stayed still for a decade. Worse still, I can see that health pressures and initiatives – the 2018 UK sugar tax, for example – might turn consumers off buying its product in the future.
Both these problems put me off joining Buffett in holding these shares.
Apple
On the other hand, another of his picks, Apple (NASDAQ: APPL), has terrific revenues, stacks of cash, and capable leadership. I can see everything needed for the share price to grow.
It seems Buffett agrees with me on this one, because while only 8.51% of his portfolio is in Coca-Cola, a whopping 38.9% is invested in Apple.
It’s his biggest holding and a huge part of his portfolio of 53 companies.
My concern here is that the firm’s previous products were absurdly successful. So much so, that to keep up its level of innovation it feels like Apple’s engineers would have to invent the flying car.
So while I do think this is an excellent company, I wouldn’t say it’s Buffett’s best stock.
TSMC
Flying under the radar in the Berkshire Hathaway portfolio is Taiwanese chip manufacturer TSMC (NYSE: TSM).
This single company produces 55% of the world’s semiconductors. These tiny chips are vital in modern electronics you find in cars, smartphones, games consoles, and medical equipment, and the world relies on TSMC to produce them.
As well as a dominant market share, the high level of technical knowledge required to produce these chips gives the Taiwanese firm a huge economic moat.
The company is not without its challenges. Most of its facilities are located in Taiwan, a precarious place to be with China making signs that it wants to invade. The company plans to produce chips overseas soon but any conflict would still be a massive blow.
Buffett himself recently sold 86% of his stock in the company, perhaps a sign that he is worried about these geopolitical risks.
Even with those issues, for my money, TSMC is the best stock Buffett holds. It has all the ingredients for explosive share price growth, and it might be undervalued right now because of those risks.
I have some exposure to the company already through my stake in Scottish Mortgage Investment Fund, and I’m considering buying shares outright myself soon.
