One of the most successful investors of all time, it’s little wonder that people pay close attention to what’s in Warren Buffett‘s portfolio. In this editorial post, some of our Foolish freelancers pick their favourites from the Sage of Omaha’s Berkshire Hathaway holdings!
Apple
What it does: Apple is the largest consumer technology company globally, with the iPhone being its most valuable source of revenue.
By Charlie Keough. For me, it has to be Apple (NASDAQ: AAPL). The stock is Warren Buffett’s largest holding. And with him signposting it as one of the best businesses in the world, it would be difficult to disagree.
Apple products are used by over one billion people across the globe. And its grip on the market is glaring to see. Buffett once said to invest in companies where you can easily understand and appreciate their core features. This certainly rings true for Apple.
The company has also placed a large emphasis on returning value to shareholders, highlighted in the latest quarter where it sanctioned an additional $90bn for share buybacks.
There’s the potential that demand slows down as inflation continues to bite away at consumers’ wallets. And the mixed reaction to its recently announced VR headset priced at $3,499 highlights this threat. However, with its iconic brand and vast customer base, I’d happily snap up Apple shares.
Charlie Keough owns shares in Apple.
PayPal
What it does: PayPal is a financial technology company operating an online payments system and serves as an electronic alternative to traditional paper methods such as cheques and money orders.
By John Choong: Although Warren Buffett’s main fund, Berkshire Hathaway doesn’t own PayPal (NASDAQ:PYPL) stock, its subsidiary in the form of New England Asset Management does — which is often referred to as the Oracle of Omaha’s secret portfolio.
PayPal may have reported an excellent quarter of results, beating Wall Street’s estimates and even upgraded its outlook for the year, but the market still chose to punish the stock. Investors seem to fear margins declining and have ignored the board’s strategy of acquiring lower-margin unbranded customers first and then converting them into higher-margin branded ones.
Nonetheless, I see this as a buying opportunity more than anything. The platform has shown that its strategy works and has a strong track record of doing so. And if the market isn’t buying that, I will when the shares’ multiples are at their decade lows. After all, as Buffett once said, “be greedy when others are fearful”.
| Metrics | PayPal | Peer Average |
| P/B ratio | 3.6 | 17.4 |
| P/S ratio | 2.5 | 7.7 |
| P/E ratio | 26.2 | 30.9 |
| FP/S ratio | 2.3 | 6.8 |
| FP/E ratio | 17.8 | 24.2 |
John Choong has positions in PayPal.
The Coca-Cola Company
What it does: The Coca-Cola Company manufactures many of the world’s best-loved beverages including Coke, Fanta and Sprite.
By Royston Wild. To use one of its old slogans, when it comes to dividends, The Coca-Cola Company (NYSE:KO) truly is “the real thing.”
The soft drinks business — which is the fourth-biggest holding in Berkshire Hathaway’s investment portfolio — has raised annual dividends for an eye-popping 61 years in a row.
This stunning record reflects the colossal brand power of its beverages. Demand for them remains high even when times get tough, giving the firm excellent earnings stability. In fact, their enduring popularity allows Coca-Cola to effectively raise prices during economic downturns.
Net revenues rose 5% between January and March even as broader consumer spending remained weak, latest financials showed. This was driven by an 11% increase in selling prices. Meanwhile global unit case volumes rose 3% year on year.
Coca-Cola has to paddle hard to succeed in a congested marketplace. But its proven ability to beat back the competition and grow long-term earnings makes it a rock-solid buy in my book.
Royston Wild does not own shares in The Coca-Cola Company or Berkshire Hathaway.
Verisign
What it does: Verisign provides domain registry services for websites.
By Stephen Wright. I own shares in no fewer than five stocks from the Berkshire Hathaway portfolio (plus Berkshire itself). But if I could only buy one Warren Buffett stock, it wouldn’t be any of them.
Instead, I’d choose Verisign (NASDAQ:VRSN). I’ve never bought the stock because it’s always looked expensive to me, but if my choices were limited, I’d choose it as my one stock to buy.
So what does Verisign do? Put simply, it provides domain registry services for websites – any website ending with ‘.com’ or ‘.net’ pays Verisign a registration fee.
In other words, it’s like having a toll booth on the internet. And best of all, its business is protected by agreements giving it exclusive rights to perform this service.
Those agreements renew automatically, provided the company meets its obligations. Berkshire owns around 12% of the business and I think it might be the best stock it owns.
Stephen Wright owns shares in Berkshire Hathaway.
Visa
What it does: Visa is a digital payments firm that connects consumers, merchants, and financial institutions in over 200 countries.
By Ben McPoland. The global war on cash continues. And while notes and coins are stubbornly holding out against digital payments, I think there’s only one eventual winner. That’s why I’d buy Visa (NYSE: V).
The company is astonishingly profitable. In approximately 12 weeks to March 31, net income totalled $4.3bn, up 17% year on year. Incredibly, the net profit margin was just shy of 53%!
Another big attraction is that Visa is a natural hedge against inflation. That’s because it takes a tiny cut of every transaction that occurs on its network, regardless of how much items cost.
One risk worth noting is that US legislation aimed at improving competition among credit-card networks is being reintroduced. It would enable merchants to route payments through alternative (and potentially cheaper) networks to Visa’s. However, the bill isn’t certain to pass, particularly as it could open up a plethora of security risks.
Given Visa’s dominance, the stock is also quite pricey. So it may be better to accumulate on dips.
Ben McPoland owns shares in Visa.
