During the first nine months of 2024, Warren Buffett’s Berkshire Hathaway Offloaded $133 billion worth of stock. Buffett reduced Berkshire’s large stake apple And sold about a quarter of it Bank of America hold
In the third quarter, Apple, American Express(NYSE: AXP )Bank of America, and Coca-Cola(NYSE: KO ) Makes up 70% of Berkshire’s $271 billion Stock portfolio. Buffett is hoarding cash at a time when S&P 500 is trading at 30 times earnings, which is historically high for this popular market barometer.
However, it is worth looking at the stocks that Buffett has chosen No For sale now. Buffett continues to own shares of Coca-Cola and American Express, which says a lot about what he thinks about their competitive advantages and growth prospects.
Warren Buffett has often invested in top consumer brands throughout his investment career. when Buffett sees a quality business Trading at an attractive valuation, he quips, and his 1988 investment in Coca-Cola is a good example.
Coca-Cola stock fell sharply in the Black Monday crash of 1987. But the company was growing earnings at double-digit rates, and it still had plenty of opportunity for international growth. After the sale closed, shares traded at about 16 times earnings, prompting Buffett to invest a fifth of Berkshire’s equity in Coke stock.
Buffett has never sold a single share of Coca-Cola. The stock has split several times over the past 30 years, leaving Berkshire with 400 million shares outstanding at the end of the third quarter of 2024. Those shares are worth $25 billion at current share prices, and pay $776 million in annual dividends.
Coca-Cola is not a high-growth company when Berkshire originally invested, but the company should continue to grow earnings as it gains market share. Coca-Cola experienced a slight decline in unit case volume last quarter, reflecting a weak consumer spending environment. But in the long term, management expects revenue to grow marginally faster than the global beverage industry’s 4% historical growth rate.
The stock trades at 21 times 2025 earnings estimates and offers a high dividend yield of 3.14%. Assuming the company grows earnings faster than revenue, it probably won’t be enough to outperform the S&P 500 over time. However, Coca-Cola’s strong brand and consistent sales performance make it a good stock to hold if you want to increase your passive income.
Berkshire has held a large stake in American Express stock for 30 years, and as of Q3 2024, it still owns 151 million shares. After joining the position in 1998, Buffett continued to patiently hold the stock and add value as the business grew.
American Express earned $12.5 million in 1964, $1.4 billion in 1994, and $9.9 billion last year. This record of profitable growth clearly shows a wide competitive moat.
American Express stands out in an industry dominated by a handful of credit card companies. It has built a strong brand on customer service and a card membership model. Net card fees totaled approximately $2.2 billion in the quarter, up 18% from the year-ago quarter. This gives American Express recurring revenue that it reinvests in benefits to retain and attract new card members.
Another attractive aspect of the business is that American Express card members spend more on average than customers of other card brands. Despite recent weakness in consumer spending, total transaction volume, or build business, increased 6% from last year.
With single-digit growth in billed business, American Express is still on pace to report outstanding earnings growth of 25% for 2024. This reflects steady growth in card fees, low delinquency rates, and new card members.
The stock is not cheap. It is trading at 20 times 2025 earnings estimates, which is more than its 10-year average price-to-earnings multiple of 18. However, analysts expect earnings to grow at an annual rate of about 14% over the long term, the target according to management, which could justify a higher valuation.
While American Express may experience weak financial results in a recession, Buffett clearly believes the stock will increase in value over time.
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Bank of America is an advertising partner of Motley Fool Money. American Express is an advertising partner of Motley Fool Money. John Ballard No position in any of the stocks mentioned. The Motley Fool has recommended positions in Apple, Bank of America, and Berkshire Hathaway. Motley Fool has a Disclosure Policy.
