Buffett's Winning Trio: Unveiling The 3 Stocks Driving His Remarkable Returns

Warren Buffett's investment strategies are widely coveted by investors globally, as the Oracle of Omaha's portfolio has delivered a robust 9.85% compounded annual return over the past 30 years. While Buffett has amassed a majority of his wealth through diversified businesses, his stock investments have also generated billions in passive income alone.  

Buffett has long advocated long-term investment strategies in established blue chip companies and has typically condoned avoiding taking immense risks.

"One investment rule at Berkshire has not and will not change: Never risk permanent loss of capital. Thanks to the American tailwind and the power of compound interest, the arena in which we operate has been — and will be — rewarding if you make a couple of good decisions during a lifetime and avoid serious mistakes," Buffett stated in Berkshire Hathaway Inc.'s annual shareholder letter.

Some of Buffett's profitable investment bets have been in large-cap dividend-paying stocks. 

American Express

Buffett describes his stake in American Express Co. AXP as his "secret sauce," as the company's immense dividend payouts account for a sizable portion of Berkshire's earnings. 

Buffett acquired his stake in American Express for $1.3 billion in 1995, but its annual earnings in 2023 "considerably exceeded" the cost of purchase. In addition, his total stake in American Express was valued at roughly $22 billion as of Dec. 31, 2022. 

Buffett's investment in American Express accounts for 4% to 5% of Berkshire Hathaway's generally accepted accounting principles (GAAP) net worth, while the total dividend earnings from the stake amounted to nearly $302 million in fiscal 2022. The investment guru predicts American Express's dividend payouts to increase by 16% in 2024. 

While Buffett did not purchase or sell any shares of American Express in 2023, his ownership stake in the company rose marginally because of Berkshire's share repurchases. 

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Coca-Cola 

The Coca-Cola Co. KO is another one of Buffett's hidden gems, as its dividend payouts make a sizable paycheck for one of the world's richest men. Buffett invested a total of $1.3 billion in Coca-Cola in 1994 and cashed in $704 million in dividends annually by 2022. 

"Growth occurred every year, just as certain as birthdays," Buffett said in Berkshire Hathaway's 2022 shareholder letter. "We expect that those checks are highly likely to grow."

In addition, Berkshire Hathaway's total stake in Coca-Cola was valued at $25 billion, reflecting an over 1,800% capital appreciation. 

Apple 

Buffett claimed that Apple Inc. AAPL is "a better business than anything we own." He had a 5.9% stake in Apple as of Dec. 31, 2023, making it one of Berkshire Hathaway's largest holdings. The Magnificent Seven stock has grown by over 365% since the end of 2018, outperforming the benchmark S&P 500's returns.

However, Buffett sold nearly 1% of his stake in Apple in the last quarter of 2023. While concerns regarding Apple's operational challenges have caused the stock to plummet by more than 12% so far this year, analysts remain bullish regarding the tech giant's long-term growth prospects. 

Wedbush Securities analyst Daniel Ives has an Outperform rating on Apple stock with a price target of $250, reflecting a potential upside of nearly 50%. JPMorgan Chase & Co. analyst Samik Chatterjee maintains a similar Overweight rating on Apple, with a price target of $215, indicating a potential upside of over 27%.

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