Warren Buffett is widely regarded as one of the best investors of all time. Since 1965, Buffett’s investment portfolio has generated returns of more than 2,700,000% for Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B), delivering fortunes to its shareholders along the way.
It’s easy to see why smart investors keep a close eye on Buffett’s stock picks. Here are three of his largest holdings — all of which could help you protect and grow your wealth.
Apple (NASDAQ:AAPL) needs little introduction. The tech titan is beloved by its shareholders, many of whom have become rich by owning its shares. Yet investors may not love Apple’s stock quite enough.
While most people understandably focus on the iPhone, which represents the lion’s share of Apple’s revenue, it’s the company’s services and “other products” segments that have become its most important growth drivers.
The tech giant’s profits are likely to receive a boost from its new Apple One bundle, which gives customers the option of subscribing to several of its services — including Apple Music, TV+, Arcade, iCloud storage, News+, and Fitness+ — for one monthly fee. Meanwhile, Apple’s new AirPods Max headphones should help fuel the already strong growth of its other products revenue.
When combined with a new 5G-fueled iPhone upgrade cycle — and higher remote work-related Mac and iPad sales during the coronavirus pandemic — Apple’s services and other products businesses give its shareholders many ways to win.
Apple is Buffett’s largest position. Berkshire Hathaway owns a staggering $123 billion worth of the tech leader’s stock. Apple has rewarded its shareholders with $497 billion in dividends and share repurchases since initiating its cash payout in 2012. Its shares currently yield 0.7%, and investors can expect to continue to receive steadily increasing dividend payments in the years ahead.
Bank of America
If you’re looking for a relatively low-risk way to profit from a recovery in the U.S. economy, you need look no further than Bank of America (NYSE:BAC).
The financial services giant gives investors a great way to profit from a coronavirus vaccine. As the COVID-19 crisis subsides, unemployment levels should fall. That ought to lead to lower loan default levels, which, in turn, should drive Bank of America’s profits higher.
A post-pandemic economic recovery would likely also lead to a rise in interest rates. Banks’ net interest margins tend to expand as rates increase. So, this, too, should boost Bank of America’s earnings.
Yet investors don’t appear to be pricing these attractive recovery prospects into Bank of America’s stock. Its shares can currently be had for only about 13 times analysts’ earnings estimates for 2021. Bank of America’s shares also offer an attractive dividend yield of 2.5%.
This could explain why Buffett has been loading up on Bank of America’s stock. The banking leader is now Berkshire Hathaway’s second-largest position behind Apple, with a stake currently valued at nearly $30 billion.
If you’re looking for an ultra-safe stock, Coca-Cola (NYSE:KO) is an excellent option. The beverage king is Buffett’s third-largest and longest-held position, with Berkshire Hathaway having owned shares since 1988. Coca-Cola has survived a host of challenges in the decades since Buffett first bought shares, and yet it still found a way to reward its shareholders with a steadily rising stream of cash dividends along the way.
Like Bank of America, Coca-Cola provides investors with a great way to potentially profit from a post-pandemic economic recovery. As more bars, restaurants, and sports stadiums reopen, Coca-Cola’s sales and profits should receive a boost.
Yet even if a recovery takes longer than expected, Coca-Cola — and its shareholders — will be just fine. In the midst of the COVID-19 crisis, Coca-Cola was still able to generate $6.7 billion in operating income and $5.5 billion in free cash flow over the first three quarters of 2020. It’s this type of impressive and reliable profit and cash flow production that has allowed the beverage titan to raise its cash payout for an incredible 58 consecutive years, making it a rare Dividend King.
Investors can expect many more dividend increases from Coca-Cola in the decades ahead. Its stock remains a solid buy today, with a hefty dividend yield of more than 3%.