Warren Buffett famously said his “favourite holding period is forever.” I’m looking at two stocks that have been permanent features in the portfolio of his company Berkshire Hathaway through three major stock market crashes. He’s held them at least through the early 2000s dotcom bubble, the 2008 Global Financial Crisis, and the 2020 Covid-19 recession.
Let’s explore whether I’d buy these Warren Buffett stocks today.
Coca-Cola — Warren Buffett’s oldest stock position
Warren Buffett first bought Coca-Cola (NYSE: KO) stock in 1988. Accordingly, the soft drinks manufacturer was actually a stalwart of Buffett’s portfolio even before the relatively mild US recession in the early 1990s.
Berkshire acquired 400m Coca-Cola shares at around $3.25 per share. It’s never sold a single one. The Coca-Cola share price is now over $65, meaning the holding is valued in excess of $26bn today — a stunning unrealised gain of over 2,000%. On top of that, Warren Buffett (or at least, Berkshire Hathaway) earns an annual dividend yield above 50% on his initial investment.
Today, Coca-Cola’s in good financial shape. Net revenues grew 17% in 2021, operating income was up 15% and cash flow increased 28%. Moreover, the company continues to innovate with a new product range for 2022, including Coca-Cola with Coffee Mocha.
Based on consensus forecasts, the stock is arguably pricey at present, trading at 27x current year earnings. Nevertheless, I think there’s still value in this high-margin, cash-generative business that has increased its dividend regularly for the past 59 years.
American Express — Berkshire’s third-largest stock holding
Warren Buffett first invested in American Express (NYSE: AXP) back in 1963, when it was a young company mired in scandal, but began building the stake he owns today in 1993. Currently, the billionaire holds 151.6m shares, worth $29bn in total.
The American Express share price is up nearly 22% over 12 months. Last year, revenue grew 17% and total cardholder spending rose 25%. Additionally, AmEx recently raised its dividend by 20% to $0.52 per share.
Looking ahead, American Express stock should benefit from a continued recovery in the travel sector. Travel consultancy and associated card rewards have been historically important revenue streams.
As monetary policy tightens, the US economy may enter a recession in 2023. This could negatively impact the AmEx share price if consumer spending falls. However, the card payment company has always rebounded after recessionary shocks before and its long-term prospects still look good to me.
Would I buy?
A bear market could be imminent, but studying Warren Buffett’s long-term investing approach eases my worries. Buying and holding carefully selected stocks through thick and thin has handsomely rewarded the Oracle of Omaha over decades.
American Express and Coca-Cola currently trade near all-time highs. This could mean further upside is limited. Indeed, Berkshire built both positions years ago at considerably cheaper prices than today. However, they’re still in its top four stock market holdings, with no signs of selling.
In Buffett’s own words: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” AmEx and Coca-Cola are clearly wonderful companies in his view. That’s good enough for me.
Warren Buffett has a unique gift for identifying wonderful companies at wonderful prices. I’ll settle for those same companies at fair prices. I’d buy both shares today.