Three Effortless Stocks Advised by Warren Buffett for the Upcoming Year's Investment
Warren Buffett has significantly boosted the wealth of Berkshire Hathaway investors over the decades. From 1965 up until 2023, Berkshire shares experienced a massive increase of 4,384,748%, equating to approximately 20% growth annually. By scrutinizing the stocks that Berkshire Hathaway has invested in, individuals can potentially reap the benefits of Buffett's exceptional business acumen.
However, it's important to note that some of Berkshire's stock holdings currently present better value opportunities than others. Here's why three of our contributors believe Coca-Cola (KO -0.67%), NVR (NVR -0.39%), and Amazon (AMZN -1.09%) are solid investments for the upcoming year.
Warren Buffett's long-standing venture
John Ballard (Coca-Cola): Warren Buffett first put money into Coca-Cola back in the 1980s, followed by additional investments in 1994. Buffett has consistently held onto every share since then, demonstrating his unwavering confidence in the company. Based on Coke's projected payouts, Berkshire Hathaway is set to receive a substantial $776 million in dividend payments** from Coca-Cola over the next year, indicating an impressive return on the initial investment cost of $1.3 billion.
Coca-Cola anticipates a 10% growth in non-GAAP revenue, which is not under the umbrella of generally accepted accounting principles, along with a 14% to 15% increase in adjusted earnings per share in 2024. Although Coca-Cola has faced sales challenges during the inflation period, it's seen an uptick in market share within non-alcoholic beverages, highlighting the strength of its brand.
As the current headwinds may dissipate in 2025, Coca-Cola's management expects for the volume of sales in emerging markets to surpass that of developed markets, potentially paving the way for further international growth. Coca-Cola Zero Sugar has shown remarkable success, with an 11% increase in unit-case volume across all operating segments. While there's a slight decline in sales for products like water, sports drinks, coffee, and tea, traditional Coca-Cola products remain sturdy, helping offset the recent setbacks.
Coca-Cola's brand power allows it to gradually increase prices in line with inflation. The company has achieved unit-case volume growth in the past two years, setting itself up for even better development when the global economy stabilizes. Currently, the stock is being traded at 21 times this year's estimated earnings, which is considered a fair price. The dividend yield is also worth considering at 3.05%, higher than the average 1.22% of the S&P 500. Coca-Cola's history of increasing dividends reflects the company's financial robustness throughout various market conditions.
A blooming real estate market
Jeremy Bowman (NVR):** The housing market has been experiencing challenges, mainly due to the pandemic boosting home prices and mortgages, resulting in reluctance among current homeowners to sell.
However, the housing market should eventually recover, and as the federal funds rate decreases, mortgage rates will follow suit, thawing out the market. Homebuilder stocks have underperformed during the post-pandemic stock rally, but longtime sector champion and Berkshire holding NVR could benefit from these developments.
NVR has adopted a low-risk strategy, purchasing the rights to build on finished lots instead of developing them, which means less investment in the company's balance sheet.
Optimism within the homebuilder industry recently reached its highest level in over two and a half years, as there's hope that regulatory easing will bring relief to the housing market. Homebuilder stocks, including NVR, also appear to be undervalued, as the stock currently trades at a price-to-earnings ratio (P/E) of 16.7, which is significantly cheaper than the S&P 500's valuation.
Third-quarter new orders soared by 19% to 5,650 units, while the average sale price saw a slight decrease by 1%. Revenue saw a 6% increase to $2.57 billion, and earnings per share grew by 4%. NVR also reduced its outstanding shares by 5% over the past year, thanks to its stock buyback program.
With an attractive valuation, an imminent housing market recovery, and a history of success, NVR looks like a smart investment for the upcoming year.
Amazon's remarkable ascent
Jennifer Saibil (Amazon):** Despite being a relatively young venture, Amazon checks many boxes that resonate with Warren Buffett's investment strategy: it's an industry leader with multiple revenue streams, a key player in the American economy, and has a promising future. Although it doesn't hold a large portion of the Berkshire Hathaway portfolio and likely never will, Amazon is a compelling pick for almost any investor.
With a leading position in two rapidly expanding markets – e-commerce and cloud services – Amazon has the opportunity to thrive in the ever-changing technological landscape. Its successful forays into streaming and advertising, along with smaller segments like devices and healthcare, make it an even more appealing investment.
Amazon is currently making significant strides in artificial intelligence (AI), which is paving the way for new breakthroughs in various industries. Buffett himself has expressed admiration and pride in Amazon's achievements, even though it may not be his typical choice for investment.
Despite not being a traditional Buffett pick, Amazon still proves itself to be an excellent choice for most investors, offering significant potential for growth in the coming years.
Two years ago, Amazon revealed its strategy for implementing artificial intelligence generation, timing it perfectly with ChatGPT's launch and subsequent buzz. Generative AI has since revolutionized various aspects of life, streamlining repetitive tasks in numerous professions and sparking creative thinking in artists.
Amazon's extensive AI division caters to a wide array of needs within the online shopping and cloud computing sectors, and its executives believe this is only the tip of the iceberg. According to a Bloomberg report, the generative AI market could reach an astonishing $1.3 trillion by 2032, growing at an annual rate of 42%. Amazon's CEO, Andy Jassy, asserted that it's already producing billions in profits, and this is merely the opening act.
Amazon is well-positioned to capitalize on AI developments, but it holds numerous potential growth avenues across its vast domain. Thus, it's an intuitive investment choice for 2025 and beyond.
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After witnessing Warren Buffett's successful long-term investments in Coca-Cola, individuals might consider investing their money in this finance sector giant. Buffett first invested in Coca-Cola in the 1980s and has consistently held onto his shares since then, demonstrating his confidence in the company. This unwavering belief is set to pay off, as Berkshire Hathaway is projected to receive a substantial $776 million in dividend payments from Coca-Cola over the next year.
Similarly, investing in NVR, another Berkshire Hathaway holding, could be a smart move for those looking to venture into the real estate sector. The housing market has faced challenges due to the pandemic, but as mortgage rates decrease, and the market recovers, NVR, which adheres to a low-risk strategy, stands to benefit significantly. The stock currently trades at a lower price-to-earnings ratio than the S&P 500, indicating its attractiveness as an investment opportunity.
