Top Warren Buffet Investments Worth Considering for a $1,200 Portfolio at Present
Buffet's beloved Berkshire Hathaway, represented by tickets BRK.A and BRK.B, does not require an introduction. Between 1965 and 2023, Berkshire's stock soared, recording a staggering 4,384,748% gain or an annual compound growth rate of 19.8%. Despite this, the S&P 500 bagged a 31,223% total gain with a 10.2% annual compound growth rate. The dominance of Berkshire remains one of the reasons it steadily garners investor respect.
While due diligence is always crucial, watching Berkshire's portfolio can offer valuable investment ideas or serve as a checkpoint when contrasting your thesis with its buying or selling actions. With a $1,200 budget, here are top Buffett picks for your portfolio:
Buffett's everlasting affection for Coca-Cola (KO)
Berkshire's affair with Coca-Cola kicked off in the 1980s and has been a lucrative relationship ever since. Coca-Cola becomes the fourth largest position in Berkshire's mayhem of a $297 billion equities portfolio, accounting for 8.4% of the portfolio's total value.
What draws Buffett to Coca-Cola? In his 2022 letter to shareholders, Buffett nostalgically shared that the dividend payout from Coca-Cola in 1994 was a paltry $75 million. By 2022, this dividend had ballooned 838% to $704 million. Now, Coca-Cola's dividend yield hovers around 3.1%. As part of the club of Dividend Kings, Coca-Cola has mastered the art of increasing its dividend for an extraordinary 62 consecutive years. Each year, this steady stream of income arrives in the form of a check.
Coca-Cola's performance has been lackluster in recent years, with the stock falling 2% while the broader market skyrocketed 53%. Consumer staples, including Coca-Cola, are viewed as protection against high inflation. Despite the expensive economy, consumers still purchase essential items like Coca-Cola. Once the Fed abandoned its rate hikes and inflation eased, consumer staples became less appealing.
Analysts, however, regard Coca-Cola as an exception because of its exceptional performance in the U.S. and renewed focus on global franchising. While the waiting period for stock appreciation may continue, investors can enjoy pocketing a passive and steadily-growing income every three months.
Occidental Petroleum: A hedge for geopolitical upheaval (OXY)
Since Berkshire's recent acquisition of US oil producer Occidental Petroleum (OXY), Berkshire has been snatching up shares like candy. Occidental now boasts a 28% stake in the company's outstanding shares, making it the sixth-largest position in Berkshire's portfolio.
In Buffett's 2023 letter to shareholders, he assured his lack of interest in taking over the company outright, although some speculate otherwise. Buffett spoke highly of Occidental's contribution to the U.S. Strategic Petroleum Reserve and its role in making the U.S. less reliant on foreign oil. Additionally, he commended Occidental's carbon-capture initiatives and his admiration for CEO Vicki Hollub.
Occidental has been working tirelessly to build the world's largest direct air capture facility, which can effectively capture and bury carbon dioxide. The Stratos plant is expected to become operational this year, with the capacity to extract 250,000 tons of CO2 annually. Furthermore, Occidental recently acquired CrownRock, which added 170,000 barrels of oil equivalent per day to its production capacity and was immediately accretive to free cash flow.
Management is currently focused on bringing down the balance sheet, growing cash flow, and repurchasing shares. With oil prices rising due to US sanctions on Russia, there is potential for volatility in oil prices in the coming years. Owning Occidental as a hedge against geopolitical instability might be a smart move.
- Given Buffet's investment strategies, it might be wise for individuals with a budget of $1,200 to consider investing in stocks that Berkshire Hathaway, such as Coca-Cola (KO), often includes in its portfolio. This could potentially offer stable returns, similar to Berkshire's long-term engagement with Coca-Cola.
- Incorporating assets like Occidental Petroleum (OXY) into a diverse portfolio could serve as a hedge against geopolitical upheaval, as Berkshire Hathaway has recently increased its stake in the company to gain exposure to the U.S. oil sector. This investment could help mitigate potential market volatility caused by geopolitical instability.
