There’s no doubt that Berkshire Hathaway‘s new CEO, Greg Abel, is approaching things with a slightly different vibe compared to Warren Buffett. In his very first quarter, he made the bold move of cutting 16 stock positions that Buffett had built over 55 years. None were particularly large, but it’s interesting to see how quickly things can shift in the investment world.
Right now, attention seems focused on a specific stock that both Abel and Buffett believe is worth holding onto for the long haul.
Let’s take a closer look at three of Buffett’s top investments that he held onto, even as Abel had the opportunity to back out.
1. Coca Cola
This investment is so iconic for Buffett that it might as well be a well-worn phrase in his playbook. Coca-Cola has grown into Berkshire’s third-largest company, showcasing the wisdom behind this choice. Both Abel and Buffett hold the Coca-Cola Company (NYSE:KO) in high regard, mainly because of its reliable dividend growth.
While Coca-Cola may not have always seemed like a guaranteed winner, Berkshire currently holds 400 million shares, bringing in about $800 million per year in dividends. For context, Berkshire’s various privately owned businesses generate around $40 billion in operating profits annually.
These Coca-Cola shares not only provide dividends but have also seen some capital gains. The company’s diverse product lineup, including Gold Peak Tea, Minute Maid Juice, Powerade, and Dasani Water, keeps it relevant to changing consumer tastes. Plus, its sheer size gives Coca-Cola significant leverage in marketing and sales.
2. Alphabet
Yes, Berkshire Hathaway owns part of Alphabet, Google’s parent company, and it’s a substantial stake after recent acquisitions. Buffett initially bought 17.8 million shares last year, but Abel has more than tripled that to 57.8 million shares now, placing Alphabet in the fifth position for Berkshire with a value of around $26 billion.
One might wonder what spurred this shift, especially given Buffett’s historical hesitance toward tech stocks. Initially, his worries about technology investments were understandable—technology can change so rapidly that it’s hard to keep up.
However, as the market has stabilized, it’s become evident which tech companies are here to stay. It’s clear Buffett recognized Alphabet’s dominance in search engines, and Abel has grasped how Alphabet is expanding beyond just that, with ventures in cloud computing, mobile OS, YouTube, and AI.
3. Ally Financial
Ally Financial (NYSE: Ally) might not be a name you’d expect from Buffett, who generally shies away from banks and newer tech-focused companies. Nevertheless, he greenlit the purchase of 30 million shares of this online bank in 2022, and most have remained part of the portfolio since.
In hindsight, it seems to have been a smart decision. Revenue growth is finally accelerating and is projected to increase around 20% this year, indicating Ally’s business is at a critical juncture.
The banking landscape is also shifting towards online and app-based services, indicating a bright future for neobanks, with growth projections hovering around 11% annually through 2031.
While Ally’s stock hasn’t performed spectacularly in the short term, the consensus among analysts remains positive, rating it a Strong Buy, with a target price that suggests there’s room for growth.
Should You Buy Coca-Cola Stock Now?
Before making any moves on Coca-Cola stock, it’s wise to keep certain factors in mind. Notably, a recent analysis found that some of the analysts’ top picks do not include Coca-Cola among their current recommendations. They’re focusing instead on other stocks that promise substantial returns in the future.
