When Warren Buffett speaks, investors listen. And when Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B)files its 13F form -- which goes through the holding company's latest trades -- with the Securities and Exchange Commission (SEC), investors start analyzing.
The most recent 13F had two new positions and some smaller trades. But most of the equity portfolio, which has 41 stocks right now, remained the same. Buffett is a big believer in long-term investing, and his favorite holding period is, famously, "forever."
Amazon(NASDAQ: AMZN) and Coca-Cola(NYSE: KO) are two no-brainer stocks to buy right now, and I'm going to add a new position, Ulta Beauty(NASDAQ: ULTA), to that list, too.
1. Amazon: the artificial intelligence (AI) stock
Amazon is one of the few tech stocks that Buffett owns. In fact, he only bought in 2019, after it had already minted millionaires. Buffett doesn't go for glitz or hype; he prefers stability and value. That's an approach that's helped him beat the market over his decades at the helm of his holding company even as he avoids fast growing stocks.
Amazon has become the second-largest company in the U.S. by sales, and it's reliable for cash and profitability. That's why even though it's a tech stock that embraces new trends, it still fits into Buffett's schema. It's one of few AI stocks that you'll find in the Berkshire Hathaway portfolio.
Of course, Amazon is a lot more than AI. It has an unparalleled global e-commerce business which accounts for almost 38% of all U.S. e-commerce. That's a moat that's impenetrable to any real challengers in the near term. It isn't taking any chances, though, and it's leveraging its position to make customers even more loyal by speeding up service and offering a wider array of products.
It's also the global leader in cloud computing, and it's beefing up Amazon Web Services (AWS) with a massive slate of high-level AI services. It has a three-tier system to work with any kind of client, and CEO Andy Jassy pointed out that "During the past 18 months, AWS has launched more than twice as many machine learning and generative AI features into general availability than all of the other major cloud providers combined."
Amazon is in full growth mode, and it has many growth drivers that make it a standout stock.
2. Coca-Cola: the classic Buffett stock
Coca-Cola is one of three stocks that Buffett has said he would never sell. He loves its brand, dominance, and dividend, and it's his longest-held stock. In fact, when investors talk about Buffett's favorite holding period being forever, what he actually said was "When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever," and he was talking about Coca-Cola.
Coca-Cola was actually under severe pressure before CEO James Quincey took over in 2017, and Buffett still held on. Having Quincey on board proved providential as Coca-Cola began to turn things around before the pandemic, and it was in good hands to weather the declines. It's well past that now and has been demonstrating resilience in the inflationary climate.
Coca-Cola's growth opportunities may be more limited than that of a typical growth stock, but it continues to innovate with new beverages and product types. The company has a solid balance sheet and cash at hand, and is able to acquire smaller companies that generate some of its higher growth. Coca Cola then brings these newer drinks into its unmatched global distribution system, leading to increased presence, sales, and efficiency. It's an incredible model that leverages the strength of its core brands along with the growth potential of new ones.
The company has managed to navigate the pressures of the current environment and is well-positioned to keep its top spot as the leading global beverage company. It's also as reliable as a Dividend King can be for growing passive income.
3. Ulta Beauty: the surprise Buffett stock
I'm not sure that too many investors saw it coming when Berkshire Hathaway's latest 13F filing included a new position in Ulta Beauty, but it's a stock that fits well into the Buffett mold. It has a distinctive approach to selling beauty products and has grown to an impressive almost 1,400 stores that give it a leading position against competitors trying to copy it. While it's still opening new stores, with plans for up to 65 this year, it's the loyal shoppers that are driving growth and generating opportunities for more.
Ulta is definitely feeling inflationary pressure right now, but its business concept is intact. It reported a tiny 1.6% increase in comparable sales in the 2024 fiscal first quarter (ended May 4), but what really dragged down the stock were margins and outlook. Operating margin declined from 16.8% to 14.7%, and management lowered its full-year outlook for revenue, comparable sales, operating margin, and earnings per share (EPS).
It's easy to see why Buffett picked Ulta right now. It's down 18% over the past year, and that's including the jump from after the news of Buffett's buy. At the current price, it trades at a price-to-earnings ratio (P/E) of 14, which looks undervalued as compared with its opportunity. An industry leader at a cheap price is right up Buffett's alley, and Ulta Beauty stock looks like a great buy for any individual investors.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, and Ulta Beauty. The Motley Fool has a disclosure policy.
