In This Article:
Warren Buffett and his company Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) need no introduction. Between 1965 and 2023, Berkshire's stock generated a total gain of 4,384,748%, or a compound annual gain of 19.8%. Over the same period, the broader benchmark S&P 500 including dividends generated a total gain of 31,223%, or a compound annual growth rate (CAGR) of 10.2%. This dominance is one of many reasons investors revere Buffett and Berkshire.
While you should never invest without doing due diligence, you can follow Berkshire's portfolio for investment ideas, or to check your thesis if Berkshire is buying or selling a stock that you might have done the opposite with. Here are the best Buffett stocks to buy with $1,200.
Buffett's love affair with Coca-Cola
Berkshire first bought Coca-Cola (NYSE: KO) in the 1980s, and it's been a big winner over the many decades Berkshire has owned the stock. Coca-Cola is Berkshire's fourth-largest position and makes up 8.4% of the conglomerate's roughly $297 billion equities portfolio.
Why does Buffett love Coca-Cola so much? The dividend. In Berkshire's 2022 letter to shareholders, Buffett wrote that the dividend Berkshire received from the company in 1994 was $75 million. By 2022, that dividend had grown 838% to $704 million. Today, Coca-Cola's dividend yield is roughly 3.1%. The company has increased its dividend for an astounding 62 consecutive years, putting it in an exclusive club known as the Dividend Kings. This is easy, reliable money for Berkshire, and the checks cash every year.
Coca-Cola's stock has not performed well in recent years. While the broader market soared over 53% in 2023 and 2024, Coca-Cola's stock fell 2%. Consumer staples are seen as defensive during high-inflation environments. People will typically still buy essentials in an expensive economy, and companies can typically pass on an increase in their prices to customers.
However, once the Fed stopped raising rates and inflation eased, consumer staples became less attractive. Additionally, they began to have less pricing power as consumers started to hit their breaking points.
While the environment could remain challenging for consumer staples, many analysts view Coca-Cola as an outlier due to its strong execution in the U.S. and renewed focus on global franchising. While waiting for these efforts to translate into appreciation for the stock, investors can collect a steady and growing stream of passive income every three months.
Occidental Petroleum: A hedge on geopolitical uncertainty
Since launching a new stake in the U.S. oil producer Occidental Petroleum (NYSE: OXY), Berkshire has bought the stock like there is no tomorrow. Occidental is the sixth-largest position in Berkshire's portfolio, and Berkshire now owns over 28% of outstanding shares.