It’s no surprise that Warren Buffett and his company are followed by nearly every investor, from individual traders to those working in hedge funds. Berkshire Hathaway (BRK.A -0.62%) (BRK.B -0.63%).
After all, from 1965 to 2021, Berkshire’s stock generated an average annual return of more than 20%. S&P 500 It’s only 10.5% compound interest including dividends. Berkshire’s stock has also outperformed the market this year.
One reason for Berkshire’s outperformance is due to its large stock portfolio, currently valued at over $332 billion. Many investors know about some of the largest positions in Berkshire’s portfolio. appleWhat they may not know is that just two consumer staples stocks now make up just over 11.5% of Berkshire’s total portfolio.
Let’s see.
Coca-Cola: $25.6 billion (7.7%) of invested assets
Buffett and Berkshire have many big names in their stock portfolios, but few have the brand power of the beverage giants. coke (Wh -0.57%)Buffett first bought Coca-Cola stock in 1988 and is now the fourth largest position in his portfolio.
Having a great brand like Coca-Cola makes it easier for management to pass on the high costs of running a business to consumers without much impact on sales, increasing the company’s ability to withstand inflation. I can do it.
In the third quarter, Coca-Cola management successfully implemented this strategy, driving prices up 12% in the quarter. Unit case volume also increased by 4%, indicating strong sales despite higher prices. Net revenues were up 10% in the quarter and earnings were up 14%. Additionally, management has raised its full-year guidance for the company.
Over the last few years, Coca-Cola has focused on building a strong beverage line that keeps consumers satiated and thirsty, regardless of economic downturns or high inflation. There are still many uncertainties in the environment, including the recession, that could affect demand next year, but so far so good.
Kraft Heinz: $13.2 billion (3.9%) of invested assets
Just like you’ve heard of Coca-Cola, you’ve probably heard of food conglomerates. craft heinz (Science 0.23%) Thanks to famous and beloved products like Kraft Macaroni and Cheese and Heinz Ketchup.
Berkshire currently owns 26.6% of the company’s total outstanding shares, so while it’s not the largest position in the portfolio, it ranks high in terms of total shares held by the company.
Berkshire first invested in Heinz in 2013, partnering with 3G Capital to acquire Heinz for $23 billion. In 2015, Heinz merged with Kraft and debuted at around $71 for shares. Today, those stocks trade for less than his $40, and Kraft’s Heinz is considered one of Buffett’s biggest mistakes: his purchase price was too high.
Kraft Heinz has a lot of debt, but management has been more aggressive in repaying it in recent years. The company has done this by selling business units and lowering its dividend, but it still maintains a healthy 4% annual yield.
There is still a long way to go, but investors are growing more confident in Kraft Heinz’s ability to reduce debt. The stock is trading at less than 15 times his expected earnings. This isn’t necessarily cheap, but it’s not extremely expensive either, given some of the brands the company has.
Bram Berkowitz has no positions in any of the mentioned stocks. The Motley Fool holds positions in and recommends Apple and Berkshire Hathaway. The Motley Fool recommends Kraft Heinz Stock and recommends the following options: $265 call at Berkshire Hathaway in 2023, $130 short call at Apple in March 2023. The Motley Fool’s U.S. headquarters has a disclosure policy.