While the current rally may have more legs, there are some very dark clouds on the horizon for the rest of 2023. Profligate government spending has propped up the economy for the past decade or more. While the government can continue to print money, consumers cannot. With all the old largesse from handouts having long been spent, many Americans are ramping up credit card debt at a record pace. In fact, for the first time ever, consumers now have more than $1 billion on credit cards with interest rates as high as 20% or more.
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If any investor has stood the test of time, it is Warren Buffett, and with good reason. For years, the “Oracle of Omaha” has had a rock-star-like presence in the investing world. His annual Berkshire Hathaway shareholders meeting draws literally thousands of loyal fans who are investors. Known for his long buy-and-hold strategies and his massive portfolio of public and private holdings, Buffett remains one of the preeminent investors in the world.
Berkshire Hathaway stock has been on fire over the past year and hit an all-time high on Monday. Investors cite the huge Apple move higher (which is the biggest position in the portfolio) but also point to the massive trove of cash the fund has (which has risen to almost $150 billion) as another huge positive. Buffett has been buying ultra-safe short-term Treasury bills that pay the highest yield in years. Operating earnings jumped a stunning 6.6% year over year as insurance earnings helped to power gains.
We screened the Berkshire Hathaway portfolio looking for the potential big-time winners in the portfolio and found five that look like solid ideas for investors now. All pay dependable dividends and are rated Buy at top Wall Street firms. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Apple
It is almost hard to comprehend that this legacy technology giant makes up a stunning 45% of the Berkshire Hathaway portfolio. Apple Inc. (NASDAQ: AAPL) designs, manufactures and markets consumer electronics worldwide, including the iPhone line of smartphones, the Macintosh family of notebook and desktop computers, iPad multi-purpose tablets, and such wearables and accessories as AirPods, Apple TV, Apple Watch, Beats and HomePod.
It also provides AppleCare support and cloud services, and it operates various platforms, including the App Store, that allow customers to discover and download applications and digital content, such as books, music, video, games and podcasts.
Its services include Apple Arcade, a game subscription service; Apple Fitness+, a personalized fitness service; Apple Music, which offers users a curated listening experience with on-demand radio stations; Apple News+, a subscription news and magazine service; Apple TV+, which offers exclusive original content; Apple Card, a co-branded credit card; and Apple Pay, a cashless payment service. Apple also licenses its intellectual property.
The company serves consumers, and small and mid-sized businesses and the education, enterprise and government markets. It distributes third-party applications for its products through the App Store. The company also sells its products through its retail and online stores, and direct sales force, as well as third-party cellular network carriers, wholesalers, retailers and resellers.
Shareholders receive a 0.53% dividend. Wedbush has a $230 price target on Apple stock. The consensus target is $201.18, and the shares closed on Thursday at $177.97.
Bank of America
Buffett owns a billion shares of this bank. Bank of America Corp. (NYSE: BAC) is a ubiquitous presence in the United States, providing various banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, corporations and governments in the United States and internationally. It operates 5,100 banking centers, 16,300 ATMs, call centers and online and mobile banking platforms.
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Bank of America has expanded into several new U.S. markets, with scale across the country positioning it ideally to benefit from accelerating loan growth over the next two years. Moreover, unlike smaller peers, scale allows the bank to increase investment substantially over the next few years without notably jeopardizing returns, driving further market share gains.
Investors receive a 3.07% dividend. Oppenheimer’s target price is $47, and Bank of America stock has a consensus target of $35.81. Thursday’s closing share price was $30.94.
Chevron
This integrated giant is a safer way for investors looking to get positioned in the energy sector, and shares have backed up some. Chevron Corp. (NYSE: CVX) engages in integrated energy and chemicals operations worldwide. The company sports a sizable dividend and has a solid place in natural gas and liquefied natural gas (LNG).
The Upstream segment is involved in the exploration, development, production and transportation of crude oil and natural gas; processing, liquefaction, transportation and regasification associated with LNG; transportation of crude oil through pipelines; and transportation, storage and marketing of natural gas, as well as operates a gas-to-liquids plant.
The Downstream segment engages in refining crude oil into petroleum products; marketing crude oil, refined products and lubricants; manufacturing and marketing of renewable fuels; transporting crude oil and refined products by pipeline, marine vessel, motor equipment and rail car; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses and fuel and lubricant additives. It is also involved in the cash management and debt financing activities; insurance operations; real estate activities; and technology businesses.
Chevron posted strong second-quarter results and remains one of the best ways to play energy safely.
The dividend yield here is 3.78%. The Raymond James target price is $208, while the consensus target is just $185.36. Chevron stock closed on Thursday at $160.83.
Coca-Cola
This stock not only offers safety but comes with an incredibly strong worldwide brand with 40% overseas sales. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands. It remains a top Buffet holding, as he owns a massive 400 million shares.
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Led by Coca-Cola, one of America’s most trusted food and drink brands, the company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the number one provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks.
Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy Coca-Cola beverages at a rate of more than 1.9 billion servings a day. Also remember that the company also owns almost 17% of Monster Beverage, which continues to deliver big numbers.
Coca-Cola stock comes with a 3.02% dividend. The $71 J.P. Morgan target price compares with a $70.02 consensus target and Thursday’s close at $60.92.
Kraft Heinz
Even in bad times, everybody has to eat, and Kraft Heinz Co. (NASDAQ: KHC) always stands to benefit. The company was formed almost six years ago in the merger of H.J. Heinz and Kraft Foods. The company is a leading global food company, with $25 billion in annual revenues generated by such well-known brands as Kraft, Heinz, Oscar Meyer and Maxwell House. It is also one of America’s most trusted food and drink brands.
The company is the third largest food and beverage manufacturer in North America and derives 76% of revenues from that market and 24% from overseas. The company’s other brands include ABC, Capri Sun, Classico, Jell-O, Kool-Aid, Lunchables, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon, Quero, Weight Watchers Smart Ones and Velveeta.
Buffett holds a big position in Berkshire Hathaway: 325 million shares.
Shareholders enjoy a 4.64% dividend. BofA Securities team has named Kraft Heinz stock as one of its top dividend picks. Its $48 price target is well above the consensus target of $41.20 and Thursday’s close at $34.39.
Given Buffet’s proclivity for only owning the stock of companies that he understands inside and out, these make sense now for growth and income investors worried about the potential for a steep market decline in the fall. While these five top stocks could sell off in a large correction, they will hold on far better than most, and many of these stocks (with the exception of Apple) are offering the best entry points and dividends in some time.
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