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.
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The rally since the beginning of the year has been a welcome relief for beleaguered investors, but some dark clouds are on the economic horizon. Massive layoffs; manufacturing slowing; inflation, while dropping, still way above the Federal Reserve’s target; geopolitical issues with China; the ongoing Russia-Ukraine war; and more are all real concerns for investors.

We screened the Berkshire Hathaway portfolio looking for companies seemingly poised not only to thrive in the current higher interest rate environment but possibly to benefit. While all seven are rated Buy across Wall Street, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Citigroup

This top bank has rallied nicely off the lows and Buffett bought $2.5 billion worth of stock back in the summer of 2022. Citigroup Inc. (NYSE: C) is a leading global diversified financial service company that provides consumers, corporations and governments a broad range of financial products and services.

Citigroup offers services such as consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management. And it operates and does business in more than 160 countries and jurisdictions in North America, Latin America, Asia and elsewhere.

Trading at a still cheap 7.5 times estimated 2023 earnings, Citigroup looks very reasonable in what remains a volatile stock market and in a sector that has dramatically lagged.

Investors receive a 4.62% dividend. BMO Capital Markets has a $62 price target on Citigroup stock, while the consensus target is $55.72. The shares closed on Monday at $44.10 apiece.

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.

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 16.7% of Monster Beverage, which continues to deliver big numbers.

Shareholders receive a 3.01% dividend. The $70 Barclays target price is in line with the consensus target of $70.02. Coca-Cola stock closed at $60.88 on Monday.

This is one of the largest producers of alcoholic beverages in the world. Diageo PLC (NYSE: DEO) produces, markets and sells alcoholic beverages worldwide, including scotch whiskey, gin, vodka, rum, beer, Irish cream liqueurs, wine, Raki, tequila, Canadian and American whiskey, Cachaça and brandy, as well as adult beverages and ready to drink products. The company’s premium brands include Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray and Guinness.
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Diageo’s reserve brands include Johnnie Walker Blue Label, Johnnie Walker Green Label, Johnnie Walker Gold Label 18-year-old, Johnnie Walker Gold Label Reserve, Johnnie Walker Platinum Label 18-year-old, John Walker & Sons Collection, Johnnie Walker The Gold Route, Johnnie Walker The Royal Route and other Johnnie Walker super-premium brands, as well as The Singleton, Cardhu, Talisker, Lagavulin and other malt brands.

Diageo stock comes with a 2.11% dividend. The BofA Securities price target is $196. The $184.01 consensus is closer to Monday’s $173.18 closing share price.

Jefferies Financial

This broker-dealer is a newer holding for Buffett and is a very solid idea for those looking for financials other than money center banks. Jefferies Financial Group Inc. (NYSE: JEF) engages in the investment banking and capital markets and in asset management businesses in the Americas, Europe, Asia and elsewhere.

The company operates via its Investment Banking and Capital Markets, Asset Management, Merchant Banking, and Corporate segments. It provides investment banking, advisory services with respect to mergers or acquisitions, restructurings or recapitalizations and private capital advisory transactions, as well as equity and debt underwriting and corporate lending.

Jefferies also offers financing, securities lending, and other prime brokerage services; equities research and finance; and wealth management services. It provides clients with sales and trading of investment-grade corporate bonds, U.S. and European government and agency securities, municipal bonds, mortgage-backed and asset-backed securities, leveraged loans, consumer loans, high-yield and distressed securities, emerging markets debt, interest rate, and credit derivative products, as well as foreign exchange trade execution and securitization. It manages, invests in and provides services to a diverse group of alternative asset management platforms across a spectrum of investment strategies and asset classes.

The dividend yield here is 3.43%. Oppenheimer has set its price objective at $45, and Jefferies Financial stock has a consensus target of $37.33. The shares closed on Monday at $34.97.

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.
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Buffett holds a big position, with 325 million shares of Kraft Heinz in the Berkshire Hathaway portfolio.

Kraft Heinz stock investors receive a 4.65% dividend. The BofA Securities price target of $48 compares with a $41.20 consensus target and Monday’s close at $34.24.

Kroger

This grocery chain giant is still pursuing the closing of the purchase of the Albertson’s chain, which will cement its status as the largest grocery store operator. Kroger Co. (NYSE: KR) operates as a retailer in the United States with a focus on combination food and drug stores, multi-department stores, marketplace stores and price impact warehouses.

Its combination food and drug stores offer natural food and organic sections, pharmacies, general merchandise, pet centers, fresh seafood and organic produce. Its multi-department stores provide apparel, home fashion and furnishings, outdoor living, electronics, automotive products and toys.

The company’s marketplace stores offer full-service grocery, pharmacy, health and beauty care, and perishable goods, as well as general merchandise, including apparel, home goods, and toys. The price impact warehouse stores provide grocery and health and beauty care items, as well as meat, dairy, baked goods and fresh produce items.

Kroger also manufactures and processes food products for sale in its supermarkets and online, and it sells fuel through 1,613 fuel centers. As of January 29, 2022, the company operated 2,726 supermarkets under various banner names in 35 states and the District of Columbia.

Shareholders receive a 2.37% dividend. Kroger stock has a $65 target price at BofA Securities. That is well above the $50.86 consensus target. Monday’s final trade was for $48.56 a share.

Procter & Gamble

This company offers a very solid dividend and a host of recognizable products. Procter & Gamble Co. (NYSE: PG) is one of the world’s largest consumer products firms and one of the oldest companies in the Fortune 500. Its many brands include Pampers, Tide, Bounty, Charmin, Gillette, Oral B, Crest, Olay, Pantene, Head & Shoulders, Ariel, Gain, Always, Tampax, Downy and Dawn.

The company sells its products through mass merchandisers, e-commerce, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, baby stores, specialty beauty stores, high-frequency stores and pharmacies. The company has been very innovative in its product development process and uses that to help ensure future growth and cash flow. This should provide investors with years of steady growth and dividends.

The dividend yield is 2.40%. Morgan Stanley’s price objective is $174, and the consensus target is $166.49. Procter & Gamble stock closed on Monday at $155.79.

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Again, while the market bounce back has been pleasant so far in 2023, the truth is the economy may be poised to roll over With at least two interest rate hikes possibly still on the way, in September and again in December, and a terminal rate that some say could be as high as 6%, the lagging effect of the biggest hike in rates since the 1980s may well come back to haunt the stock market.

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