In 2024, Warren Buffett’s Berkshire Hathaway sold $133 billion worth of stocks in the first 9 months. Buffett reduced a substantial portion of Apple shares and sold nearly a quarter of the Bank of America holdings.
As one of the most renowned value investors in the world, Buffett held a significant amount of cash during a year that saw one of the best performances for the stock market since 2000.
By the end of the third quarter of the previous year, Apple, American Express, Bank of America, and Coca-Cola made up 70% of Berkshire’s $271 billion stock investments. At that time, the S&P 500 index had a price-to-earnings ratio of 30, historically high levels, while Buffett was in the process of accumulating cash.
According to Berkshire Hathaway’s financial report for the third quarter of 2024, the company held over $325 billion in cash and equivalents, with a large portion being U.S. Treasuries.
Of interest is Buffett’s choice of stocks not to sell. The Motley Fool reported that Buffett continued to hold stocks in Coca-Cola and American Express, indicating his positive outlook on the competitive advantages and growth prospects of these companies.
Throughout his investment career, Buffett has often invested in top consumer brands. When he sees a high-quality company trading at an attractive price, he will make a move.
Coca-Cola’s stock price sharply dropped during the Black Monday crash in 1987. Despite the decline, the company’s earnings were growing at a double-digit rate, with significant international growth opportunities. The stock price post-sell-off was around 16 times the earnings, prompting Buffett to invest a fifth of Berkshire Hathaway’s stake in Coca-Cola stocks.
Since then, Buffett has never sold a share of Coca-Cola. By the end of the third quarter of 2024, Berkshire Hathaway held 400 million shares of Coca-Cola, valued at $25 billion at the current stock price, paying an annual dividend of $776 million.
Coca-Cola may no longer be the high-growth company it was when Berkshire initially invested, but with expanding market share, the company’s profits are expected to continue growing. Despite a slight decline in unit case volume in the previous quarter, Coca-Cola’s management anticipates revenue growth slightly surpassing the historical 4% growth rate of the global beverage industry.
The stock trades at 21 times the expected earnings for 2025, with a dividend yield of 3.14%. For those seeking passive income, Coca-Cola’s strong brand and stable sales performance make it a worthy hold.
Having held a substantial stake in American Express for 30 years, Berkshire still had 151 million shares by the end of the third quarter of 2024.
In 1964, American Express made a profit of $12.5 million, growing to $14 billion in 1994 and $9.9 billion in the past year.
American Express has stood out in an industry dominated by a few credit card companies. With a robust brand built on customer service and a membership model, the company’s total card fees in the last quarter approached $2.2 billion, an 18% increase year over year. This provides American Express with continuous income, reinvested in benefits to retain and attract new card members.
Another attractive aspect of the business is that the average spending of American Express card members exceeds that of other card brands. Despite recent soft consumer spending, the total transaction volume (billing business) grew by 6% in the past year.
Even with a single-digit growth rate in the billing business, American Express is expected to achieve remarkable profit growth of 25% in 2024. This is reflective of strong credit card fees, low delinquency rates, and steady growth of new card members.
The stock may not be cheap, trading at 20 times the expected earnings for 2025, higher than its 10-year average price-to-earnings ratio of 18 times. However, analysts project long-term earnings to grow at a rate of about 14% annually.
Furthermore, in his public letter at the end of November, Buffett detailed his asset allocation plan, intending to donate 99% of the massive assets accumulated in Berkshire Hathaway. He also explained his decision not to leave his wealth to his children, stating he has no intention of establishing a dynasty but is focused on making a broader impact with his wealth, “I do not intend to build a dynasty, or pursue plans outside of my children’s sphere.”
He added, “During the period from 2006 to 2024, I had the opportunity to observe each child’s behavior, and they also learned how to drive large-scale charitable work, and gained a better understanding of human behavior.” “They enjoy financial security but are not fixated on pursuing wealth.”
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