Hi, I’m Susan Dziubinski with Morningstar. Berkshire Hathaway recently published its 2023 annual report and letter to shareholders. In it, Berkshire chairman Warren Buffett identified a few publicly traded stocks that he expects Berkshire to own “indefinitely.”
What makes these stocks so special? Buffett says these companies make him comfortable because they are hugely successful in their base businesses. Plus, the products and services that these companies provide “travel,” meaning that they’ve become worldwide brands and essentials of the world we live in.
Today we’re looking at three of the stocks that Buffett expects Berkshire to own indefinitely. None of these forever stocks is a screaming bargain according to our metrics, but all three are great candidates for a watchlist.
3 Warren Buffett Stocks to Own Forever
• Coca-Cola
• American Express
• Occidental Petroleum
The first forever stock in Berkshire’s portfolio is Coca-Cola. Berkshire owns about 9% of Coke’s outstanding shares. Coke is a classic Warren Buffett business. The world’s best-known beverage company has built a wide economic moat around its business with its storied brands, a loyal following, and significant cost advantages. The company dominates the carbonated soft drink market and as a result, generates predictable cash flows. And Coke’s management team has done an exceptional job of maintaining a healthy balance sheet that can withstand economic uncertainties and making astute investments to benefit top-line growth. The company has also consistently returned cash to shareholders via share repurchases and dividends. We think Coke’s stock is worth $60.
The second stock Berkshire plans to hold indefinitely is American Express. Berkshire owns more than 20% of the company’s stock. American Express has carved out a wide economic moat with its closed-loop network. The firm issues credit cards, operates the payment network, and maintains a direct relationship with the merchant, which allows it to capture the full economic profit from a single credit card payment. And as a result, the company is less reliant on net interest income than its competitors. The company maintains an enviable position with small and midsize businesses in America, which solidifies its strong financial position. We assign American Express stock a fair value estimate of $190.
The final forever stock in Berkshire Hathaway’s publicly traded portfolio is Occidental Petroleum. Berkshire owns more than 28% of the company’s outstanding shares. Oxy is one of the world’s largest independent oil and gas producers. Buffett thinks the company’s leadership position in carbon-capture initiatives could bear fruit, too. Morningstar doesn’t think Oxy has an economic moat, due largely to the expensive acquisition of Anadarko Petroleum in 2019. That purchase put a dent in Oxy’s profitability. But management has been deleveraging the company’s balance sheet, and we think the books look better than they have in several years. We expect Oxy’s financial health to continue to improve. We think the stock is worth $56 per share.
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