Warren Buffett is lauded as one of the most popular and successful investors. He is the chairman and the largest shareholder of the investment group Berkshire Hathaway Inc. (BRK.A), which has delivered 20% compounded annual gains since 1965.
In its fiscal third quarter of this year, Berkshire Hathaway reported $6.47 billion in operating income, which represents an 18% increase year-over-year. The investment group has benefited from the economy’s reopening and a return of demand to pre-pandemic levels. BRK.A, driven by its sound equity investments, has surged 31.1% in price over the past year.
Buffett holds a 9.3% stake in The Coca-Cola Company (KO), a 19.1% stake in the American Express Company (AXP), and a 35.4% stake in DaVita Inc. (DVA). These stocks are fundamentally strong, and we think might be solid bets in the coming month.
The Coca-Cola Company (KO)
This Atlanta, Ga.-based global non-alcoholic beverage manufacturer sells its beverages under popular brand names that include Coca-Cola, Sprite, Fanta, Dasani, Minute Maid, and POWERADE.
On November 8, KO named communication company WPP plc as its Global Marketing Network Partner. The company expects WPP to play a vital role in executing a new marketing model to drive its long-term growth. KO also appointed public relations company Dentsu Inc. as its Complementary Media Partner in selected markets.
On November 1, the company announced that it had acquired full-ownership of sports performance and hydration beverages company BODYARMOR. The acquisition should expand KO’s product portfolio.
For its fiscal third quarter, ended October 1, its non-GAAP net operating revenues increased 16.1% year-over-year to $10.04 billion, while its non-GAAP operating income rose 14.6% from the prior-year quarter to $3.01 billion. Its non-GAAP net income and non-GAAP net income per share stood at $2.82 billion and $0.65, respectively, both registering an 18.2% year-over-year increase.
The $2.29 consensus EPS estimate for the current year (fiscal 2021) indicates a 17.4% year-over-year increase. And the $38.12 billion consensus revenue estimate for the current year reflects a 15.5% improvement from the prior year. Also, KO has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 8.9% in price over the past year and 7.5% year-to-date to close yesterday’s trading session at $58.95.
KO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
KO has an A grade for Quality and a B grade for Stability. In the 36-stock Beverages industry, it is ranked #12. This industry is rated B. Click here to see the additional POWR Ratings for KO (Growth, Value, Momentum, and Sentiment).
American Express Company (AXP)
AXP operates through the three broad segments of Global Consumer Services Group; Global Commercial Services; and Global Merchant and Network Services. The New York City-based company provides charge and credit payment card products and travel-related services internationally.
On December 10, AXP announced that in a partnership with credit services provider Nova Credit, it had expanded credit access to immigrants from several countries. The new digital capability enables people from nine countries to use their credit history to apply for AXP’s personal American Express® Cards. The company expects to extend this service to include more countries in 2022, adding to its revenue stream.
On Dec. 8, AXP declared a $0.43 quarterly dividend per common share, payable on Feb. 10, 2022. This reflects upon the company’s ability to pay back shareholders.
AXP’s total revenues net of interest expense increased 24.9% year-over-year to $10.93 billion in its fiscal third quarter, ended Sept. 30. Its net income and EPS were $1.83 billion and $2.27, respectively, registering a 70.2% and 74.6% improvement from the prior-year quarter, respectively.
The Street’s $9.62 EPS estimate for the current year (fiscal 2021) indicates a 155.2% rise from the same period last year, while the Street’s $41.68 billion revenue estimate for the current year reflects a 15.5% year-over-year increase. In addition, AXP has topped consensus EPS estimates in each of the trailing four quarters.
Over the past year, AXP’s shares have gained 38.7% in price to close yesterday’s trading session at $163.83. It has gained 35.5% year-to-date.
It is no surprise that AXP has an overall B rating, which translates to Buy in our POWR Rating system. The stock has a Sentiment grade of B. It is ranked #13 of the 54 stocks in the Consumer Financial Services industry. To see the additional POWR Ratings for Growth, Value, Momentum, Stability, and Quality for AXP, click here.
DaVita Inc. (DVA)
Denver, Colo.-based DVA operates as a kidney dialysis services provider for patients with chronic kidney failure or end-stage renal disease (ESRD). The company offers outpatient, hospital inpatient, and home-based hemodialysis services and own clinical laboratories.
On December 9, DVA announced that it powers its North American operations with renewable energy exclusively. The achievement of this goal aligns with DVA’s commitment to sustainability. The company also announced that it plans to be 100% renewable-energy-based across its global operations by 2025.
DVA’s total revenues increased 0.5% year-over-year to $2.84 billion in the fiscal third quarter, ended Sept. 30. Its net income rose 63.5% from the prior-year quarter to $260 million, and its per-share value came in at $2.36, up 84.4% from the same period last year.
The $1.84 consensus EPS estimate for the current quarter (ending December 2021) indicates a 10.2% year-over-year increase. And the $2.91 billion consensus revenue estimate for the current quarter reflects a 0.3% improvement from the prior-year quarter. Furthermore, DVA has beaten consensus EPS estimates in three of the trailing four quarters.
DVA’s stock has gained 17% in price over the past month and 1.8% over the past five days to close yesterday’s trading session at $113.43.
DVA has an overall B rating, which translates to Buy in our POWR Rating system. The stock has a Value and Quality grade of B. In the 88-stock Medical – Services industry, DVA is ranked #14. Click here to see the additional POWR Ratings for DVA’s Growth, Momentum, Stability, and Sentiment.
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KO shares were trading at $58.90 per share on Thursday morning, down $0.05 (-0.08%). Year-to-date, KO has gained 10.79%, versus a 29.64% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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