3 Warren Buffett Holdings to Buy on the Dip

Warren Buffett, also known as the ‘Oracle of Omaha,’ is deemed one of the most successful institutional investors of the modern era. Buffett runs Berkshire Hathaway Inc. (BRK.A), which owns more than 60 companies, and he has a net worth of $114 billion as of today.

BRK.A posted operating earnings of $6.5 billion, indicating an 18% year-over-year increase. The company’s shares gained 30% in 2021. Additionally, the company has provided 20% average annual returns since 1965, which is almost double the annual returns of the S&P 500, which can be attributed to Buffett’s sound investment decisions.

As of September 30, Buffet holds 887.1 million shares of Apple Inc. (AAPL), 400 million shares of The Coca-Cola Company (KO), and 151.6 million shares of American Express Company (AXP). 

Apple Inc. (AAPL)

AAPL needs no introduction. The maker of iPhones, iPads, and other products is the first to attain a $2 trillion market capitalization.

On November 17, AAPL announced Self Service Repair, allowing customers to repair AAPL’s iPhone® 12 and iPhone 13 lineups. The service is also expected to be expanded to include the Mac® computers featuring M1 chips. The new Apple Self Service Repair Online Store would offer more than 200 individual parts and tools enabling common repairs, which should add to the company’s revenue stream.

On November 10, AAPL unveiled Apple Business Essentials, a service that brings together the company’s offerings of device management, 24/7 Apple Support, and iCloud® storage, into a subscription plan for small businesses with not more than 500 employees. The new subscription service is expected to be beneficial for the company.

AAPL’s total net sales increased 28.8% year-over-year to $83.36 billion in the fiscal fourth quarter ended September 25. Operating income rose 61% from the prior-year quarter to $23.79 billion. Net income and EPS improved 62.2% and 69.9% from the prior-year period to $20.55 billion and $1.24, respectively.

Analysts expect AAPL’s EPS to improve 2.5% year-over-year to $5.75 for the fiscal year 2022. Likewise, Street expects revenue to increase 4.5% from the prior year to $382.26 billion for the same period. Moreover, AAPL has an impressive surprise earnings history as it has topped consensus EPS estimates in three out of the trailing four quarters.

AAPL’s shares have gained 30% over the past year but declined 2.9% over the past month to close yesterday’s trading session at $166.23. AAPL is currently trading 9.1% below its 52-week high of $182.94.

The Coca-Cola Company (KO)

This global non-alcoholic beverage manufacturer sells its beverages under popular brand names such as Coca-Cola, Sprite, Fanta, Dasani, Minute Maid, and POWERADE.

On January 6, beverage alcohol company Constellation Brands, Inc. (STZ) announced that it had entered into a brand authorization agreement with KO. The agreement is expected to bring KO’s FRESCA® brand into beverage alcohol through the launch of FRESCA™ Mixed, a spirit-based cocktail. KO might benefit from this partnership by leveraging STZ’s consumer-focused approach.

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 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 the fiscal third quarter ended October 1, non-GAAP net operating revenues increased 16.1% year-over-year to $10.04 billion, while non-GAAP operating income rose 14.6% from the prior-year quarter to $3.01 billion. Non-GAAP net income and non-GAAP net income per share stood at $2.82 billion and $0.65, both registering an 18.2% year-over-year increase, respectively.

The consensus EPS estimate of $2.29 for fiscal 2021 indicates a 17.4% year-over-year increase. Likewise, the consensus revenue estimate of $38.13 billion for the same period reflects an improvement of 15.5% from the prior year. In addition, KO has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.

The stock has gained 25.8% over the past year and 0.1% over the past five days to close yesterday’s trading session at $61.00. It is currently trading 0.7% below its 52-week high of $61.45.

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 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 December 8, AXP declared a quarterly dividend of $0.43 per common share payable on February 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 the fiscal third quarter ended September 30. Net income and EPS came in at $1.83 billion and $2.27, registering an improvement of 70.2% and 74.6% from the prior-year quarter, respectively.

Street EPS estimate for the fiscal year 2021 of $9.68 indicates a rise of 156.8% from the same period last year, while Street revenue estimate of $41.76 billion for the same year reflects a 15.7% year-over-year increase. Additionally, AXP has beaten consensus EPS estimates in each of the trailing four quarters.

Over the past year, AXP’s shares have gained 27.3% to close yesterday’s trading session at $161.39. It has declined 6.9% over the past five days. The stock is currently trading 14.6% below its 52-week high of $189.03.

AAPL shares were trading at $168.89 per share on Thursday afternoon, up $2.66 (+1.60%). Year-to-date, AAPL has declined -4.89%, versus a -3.78% rise in the benchmark S&P 500 index during the same period.

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.

More...