Warren Buffett‘s closely followed as a stock picker by the investing community. They’re always eager to read the latest regulatory filings of his investment firm, Berkshire Hathaway, to discover what the ‘Oracle of Omaha’ and his team have been up to. After all, he’s been beating the market since the 1960s.
Given all his long-term successes, should I be investing in the same companies as Buffett? And are his largest positions no-brainer buys for my portfolio?
Should I buy Apple shares?
Currently, the largest position in the Berkshire portfolio is Apple (NASDAQ:AAPL), home to around a third of Buffett’s investment capital. The technology stock’s been a tremendous performer over the years, with shares climbing 275% in the last five years alone. And that’s after the stock market decided to throw a tantrum in 2022.
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Device sales of iPhones and MacBooks make up the lion’s share of Apple’s revenue. Yet it’s the group’s services segment that’s seemingly firing on all cylinders. Across its advertising, payment processing, App Store, and cloud services, sales are growing by double-digits and at a significantly higher profit margin than product sales.
That certainly sounds encouraging as an investment. However, a lot more growth’s needed before this part of the business replaces iPhone sales as the primary source of income. And right now, iPhone demand’s looking pretty weak.
The firm’s new iPhone 16, empowered with cutting-edge artificial intelligence (AI) capabilities just hasn’t been selling as well as previous versions. Analysts are anticipating the next edition to trigger an upgrade supercycle that would more than make up for the current lacklustre performance. Yet, with a price-to-earnings ratio of 34, it seems this growth potential’s already baked into the stock price.
For me, the price tag’s a bit rich at the moment. And it would seem Buffett might agree, given he’s recently sold some of his own shares.
Should I buy Coca-Cola shares?
Another of Buffett’s biggest holdings is Coca-Cola (NYSE:KO). The beverage business hardly needs an introduction, given that its brand is recognised in almost every country around the world, with an estimated 1.9 billion servings sold each day.
Having such a recognisable brand is a powerful competitive advantage. And that’s why, despite countless attempts, the company remains the industry leader. Its share price performance hasn’t been as explosive as Apple’s, climbing only 30% over the last five years. However, when including dividends, this return jumps to over 50%.
Surely its competitive positioning paired with highly resilient product demand makes it a no-brainer buy for income investors? Even more so, considering management’s hiked dividends for 62 years in a row?
Since investing in 1988, Buffett hasn’t sold a single share of this business. Yet he hasn’t been buying any either. The problem that plagues Coca-Cola is a lack of growth avenues. Management’s been branching out with different products, including snacks. Yet with such a dominant market position, the firm’s long-term growth rate has sat at around 5% a year – slightly ahead of inflation.
While that might be perfect for some investors looking to protect their wealth, it doesn’t offer much for those looking to build wealth. Therefore, once again, this ‘no-brainer’ stock might not actually be a sensible investment for my portfolio right now.
