When Warren Buffett speaks, investors listen. And when Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) When investors file Form 13F, which details the holding company’s most recent transactions, with the Securities and Exchange Commission (SEC), they begin their analysis.
The most recent 13F had two new positions and some smaller trades. But the bulk of the stock portfolio, now 41 stocks, remained the same. Buffett is a big believer in long-term investing and his favorite holding period is, as is well-known, “forever.”
Amazon (NASDAQ: AMZN) And Coca Cola (NYSE: KO) are two stocks you should definitely buy now, and I’m going to add a new position, Ulta Beauty (NASDAQ: ULTA)add to that list too.
1. Amazon: The Artificial Intelligence (AI) Company
Amazon is one of the few tech stocks Buffett owns. In fact, he only bought it in 2019, after it had already made millionaires. Buffett doesn’t go for glitz and glamour; he prefers stability and value. That approach has helped him beat the market during his decades at the helm of his holding company, even though he avoids high-growth stocks.
Amazon has become the second-largest company in the U.S. by revenue and is reliable for cash and profitability. So even though it’s a tech stock that embraces new trends, it still fits Buffett’s mold. It’s one of the few AI stocks you’ll find in Berkshire Hathaway’s portfolio.
Of course, Amazon is much more than just AI. It has an unrivaled global e-commerce business that accounts for nearly 38% of all U.S. e-commerce. That’s a moat that’s impenetrable to any real challenger in the near term. But it’s taking no chances and is leveraging its position to build even more customer loyalty by speeding up service and offering a wider range of products.
It is also the world leader in cloud computing, and it is bolstering Amazon Web Services (AWS) with a huge suite of high-end AI services. It has a three-tier system to work with each type of customer, and CEO Andy Jassy pointed out that “AWS has made more than twice as many machine learning and generative AI capabilities generally available in the last 18 months than all other major cloud providers combined.”
Amazon is growing rapidly and the company has many growth engines that make it a standout stock.
2. Coca-Cola: The Classic Buffett Stock
Coca-Cola is one of three stocks Buffett has said he would never sell. He loves the brand, the dominance, the dividend, and it’s his longest-held stock. When investors say Buffett’s favorite hold period is forever, he was really saying, “When we own pieces of great companies with great managers, our favorite hold period is forever,” and he was talking about Coca-Cola.
Coca-Cola was already under severe pressure before CEO James Quincey took over in 2017, and Buffett still held on. Having Quincey on board proved a godsend, as Coca-Cola started to get its act together before the pandemic, and it was in good hands to weather the downturns. It’s now long gone, showing resilience in the inflationary environment.
Coca-Cola’s growth opportunities may be more limited than those of a typical growth stock, but it continues to innovate with new beverages and product types. The company has a solid balance sheet and cash on hand, and is able to acquire smaller companies that generate some of its higher growth. Coca-Cola then brings these newer beverages into its unmatched global distribution system, resulting in greater presence, sales, and efficiency. It’s an incredible model that leverages the power of its core brands along with the growth potential of new brands.
The company has successfully weathered the pressures of the current environment and is well positioned to maintain its top position as a leading global beverage company. It is also as reliable as a Dividend King can be for growing passive income.
3. Ulta Beauty: The Surprising Buffett Stock
I’m not sure many investors saw it coming when Berkshire Hathaway’s latest 13F filing included a new position in Ulta Beauty , but it’s a stock that fits well into Buffett’s model. It has a distinctive approach to selling beauty products and has grown to an impressive nearly 1,400 stores, giving it a commanding position among rivals trying to copy it. While it’s still opening new stores, with plans for up to 65 this year, it’s the company’s loyal shoppers who are driving its growth and creating the opportunity for more.
Ulta is certainly feeling inflationary pressure right now, but its business idea is intact. It reported a modest 1.6% increase in comparable sales in its fiscal 2024 first quarter (ended May 4), but what really dragged the stock down were margins and guidance. Operating margin fell to 14.7% from 16.8%, and management cut its full-year guidance for revenue, comparable sales, operating margin and earnings per share (EPS).
It’s easy to see why Buffett picked Ulta right now. It’s down 18% in the past year, and that includes the jump following news of Buffett’s purchase. At its current price, it’s trading at a price-to-earnings (P/E) ratio of 14, which seems undervalued relative to the opportunity. A market leader at a cheap price is a natural fit for Buffett, and Ulta Beauty stock seems like a great buy for any individual investor.
Should You Invest $1,000 in Amazon Now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, and Ulta Beauty. The Motley Fool has a disclosure policy.
3 No-Brainer Warren Buffett Stocks You Can Buy Right Now was originally published by The Motley Fool
