Warren Buffett Top Stocks for 2015: Coca-Cola, IBM and Wal-Mart
At the end of the third quarter, Warren Buffett's company Berkshire Hathaway revealed it had a $17 billion position in Coca-Cola, a $13.4 billion stake in IBM and about $5 billion in Wal-Mart -- all strong indicators Buffett will continue to hold these stocks into 2015 and beyond, reports the Motley Fool.
Berkshire Hathaway acquired 400 million shares of Coca-Cola between 1988 and 1994, representing an ownership stake of slightly over 9 percent of the company. The position cost $1.3 billion, but now it is worth $17 billion. If any shares were sold, a bulk of the gains would go to Uncle Sam.
Another reason Buffett has held on to Coca-Cola: In 2014, Berkshire raked in almost $500 million in dividends.
Although a Gallup poll has found 63 percent of Americans avoid drinking soda-a sharp increase since 41 percent in 2002-Buffett has no intention of selling. In April 2013, he told Coca-Cola's CEO Muhtar Kent at the company's annual meeting, "I'm the kind of guy who likes to bet on sure things. No business has ever failed with happy customers. ... And you're selling happiness. I like wonderful brands. If you take care of a great brand, it's forever."
And Buffett is right. Coca-Cola, which is the second-largest position in the Berkshire Hathaway portfolio, controls 111 brands, 17 of which have an estimated value above $1 billion. Pair massive competitive advantage with dividends, and it is clear why Buffett is holding on to the carbonated soft drink giant.
IBM is the next largest position in the Berkshire Hathaway portfolio. In 2011, Berkshire Hathaway bought 64 million shares of IBM at a cost of $10.9 billion, for a 5.5 percent ownership stake.
The tech giant has struggled since 2011. IBM has repurchased nearly $55 billion of its shares since 2011. In the first nine months of 2014, IBM saw its earnings per share from continuing operations rise 5 percent. The earnings attributable to Berkshire based on its year-end ownership have risen by nearly 30 percent, according to the Motley Fool.
Buffett may reconsider Berkshire's stake in IBM if its business operations begin to disappoint.
IBM is struggling to regain solid ground amidst lay-off rumors. The once soaring stock has plummeted more than 20 percent in the past six months, bottoming out its 52-week low of $150.50 a share -- down from its 52-week high of nearly $200. But despite this Forbes reports IBM is an undervalued long-term investment play.
The most interesting stock that Buffett holds is Wal-Mart, the fifth-largest position of Berkshire Hathaway.
Over the first nine months of 2014, Berkshire bought nearly 10.5 million more shares, which probably cost a bit more than $750 million. Wal-Mart had unimpressive growth prospects until the third quarter, when its same-store sales rose for the first time in seven quarters. Its comparable-store sales saw growth of 0.5 percent.
The retail giant's stock soared in November thanks to a boost in online sales. Also, Wal-Mart's Neighborhood Market stores are performing quite well with comparable-store sales increasing 5.5 percent.
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