If you want your investment portfolio to outperform the way Warren Buffett’s has, it’s important to hold stocks for long periods the way he does. When asked what an ideal holding period is for the stocks he adds to Berkshire Hathaway‘s (NYSE: BRK.A)(NYSE: BRK.B) equity portfolio, the Oracle of Omaha confidently says “forever” to anyone who will listen.
No matter how long you hold a stock, the price you pay factors into the strength of your return. If you want to invest like Buffett, buying stocks at opportune times is an important part of the strategy.
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Now could be a great time to scoop up a pair of Buffett stocks. At recent prices, $24.6 billion of Berkshire’s equity portfolio is invested in two companies that Wall Street has an eye on. Recently updated price targets from a couple of analysts at Citi suggest these stocks can climb 37% and 14% over the next 12 months.
1. Amazon
Buffett trimmed Berkshire’s Amazon(NASDAQ: AMZN) stake by about half a million shares in the third quarter and retained an even 10 million. Ronald Josey, a sell-side analyst at Citi, probably thinks Buffett should have held on to the entire position.
Amazon shares are up about 83% this year, but Josey thinks the rally could run higher still. He recently raised his price target on Amazon to $210, implying a 37% gain over the next 12 months.
Josey is encouraged by Amazon’s dominant position in America’s e-commerce industry. Its third-party retailers are locked into their relationship with Amazon, as evidenced by soaring ad sales. In addition to its standard take rate, Amazon was able to squeeze an extra $12.1 billion worth of ad payments from third-party merchants in the third quarter. That was 26% more than the previous year period, and this isn’t the company’s only big growth driver right now.
Amazon Web Services (AWS) is America’s largest provider of cloud services, and growth has been resilient this year despite a challenging macroeconomic environment. Third-quarter AWS revenue rose 12% year over year to $23 billion, and this segment has lots of room to run. The global market for cloud services reached $484 billion in 2022, and it’s expected to climb by 14.1% annually through 2030.
2. Coca-Cola
It didn’t start this way, but at more than $23 billion, Coca-Cola(NYSE: KO) is Berkshire Hathaway’s fourth-largest equity holding right now. Coca-Cola shares have declined about 8% in 2023, but Citi analyst Filippo Falorni expects a rebound in 2024. He recently raised his price target on the stock to $67 per share, which implies a 14% gain over the next 12 months.
Steadily increasing dividend payments are the main attraction for this stock. In February, Coca-Cola raised its payout for the 61st year in a row.
With exactly 400 million shares in its portfolio, Berkshire is in line to receive more than $736 million in dividends from Coca-Cola in 2024, assuming it maintains its long-running streak.
Fear that increasingly popular weight management drugs such as Mounjaro could hammer sales of sugary sodas has Coca-Cola’s stock price under pressure. The fear seems overblown. North American case volume didn’t rise in the third quarter, but it didn’t fall either.
Time to buy?
Amazon offers a chance for big gains on the back of some exceptional businesses. Amazon Web Services is the world’s largest provider of cloud services, and its e-commerce operation has logistical capabilities that its competitors can only dream of.
While Amazon has plenty of avenues for growth, there’s a lot of success already baked into its stock price. It’s been trading at a nosebleed-inducing multiple of 94 times trailing free cash flow. If earnings don’t rise sharply over the next few years, the stock could tank. If you don’t have a high tolerance for risk, it’s probably best to watch from a safe distance.
With some of the most recognized brands on the planet, Coca-Cola has all kinds of pricing power that allows it to overcome a long-running trend toward lower consumption of sugary sodas. If we ignore the negative effects of a stronger dollar, third-quarter revenue rose 11% year over year.
At recent prices, Coca-Cola shares offer a 3.1% yield and most likely a lot more by the time you’re ready to retire. For most investors, adding some shares to a diversified portfolio in 2024 and holding them for the long run isn’t a bad idea.
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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. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Cory Renauer has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Berkshire Hathaway. The Motley Fool recommends the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool has a disclosure policy.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
