Warren Buffett's Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) owns one of the world's most closely followed stock portfolios. That's why many investors were recently rattled when Berkshire sold some of its top stocks -- including Apple, Bank of America, and HP -- and boosted its cash holdings to record levels.
To some investors, Berkshire's sales suggested the market was getting overheated and primed for a pullback. However, Berkshire didn't touch some of its other top positions and actually initiated new positions in some other oft-overlooked stocks. Let's examine three of those resilient stocks -- Coca-Cola (NYSE: KO), American Express(NYSE: AXP), and Ulta Beauty(NASDAQ: ULTA) -- and see why they're still screaming buys right now.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
1. Coca-Cola
Coca-Cola has been one of Warren Buffett's top holdings since 1988. Berkshire still holds 400 million shares of Coca-Cola, which gives it a 9.3% stake in the beverage maker; that massive position accounts for 9.2% of its entire portfolio.
In addition to its namesake soda and other carbonated beverages, Coca-Cola sells a wide range of other drinks like teas, fruit juices, sports drinks, bottled water, coffee, and even alcoholic beverages. That diversification shielded its business through multiple recessions over the past several decades, and it's raised its dividend annually for 62 consecutive years. It pays a decent forward yield of 2.7%, which might lock in more investors as interest rates decline.
Coca-Cola struggled during the pandemic as many restaurants temporarily closed down, but it grew again over the past three years. It repeatedly raised its prices to counter inflation, and it expects its organic sales to rise 9% to 10% this year.
From 2023 to 2026, analysts expect its reported sales and earnings per share (EPS) to grow at compound annual growth rates (CAGRs) of 4% and 9%, respectively. Those growth rates are steady, and its stock still looks reasonably valued at 24 times forward earnings.
2. American Express
Buffett initially invested in the financial services giant American Express in 1998. Berkshire now holds 151.6 million shares of the stock, which gives it an 11% stake in the company, and that position accounts for 12.7% of its portfolio.
American Express is different from Visa(NYSE: V) and Mastercard(NYSE: MA) because it's a bank, payment processor, and card issuer. Visa and Mastercard are only payment processors that partner with a wide range of banks to issue their own co-branded cards. Therefore, American Express takes on the debt and earns interest on its own loans, while Visa and Mastercard only generate revenue by charging swipe fees for each transaction.
American Express' business model is more complicated and capital intensive, but its tight focus on higher-income customers with healthy credit scores usually insulates it from macro headwinds. Amex cards still aren't as widely accepted overseas as Visa or Mastercard, but the company is gradually expanding into more international markets.
From 2023 to 2026, analysts expect American Express' revenue and EPS to grow at CAGRs of 9% and 15%, respectively. Its stock still looks like a bargain at 17 times forward earnings, and it pays a forward dividend yield of 1.1%.
3. Ulta Beauty
Ulta Beauty is one Berkshire's newest holdings. It bought 690,106 shares of the cosmetics retailer in the second quarter of 2024. That equals 1.5% of Ulta's shares but only accounts for 0.1% of Berkshire's entire portfolio.
Ulta went public seven years ago, and it grew rapidly by opening stand-alone stores that weren't tethered to dying malls, drawing in shoppers with its in-store salon services, selling a broader range of low-end to high-end products than other retailers, and striking big partnerships with hot new brands like Kylie Jenner's Kylie Cosmetics.
It also aggressively targeted younger shoppers with its social media campaigns, and it locked them in with a sticky loyalty program that now serves 43.9 million members. It reached additional customers by opening more shop-in-shops in Target's superstores over the past three years.
Ulta's stock recently tumbled amid concerns about its slowing comps growth, elevated promotions, and rising expenses. For the full year, analysts expect its revenue to stay nearly flat as its EPS declines 11%. But from 2023 to 2026, they expect its revenue and EPS to both grow at a CAGR of 3% as the macro environment stabilizes.
Those growth rates might seem anemic, but Ulta's stock looks historically cheap at 16 times forward earnings -- and it launched a $2 billion buyback plan (equivalent to over 11% of its market cap) this March. Therefore, Ulta might be a deep value play which could command a much higher valuation if its growth accelerates again.
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American Express is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Leo Sun has positions in Apple and Berkshire Hathaway. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, HP, Mastercard, Target, Ulta Beauty, and Visa. The Motley Fool recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
