3 Warren Buffett-Approved Stocks for Your 2024 Portfolio

If you’re an investor seeking top-notch stocks to bolster your portfolio, it’s often wise to take a page out of the playbook of legendary investor Warren Buffett. Known as one of the most successful investors of all time, Buffett’s portfolio is a goldmine of long-term, value-oriented picks. Many investors aspire to mimic his investment strategy by closely monitoring his favorite stocks, both long-term holdings and recent acquisitions.

In this article, we will delve into three high-quality stocks that have received Warren Buffett’s stamp of approval, making them excellent candidates for your investment portfolio in 2024 and beyond. These companies offer a compelling mix of growth potential, consistent dividends, and diversification to withstand the market’s twists and turns. Let’s explore these Buffett-approved stocks and uncover why they are worth considering for your investment strategy.

1. Apple Inc. (AAPL) – The Tech Titan

Apple’s Dominance in the Tech World

With a staggering market capitalization exceeding $3 trillion and an enterprise value of $382 billion, Apple Inc. stands as an indisputable titan in the technology sector. Renowned for its revolutionary products such as the iPhone, iPad, Mac, Apple Watch, and a suite of subscription services like Apple Music and iCloud, Apple boasts not only a loyal but a continuously expanding customer base.

As of the close of 2023, Apple boasted over 1.65 billion active devices and more than 700 million paid subscribers, solidifying its position as a tech giant. Apple’s stock is a quintessential example of a Warren Buffett-approved investment, seamlessly blending growth potential, dividends, and high-quality consumer goods. In fact, it is the single largest equity holding within Buffett’s conglomerate, accounting for approximately 48% of its equity portfolio.

Impressive Stock Performance

Apple’s stock surged by an impressive 48% in 2023, surpassing the broader Nasdaq Composite (NASX) performance and comfortably outpacing the S&P 500 Index’s (SPX) annual returns.

Despite concerns about declining revenue growth, Apple consistently outperforms earnings expectations while providing regular dividends to its shareholders. In the fiscal fourth quarter of 2023, the company reported record revenue of $89.5 billion and earnings of $1.46 per share. This marked a remarkable year-over-year increase of 29% and 38%, respectively. Additionally, Apple raised its quarterly dividend by 7% to $0.24 per share and announced a new $90 billion share repurchase program. With a modest dividend payout ratio of 15%, Apple is well-positioned to maintain and increase its dividends in the future, currently yielding 0.50%.

Return on EquityReturn on Equity (ROE) is a financial metric that stands as a beacon illuminating a company's performance and efficiency. It transcends the realm of numbers, offering a profound gl... More

AAPL has an impressive Return On AssetsIn the complex landscape of finance and corporate management, efficiency stands as a beacon guiding decisions and strategies. Businesses and investors alike seek to unravel the int... More value of 27.51%, surpassing all companies in the industry. AAPL’s Return On Equity of 156.08% is also exceptional, outperforming all industry peers. AAPL’s Return On Invested CapitalReturn on Invested Capital (ROIC) is a vital financial metric that assesses a company's efficiency in allocating capital to profitable investments. It provides valuable insights in... More of 45.31% is better than 96.97% of its industry peers. Over the past 3 years, AAPL’s Average Return On Invested Capital has been significantly higher than the industry average of 14.91%. The 3-year average ROIC for AAPL is 44.49%, slightly lower than the current ROIC of 45.31%, indicating increased profitability in the last year.

Future Growth Prospects

Looking ahead, analysts anticipate Apple’s earnings per shareEarnings per share (EPS) is a fundamental financial metric that provides valuable insights into a company's profitability. This widely used indicator helps investors and analysts g... More to grow by 7% in fiscal 2024 and 8% in FY 2025, reaching $6.56 and $7.10, respectively. Revenue is also expected to experience healthy growth, with projections of 3.57% growth in fiscal 2024 and 5.79% growth in FY 2025, amounting to $419.96 billion.

AAPL is projected to experience significant growth in earnings per share, with an estimated annual increase of 10.41% over the next 5 years. Additionally, a modest growth in revenue is expected, with an estimated annual increase of 7.20% over the same time period.

Analysts have set a mean target price of $204.79 for Apple, indicating a potential 6.3% upside from its current levels. With a consensus “Moderate Buy” rating from 28 analysts, including 17 who rate AAPL as a “Strong Buy,” 3 as a “Moderate Buy,” and 8 as a “Hold,” the consensus is optimistic about Apple’s future prospects.

2. The Coca-Cola Company (KO) – A Beverage and Investment Icon

Coca-Cola’s Global Presence and Enduring Appeal

The Coca-Cola Company, with its iconic branding spanning across more than 200 countries, is not only one of Warren Buffett’s preferred beverages but also one of his favored stocks. Producing a diverse range of beverages, from fizzy sodas to water, juice, coffee, and sports drinks, this consumer goods powerhouse boasts a portfolio of beloved brands such as Coca-Cola, Sprite, Fanta, Dasani, and Powerade.

With a market capitalization of approximately $254 billion and an enterprise value close to $281 billion, Coca-Cola embodies the quintessential Buffett stock. It marries stable income with sustainable growth, offering nearly unparalleled brand recognition. Coca-Cola represents approximately 6.4% of Berkshire Hathaway’s equity portfolio, ranking as the fourth-largest holding.

Steady Dividends and Resilience

Although Coca-Cola experienced a lackluster stock market performance in 2023, ending the year with a 7.4% decline, it has remained a dependable source of dividends. The company has raised its dividend for an impressive 59 consecutive years, earning it a coveted spot among the S&P 500’s longest-running Dividend Aristocrats and the prestigious title of Dividend King. Presently, Coca-Cola pays a quarterly dividend of $0.46 per share, yielding 3.13%. With a conservative 68% dividend payout ratio, the company retains ample profits for further growth investments.

Return on Equity

KO has a Return On Assets of 11.04%, placing it in the top tier of the industry, outperforming 87.88% of its peers. Its Return On Equity is 40.92%, also ranking it among the industry leaders, outperforming 93.94% of companies. The Return On Invested Capital for KO stands at 13.58%, placing it in the better half of the industry and surpassing 69.70% of its competitors. Over the past 3 years, KO has maintained an Average Return On Invested Capital in line with the industry average of 12.13%. The latest Return On Invested Capital of 13.58% for KO exceeds the 3-year average of 11.67%, indicating an increase in profitability.

Coca-Cola’s Resilience in Shifting Markets

Coca-Cola has successfully maintained revenue and earnings growth despite changing consumer preferences. In Q3 2023, the company reported revenue of $11.95 billion, reflecting a substantial 16% year-over-year increase, along with earnings per share of $0.74, a 7% improvement over the previous year’s quarter. Both figures exceeded Wall Street’s expectations. Coca-Cola also revised its full-year guidance, anticipating organic revenue growth of 12-14% and comparable EPS growth of 13-15%.

Future Earnings Growth

Analysts predict 8% EPS growth for the current fiscal year, followed by a 4.5% increase in 2024, reaching $2.80 per share.

The earnings per share is projected to grow by an average of 7.89% over the next 5 years. Based on estimates, KO will experience a slight increase in revenue, growing by an average of 4.79% annually.

Analysts maintain an average target price of $65.33 for Coca-Cola, indicating a potential 10.8% upside from its current levels. Out of the 15 analysts covering the stock, 11 have rated it as a “Strong Buy,” 1 as a “Moderate Buy,” and 3 as a “Hold,” resulting in a consensus “Strong Buy” rating.

3. Berkshire Hathaway Inc. (BRK.A) – The Buffett Conglomerate

Berkshire Hathaway’s Diverse Investment Ecosystem

Berkshire Hathaway Inc., led by Chairman and CEO Warren Buffett, is a colossal holding company offering investors exposure to the legendary investor’s comprehensive equity portfolio, alongside ownership of a myriad of subsidiaries such as GEICO, BNSF Railway, Dairy Queen, Duracell, and many more. With a market capitalization of $774.5 billion and an enterprise value approximating $861.4 billion, Berkshire Hathaway holds a commanding presence in the investment landscape.

Steady Growth and Share Buybacks

In 2023, Berkshire Hathaway’s B shares recorded a respectable gain of about 15.5%, although falling slightly short of the broader market’s performance.

Notably, Berkshire Hathaway refrains from distributing dividends, opting instead to reinvest earnings into its businesses and stocks. Warren Buffett is a fervent advocate of share buybacks when deemed opportune. In Q3 2023, Berkshire reported earnings of $4.96 per share, surpassing analysts’ predictions and marking a substantial 41% year-over-year increase. The company also executed $1.1 billion in share buybacks during the quarter, amounting to a total of $7 billion for the year.

Anticipated Earnings Growth

Looking ahead, Berkshire Hathaway is expected to sustain its growth trajectory. Following an anticipated 17% earnings per share increase in 2023, Wall Street foresees 11% EPS growth in 2024, reaching $18.17.

BRK.A is projected to demonstrate robust earnings per share growth over the next 5 years, with an average annual increase of 11.47%. Additionally, it is expected to experience significant revenue growth, with a yearly increase of 13.14% during the same period.

Analysts have set an average target price of $414 for Berkshire’s B shares, signifying a potential approximately 16% surge from its current levels. Among the three analysts tracking the shares, three rate them as a “Moderate Buy,” two as a “Strong Buy,” and one as a “Hold,” reflecting a positive consensus sentiment.

Return on Equity

BRK.A has an outstanding Return On Assets (7.53%), surpassing 85.29% of industry companies. Its Return On Equity (14.62%) also places it in the upper half, outperforming 73.53% of competitors. Additionally, BRK.A’s Return On Invested Capital (3.97%) is above average, exceeding 71.57% of industry peers. However, BRK.A’s Average Return On Invested Capital over the past 3 years (3.32%) falls below the industry average of 7.22%. Nevertheless, the latest Return On Invested Capital (3.97%) surpasses the 3-year average, indicating increased profitability.

Bottom-line: Incorporating Warren Buffett’s investment philosophy into your portfolio can be a prudent strategy for long-term wealth accumulation. The three Buffett-approved stocks discussed – Apple Inc. (AAPL), The Coca-Cola Company (KO), and Berkshire Hathaway Inc. (BRK.B) – each offer unique advantages, from robust growth potential to reliable dividends and brand recognition. As you plan your investment strategy for 2024 and beyond, consider adding these high-quality stocks to your portfolio for a diversified and potentially rewarding investment journey.