Three stocks Warren Buffett won’t be selling anytime soon

Berkshire Hathaway(NYSE:BRK.A) (NYSE:BRK.B)’s annual reports are always filled with the insight and wit of Warren Buffett, one of the world’s greatest investors. The 2023 Annual Report released last Saturday is no exception and is well worth a read.

One part of the report that stood out discussed three stocks in particular that Buffett said would “make us feel comfortable.” Two are held for a long time, Coca Cola (NYSE: KO) and american express The third company, (NYSE:AXP), is a relative newcomer to Berkshire. Occidental Petroleum (NYSE:Oxy).

Coca-Cola and American Express: Old Reliability

Buffett and Berkshire Hathaway have held Coca-Cola and American Express longer than any other investment in their current portfolio. The company has held Coca-Cola since 1988 and American Express since 1993, holding the second-oldest status.

These are also two of Buffett’s top four positions. American Express is the third-largest holding in the company’s $370 billion stock portfolio, accounting for about 8.9% of the total portfolio. Coca-Cola is the fourth largest among the 50 stocks in Berkshire Hathaway’s portfolio, accounting for about 6.5% as of December 31.

“American Express began operations in 1850, and Coca-Cola was launched in Atlanta drugstores in 1886. (Berkshire is not very welcoming to newcomers),” Buffett wrote in his annual letter. “Both companies have attempted to expand into unrelated areas over the years, with little success in these attempts. In the past – but certainly not now – both were mismanaged. However, each achieved great success in its basic business and was reorganized here and there as required conditions dictated. And crucially, their products ‘traveled’. Both Coke and AMEX have become globally recognizable names, as have their core products, where liquid consumption and the need for unquestionable financial trust are timeless staples of our world.”

Buffett said both companies compensated for Berkshire’s “inaction” last year by increasing earnings and dividends. American Express returned 29% in 2023. Since Buffett added it in January 1993, the stock has returned about 12% on an annualized basis and about 14% including dividends as of February 27. Meanwhile, the S&P 500’s annual return is about 10.3% including subsequent dividends.

Coca-Cola is down 4% in 2023, but its average annual return since 1988 is 9.2%, or about 12% including dividends, while the S&P 500’s total annual return is 10.3% since then. So both have beaten their benchmarks since Buffett added them to Berkshire’s portfolio.

“Lessons from Coke and AMEX? If you find a really great business, stick with it. “Patience pays off, and one great venture can offset the many mediocre decisions that are inevitable,” Buffett concluded.

Occidental: A relative newcomer.

The third stock that Buffett says he is “comfortable” with is Occidental Petroleum. Unlike the other two, this company has only been in the Berkshire Hathaway portfolio since 2019, but Buffett has been aggressively increasing his stake in the company. Berkshire purchased an additional 5.2 million shares of the stock in December and an additional 4.3 million shares in early February, increasing its stake in the company to more than 28%.

Occidental is currently the sixth-largest holding in Berkshire’s portfolio, accounting for 4.1% of total assets.

Buffett stated in his annual letter that he has no interest in acquiring or managing the company because he fully supports its current ownership. But he definitely likes investing in it.

“We particularly like America’s vast oil and gas reserves and leadership in carbon capture initiatives, although the economic feasibility of these technologies has not yet been proven. Both of these activities are very much in the best interest of our country,” Buffett wrote.

The Berkshire chairman added that shale extraction, or the ‘shale economy’, became feasible in 2011, effectively ending the country’s energy dependence. The United States currently produces 13 million barrels of oil equivalent per day (BOEPD), up from 5 million barrels in 2007. Additionally, Occidental’s annual oil production is close to that of the United States’ Strategic Petroleum Reserve (SPR).

“Under Vicki Hollub’s leadership, Occidental is doing the right thing for both the country and its owners. No one knows what oil prices will do next month, year, or 10 years. But Vicki knows how to separate rock from oil, a rare talent that will be invaluable to shareholders and the country,” Buffet wrote.

Buffett described these stocks as holdings he expects to “hold on indefinitely,” so don’t expect them to sell off any time soon.