These Ridiculously Cheap Warren Buffett Stocks Could Help Make You Richer

Warren Buffett’s holding company, Berkshire Hathaway, owns a mix of about 45 stocks at any given time. It’s diversified, but leans heavily toward bank stocks and value stocks, with a little bit of growth and technology stocks. And Buffett loves dividends.

Your individual goals may look different than those of Berkshire Hathaway, which has specific goals to achieve and strategies to grow billions of dollars for its clients. Most individuals achieve good results with a fully diversified portfolio based on size, industry, etc.

One of the distinguishing features of most Buffett stocks, and one that individual investors should also consider, is their valuation. If a stock’s valuation is already too high, the chances of it rising sharply are reduced. The premise of finding undervalued stocks is that the price rises in line with the actual value of the stock.

Buffett’s longest-held stock, which he said he would never sell, looks pretty cheap right now. Here’s how: Coca Cola (watt hours 0.34%) Stocks can help make you rich.

Why does Buffett like Coca-Cola stock?

Buffett frequently mentions Coca-Cola in interviews, shareholder letters, and annual meetings. He likes Coca-Cola because he sees it as an important player in American history and a driver of the economy. This provides a future that inspires confidence.

Coca-Cola is the world’s largest beverage company, with 12-month sales of $45 billion. The company has suffered significantly during the pandemic as people have stayed home and has been forced to make significant changes. But it emerged from the pandemic a leaner, more efficient company with a new structure and about 200 brands. This is half as much as before.

The company has raised prices to combat the impact of inflation, and sales continue to grow, with sales up 8% in the third quarter of this year compared to last year. Earnings per share (EPS) increased 9% to $0.71, and core operating profit margin also slightly expanded from 29.5% to 29.7%.

It wasn’t just the price increase. Sales are up 2% over last year, which speaks to the strength of the Coca-Cola brand and why the company’s long-term story is so compelling.

All About Dividends

Berkshire Hathaway completed its purchase of Coca-Cola stock for a total of $1.3 billion in 1994 and has not sold any stock since. The total dividend payout on Coca-Cola stock in 1994 was $74 million, expanded to $740 million in 2022. This is a type of passive income stream that is very attractive to all investors, especially retirees. This adds enormous value to the stock in addition to increasing the price.

Coca-Cola is a dividend king and has raised its dividend every year for the past 61 years. At current prices, it yields 3.1%. Management has shown complete commitment to the dividend even in adverse circumstances, making it one of the most reliable dividends in the stock market.

Coca-Cola stock price is near three-year low

Investors became more enthusiastic about Coca-Cola stock as it was included as a safe stock last year, and Coca-Cola stock rose 7.5% in 2022. S&P 500 It fell 19.5%. This trend has reversed as investors have again embraced growth stocks. Coca-Cola shares are down 8% this year while the S&P 500 is up nearly 19%.

At current prices, Coca-Cola stock trades for a price-to-earnings ratio of 23. This is close to the cheapest valuation in three years.

KO PE Ratio data from YCharts.

This is actually close to the lowest it has been in 10 years, excluding the 2020 crash. Investors are moving money back into growth stocks, which represents opportunity for investors looking for bargains.

To see how this can work in practice, Coca-Cola has grown its EPS by 40% over the last three years. The average price-to-earnings ratio during that period was 27. Using the same EPS growth, the stock would be worth $94 in three years, or 61% above the current price. And that doesn’t include dividends.

Expect to see much higher profits over the long term. Coca-Cola stock can be part of a diversified portfolio that can help you get rich over time, and there’s a price to buy.