Warren Buffett shares why he loves Coca-Cola and American Express.

It’s no secret that investment expert Warren Buffett likes things. Coca Cola (watt hours -0.82%) and american express (AXP 0.11%) stock. Although he is generous with his investment advice, he generally does not address specific positions in the market. Berkshire Hathaway portfolio. But he has praised both companies for years.

He emphasized this again in his annual shareholder letter published in late February, giving investors another glimpse into his investment approach.

Not big for newcomers.

Despite operating in completely different industries, Buffett groups stocks of Coca-Cola and American Express together. American Express has been around since 1850, and Coca-Cola has been around since 1886. “Berkshire doesn’t really like newcomers,” Buffett joked.

This is Berkshire Hathaway’s longest-held stock position. They are also the second and third largest positions in the portfolio. apologizeAmerican Express accounts for a huge percentage, with 8.9% of the total and Coca-Cola accounting for 6.6%.

Both of these companies have had incredibly successful core businesses for over 100 years. He admits that although they have each tried new side hustles without success, their main business has thrived and they are, as he puts it, “travelling.”

As their products come into their own around the world, their name has become synonymous with their core business of building strong and resilient brands. And both sell products and services that are always in demand. In fact, he calls it “a timeless staple of our world.”

Last year, Buffett used these two companies to illustrate the value of solid, established companies that pay dividends. Buffett earned more than $1 billion in dividends from them in 2022, and more in 2023 because he didn’t sell any and they both increased their dividends last year. He expects that to continue in 2024, and he has no intention of doing so. You are selling one of the two stocks.

Buffett said Berkshire Hathaway’s share of American Express’s profits in 2023 will be more than the total cost of buying American Express stock.

How’s today?

American Express and Coca-Cola both ended a difficult 2023 on a strong note. American Express revenue increased 11% year-over-year, and earnings per share (EPS) increased 27%. Coca-Cola’s sales increased 6% year-over-year and EPS increased 13%. The CEOs of both companies discussed increasing brand value as a performance factor.

Coca-Cola is the dividend king and raised its dividend for the 62nd consecutive year this month. American Express has been paying dividends since 1989. While the growth hasn’t been as consistent, it’s made up for it with increases over the past decade that are more than twice as large as Coca-Cola’s.

Take this approach and run with it.

Buffett summarizes the lessons he has learned from holding these stocks for decades: “When you find a really great business, stick with it. Patience pays off and one great business can offset a lot of unavoidable mediocre decisions.”

There is so much to learn from those words and Buffett’s wisdom needs no further explanation. Investors can use it to consider whether great businesses they have incorporated or studied have staying power. The key factor, as Buffett has repeated many times, is to focus on the business and not the stock movements.