3 Warren Buffett Stocks That Are Loud Buys Right Now

of Warren Buffett Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) owns one of the most watched stock portfolios in the world. That’s why many investors were rattled recently when Berkshire sold off some of its top stocks — including Apple, Bank of Americaand HP — and increased its cash holdings to record levels.

For some investors, Berkshire’s selloff suggested the market was overheated and ready for a pullback. However, Berkshire fell short of some of the other top positions and actually initiated new positions in other often overlooked stocks. Let’s examine three of these resilient stocks — Coca cola (K.O 0.97%), American Express (AXP 0.81%)and The ultimate beauty (ULTA 2.89%) — and see why it still screams shopping 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 owns 400 million Coca-Cola shares, giving it a 9.3% stake in the beverage maker; that massive position represents 9.2% of his entire portfolio.

In addition to its namesake soda and other carbonated beverages, Coca-Cola sells a wide range of other beverages such as teas, fruit juices, sports drinks, bottled water, coffee, and even alcoholic beverages. This diversification has protected its business through several recessions in recent decades and raised its annual dividend for 62 consecutive years. It pays a decent forward yield of 2.7%, which could turn off more investors as interest rates fall.

Coca-Cola struggled during the pandemic as many restaurants closed temporarily, but it has grown again in the past three years. It has repeatedly raised its prices to counter inflation and expects its organic sales to grow 9% to 10% this year.

From 2023 to 2026, analysts expect reported sales and earnings per share (EPS) to grow at a compound annual growth rate (CAGR) 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 originally invested in financial services giant American Express in 1998. Berkshire now owns 151.6 million shares, giving it an 11% stake, and that position represents 12.7% of its portfolio.

American Express is different from Visa (NYSE:V) and MasterCard (NYSE:MA) because it is a bank, a payment processor and a card issuer. Visa and Mastercard are just payment processors that work with a wide range of banks to issue their own co-branded cards. Therefore, American Express assumes 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’s business model is more complicated and requires more capital, but its strict focus on higher-income customers with healthy credit scores typically insulates it from headwinds. Amex cards are still not as widely accepted abroad as Visa or Mastercard, but the company is gradually expanding into more international markets.

From 2023 to 2026, analysts expect American Express’s revenue and EPS to grow at CAGRs of 9% and 15%, respectively. Its shares still look like a bargain at 17 times forward earnings and pay a forward dividend yield of 1.1%.

3. The last beauty

Ulta Beauty is one of Berkshire’s newest holdings. It bought 690,106 shares of the cosmetics retailer in Q2 2024. That’s equal to 1.5% of Ulta’s shares, but only 0.1% of Berkshire’s entire portfolio.

Ulta went public seven years ago and has grown rapidly by opening independent stores that were not tied to dying malls, attracting shoppers with its in-store salon services, selling a wider range of low-end products up to the top range. than other retailers and big partnerships with new brands like Kylie Jenner, Kylie Cosmetics.

It also aggressively targeted younger shoppers with its social media campaigns and locked them in with a loyalty program that now serves 43.9 million members. It reached additional customers by opening several shop-in-shops in Aimhis supermarkets for the past three years.

Ulta’s stock has recently tumbled amid concerns about its slowing growth, high promotions and rising expenses. For the full year, analysts expect its revenue to remain roughly flat as EPS falls 11%. But from 2023 to 2026, revenue and EPS are both expected to grow at a CAGR of 3% as the macro environment stabilizes.

Those growth rates might seem anemic, but Ulta stock looks historically cheap at 16 times forward earnings — and it launched a $2 billion buyback plan (the equivalent of more than 11% of its market cap) in March. Therefore, Ulta could be a deep value play that could command a much higher valuation if its growth accelerates again.