Stock prices rise and fall, but long-term investing in good companies leads to lasting wealth. Warren Buffett has been investing for over 70 years and has generated substantial wealth for Berkshire Hathaway and its shareholders over the decades.
Buffett has done this by taking a value-oriented approach, taking a long-term view, and buying great businesses at prices below their intrinsic value. Here are three top Buffett stocks you can add to your portfolio to create and preserve lasting wealth just like one of the all-time greats.
It doesn’t get much more “lasting” than Coca-Cola (KO 1.88%). People have been buying and drinking the company’s namesake soft drink for 130 years , and it’s unlikely they will stop any time soon. The $256 billion Atlanta-based company has also been paying and increasing its dividend for sixty years now, making it a Dividend King. Shares currently yield just under 3%. Coca-Cola is Buffett’s fifth-largest position, making up about 6.8% of Berkshire’s portfolio, according to filings . This position has served him well over the years and in this year in particular — while the Dow Jones Industrial Average and the S&P 500 are down 18% and 23% year to date, respectively, thanks to its rock-solid and defensive business model, Coca-Cola has managed to tread water and stay flat so far year to date .
While it has a 130-year track record, Coca-Cola keeps managing to reinvent itself and stay fresh with consumers by making acquisitions and rolling out new collaborations like Topo Chico Ranch Water Hard Seltzer and a ready-to-drink Jack Daniels and Coke pre-mixed cocktail this summer.
Coca-Cola is a great fit for Buffett’s portfolio and could be for yours as well because it is a stock for all seasons with a defensive and recession-resistant business model, a product that consumers love and buy on a routine basis, and an attractive and growing dividend payout.
Energy giant Chevron (CVX 1.64%) is another mainstay in Buffett’s portfolio. Buffett likes Chevron so much that Berkshire increased its position in the company by over 300% last quarter, making it the fund’s fourth-largest holding .
The company was founded 143 years ago , and like Coca-Cola, there’s no reason to believe it is going away any time soon. Despite global efforts to reduce fossil fuel use, we are going to need oil for many more years to come in order to meet the world’s growing energy needs. That said, for investors who are worried that oil usage will decrease in the future, keep in mind that Chevron is also working to diversify and has exposure to other emerging energy technologies. For example, Chevron recently announced that it will invest $2.5 billion into renewable hydrogen energy, which could pay off for Chevron if it is successful, as Goldman Sachs predicts this could be a $1 trillion market annually by 2050 .
Chevron pays out an even more impressive dividend than Coca-Cola, with a current yield of just under 4% . While Chevron isn’t yet a Dividend King, it is a Dividend Aristocrat, meaning that it has increased its dividend payout for 25 years or more. In Chevron’s case, it has increased its dividend for 35 years and counting . The surge in oil and gas prices over the past year makes it likely that Chevron can ramp up its returns to shareholders even further going forward. Chevron is also attractively valued, trading at a very modest 10 times next year’s earnings .
Chevron has vastly outperformed the broader market this year with a 26% gain year to date on the back of rising oil prices, but shares are almost 20% off of their 52-week highs, so this could be a decent entry point for investors who want another bite of the apple .
3. American Express
American Express (AXP 3.18%) is another one of Buffett’s largest holdings. The Oracle of Omaha likes American Express so much that Berkshire owns a whopping 20% of the company’s shares outstanding . American Express accounts for almost 8% of Berkshire’s portfolio . American Express actually predates both Coca-Cola and Chevron as a 172-year-old company .
Shares of the $100 billion company are down nearly 30% from their 52-week high and down 24% over the past quarter, and they’re now trading at just 12 times next year’s earnings, making this a Buffet-esque time to buy . While American Express doesn’t offer quite the same yield as Coca-Cola or Chevron, it is a dividend-paying stock and currently yields 1.4% . American Express is not a Dividend Aristocrat because it didn’t raise its payout during 2020 due to the pandemic , which is understandable, but the company has paid a dividend for 33 years, making this a very stable and reliable payout.
American Express is focused on the higher end of the consumer market, which benefits the company because these customers have more spending power and are also less likely to curtail their spending or activity because of an economic downturn. Going forward, American Express is a great way to build lasting wealth because its offerings, like the American Express Platinum cards, are popular with millennials due to perks such as access to exclusive airport lounges and Uber credits .
Be like Buffett and build long-term wealth
Buffett has built and preserved long-term wealth by investing in solid blue-chip companies over the long term at reasonable valuations. You can be like Buffett and build lasting wealth by buying shares of these three companies, which have all been successful businesses for over a century, are all reasonably valued, are all paying dividends, and all continue to pivot toward the future to ensure they remain major players in the American and global economy for decades to come, if not more. All three are among Buffett’s top five holdings, so they have the stamp of approval from the individual widely considered to be the greatest value investor of all time.