Investing in these two companies allows investors to benefit from both growth and income, one each.
With a net worth of over $140 billion and a track record of sustained success spanning decades, it’s no wonder that some people seek investment guidance from legendary investor Warren Buffett. In fact, his company, Berkshire Hathaway, has become the benchmark for many people’s stock portfolios.
If you’re looking to invest like Buffett and Berkshire Hathaway, you’ll definitely want these two companies to be at the center of your portfolio. Both companies are industry leaders, with one offering high growth opportunities and the other offering reliable above-average dividends.
1. Amazon
Buffett admitted he was hesitant to invest in Amazon (AMZN 0.78%), but then one of his top investment managers made the decision. That’s a good thing considering Amazon’s success since Berkshire Hathaway moved in early 2019.
Amazon’s two main businesses are rightfully so, starting with the e-commerce business that made the company well-known. Last year, Amazon changed the distribution and fulfillment model for its e-commerce business. Amazon decided to use eight regional fulfillment centers instead of a central hub. result? Faster delivery and increased profitability.
Amazon’s North American operating profit (profit from its core business) was just over $10 billion in the first half of this year, compared with $4.1 billion in the same period last year. The international division posted a profit of $1.2 billion, compared with a loss of $2.1 billion in the same period last year.
Add in Amazon Web Services’ (AWS) operating profit of $18.8 billion, and you have a company that has managed to increase its operating profit significantly over the past three years.
AMZN Operating Income (Quarterly) Data by YCharts
AWS is Amazon’s revenue machine and the world’s largest cloud computing platform with a 31% market share. It hasn’t grown as quickly as competitors like Microsoft’s Azure, but that’s not too surprising given AWS’s size.
Still, AWS will be a big driver of Amazon’s growth in the near future. The global cloud computing market size is estimated to grow at a compound annual growth rate of only 21% until 2030. In the most recent quarter, AWS revenue grew 19% year over year. If Amazon can maintain similar growth rates over the next five years or so, it will be in a great position.
Amazon will be a force to be reckoned with for quite some time as it remains strong in industries it currently leads (e-commerce and cloud) and grows in new industries (advertising and healthcare).
2. Coca Cola
Coca-Cola (KO -0.56%) is one of Berkshire Hathaway’s oldest and largest holdings. It’s a staple of the company’s stock portfolio, and likely will remain so for the foreseeable future.
Coca-Cola doesn’t yet have the high-growth opportunities that Amazon has, but there’s one thing that makes it a sure bet. That’s a very reliable above-average dividend. The quarterly dividend is $0.49, and the future yield is approximately 2.8%.
It’s not just the dividend itself that’s attractive. It means knowing that you can expect the stock price to rise every time you own the stock. Coca-Cola is the dividend king with 62 consecutive years of dividend increases, and given Coca-Cola’s financial health, there is no danger that this streak will end anytime soon.
In the second quarter, Coca-Cola generated revenue of $12.4 billion and gross profit of $7.6 billion, up 3% and 7%, respectively, from the same period last year. This increase isn’t spectacular, and it’s not the double- or triple-digit growth rates you’d see in younger growth stocks, but it’s certainly impressive for a company of Coca-Cola’s size and maturity. It’s growth.
KO Revenue (Quarterly) Data by YCharts
Aside from the dividend, one of the main reasons Buffett likes Coca-Cola is its competitive advantage. Two things in particular stand out: our world-class brand and distribution network.
You can count on one hand the number of brands as world-famous as Coca-Cola, and much of that has to do with the vast distribution network that Coca-Cola has successfully developed. By leveraging independent distributors and bottlers, Coca-Cola is able to operate more efficiently and make its products available in some of the world’s most remote markets.
When looking for companies to invest in for the long term (something Buffett preaches), look for solid financials and sustainable competitive advantages, and Coca-Cola has both.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Stefon Walters has a position at Microsoft. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, and Microsoft. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
