Key Points
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New Berkshire Hathaway CEO Greg Abel got right to work in Q1, with a flurry of portfolio moves.
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Despite exiting several stocks and buying others, some classic Buffett stocks remained intact.
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Their strong business fundamentals make them high-conviction buys for long-term investors today.
- 10 stocks we like better than Apple ›
Berkshire Hathaway recently revealed its latest portfolio trades, the first with new CEO Greg Abel in charge. It didn’t take long for a major shake-up. Berkshire Hathaway had its most active trading quarter in recent memory, entirely selling out of several companies and buying into others.
Given that Buffett still serves as chairman at Berkshire Hathaway, the spirit of his investing philosophy remains. That said, it’s clear that management did a thorough review of Berkshire’s holdings, and what remains are likely high-conviction holdings for the new leadership group.
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Here are five blue chip stocks that remain in the portfolio, and why investors might buy them hand over fist in May.
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1. Apple
Consumer electronics giant Apple (NASDAQ: AAPL) remains Berkshire Hathaway’s top holding. Apple’s reluctance to throw billions of dollars at artificial intelligence (AI) now looks like a prudent decision in hindsight, as the company continues to pump out cash flow and profits while partnering with Google on the next generation of Siri, the iOS voice assistant. Apple has also leaned into its hardware strengths, launching the MacBook Neo to compete at the entry level of the PC market.
Apple is a behemoth at this point, but still has enough growth and monetization levers it can pull that it warrants buying and holding the stock for the foreseeable future. If Apple does eventually take a bold swing in the AI arena, the upside potential would be tremendous given the company’s vast global user base of more than 2.5 billion active iOS devices.
2. Moody’s
The arrival of AI has disrupted companies in various industries throughout the economy. In the financial sector, Moody’s (NYSE: MCO) has been among the names that have slipped. Fears have arisen that AI will eventually analyze risk well enough to replace credit ratings. However, that seems unlikely, at least for now, since Moody’s ratings are an industry standard, built with proprietary data.
The uncertainty has pressured Moody’s stock. Shares have fallen about 35% from their high and now trade at 31 times earnings, their lowest valuation since early 2023. It’s a very reasonable price tag for a stock that analysts believe will see underlying earnings grow by 11% annually over the next three to five years. This AI-fueled decline may turn out to be a classic buy-the-dip moment in hindsight.
3. Alphabet
Tech and AI conglomerate Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) is one of the few stocks that Berkshire Hathaway bought in the first quarter, raising its position to 6.8% of its portfolio. Alphabet has become a multifaceted AI stock due to its various AI-infused businesses, including Search, Gemini, Waymo, and its Tensor Processing Unit (TPU) chips for AI cloud workloads.
Financially, Alphabet is humming. The company continues to show companywide strength, and analysts now see Alphabet growing earnings by more than 16% annually over the next three to five years. That’s plenty of growth to justify buying shares at a forward P/E ratio of 27, especially if you’re holding the stock while the business catches up with the share price appreciation.
4. American Express
One of Buffett’s longest-standing favorites is American Express (NYSE: AXP). The iconic lender and payment processor has a fully contained financial ecosystem. It issues cards, processes payments, and lends to card users, giving it full control over its business and its card users. It can offer charge cards and other financial products that competitors may struggle to replicate. It’s partially why American Express has established itself as a premium brand for high spenders.
Debt is central to the economy. U.S. households have more than $1.25 trillion in credit card debt. American Express has also done well at winning over young consumers, which bodes well for the future. Wall Street analysts estimate that the company’s earnings will grow by nearly 14% annually, making American Express a strong stock to buy and hold.
5. Coca-Cola
One last Buffett classic is Coca-Cola (NYSE: KO). It’s the only one of these five stocks that’s a Dividend King, a company with more than 50 years of consecutive dividend increases, which speaks to the durability of Coca-Cola’s global beverage business. You won’t mistake Coca-Cola for a growth stock, but that dividend, which currently yields 2.6%, adds up over time as those increases push the payout ever higher.
The company isn’t exactly cheap at almost 25 times earnings. That valuation is a tad high for a company that analysts estimate will grow earnings by 7% to 8% annually over the long term. Still, when it comes to dividend growth stocks such as Coca-Cola, the longer you own the stock, the better, as it gives the dividend more time to compound, especially if you reinvest it.
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American Express is an advertising partner of Motley Fool Money. Justin Pope has positions in Alphabet and Moody’s. The Motley Fool has positions in and recommends Alphabet, American Express, Apple, Berkshire Hathaway, and Moody’s. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
