Investing in these two companies can give investors a two-for-one growth and income benefit.
With a net worth of over $140 billion and a track record of decades of sustained success, it’s no wonder that people turn to legendary investor Warren Buffett for investment guidance. In fact, his company, Berkshire Hathaway, has become a benchmark stock portfolio for many.
If you’re looking to follow Buffett and Berkshire Hathaway’s lead on investments, the following two companies are no-brainers that can be staples in your portfolio. They’re both industry leaders, with one presenting a high-growth opportunity and one offering a reliable, above-average dividend.
1. Amazon
Buffett has admitted that he was hesitant to invest in Amazon (AMZN 0.78%), but the move was later made by one of his top investment managers. It’s a good thing, too, considering Amazon’s success since Berkshire Hathaway made the move in early 2019.
Amazon’s two main businesses make it a no-brainer, starting with the e-commerce business that made it a household name. Last year, Amazon changed its distribution and fulfillment model for its e-commerce business. Instead of a central hub, Amazon decided to use eight regional fulfillment centers. The result? Faster shipping and increased profitability.
In the first six months of this year, Amazon’s North American segment’s operating income (profit from core operations) was just over $10 billion, compared to $4.1 billion during the same period last year. Its international segment came in at $1.2 billion after losing $2.1 billion in the same period last year.
Add in Amazon Web Services (AWS) $18.8 billion in operating income, and you have a company that managed to increase its operating profits considerably in just the past three years.
AMZN Operating Income (Quarterly) data by YCharts
AWS is Amazon’s profit-making machine and the largest cloud computing platform in the world, with a 31% market share. It hasn’t been growing as fast as competitors like Microsoft‘s Azure, but that’s not too surprising considering AWS’s size.
Even still, AWS will drive a lot of Amazon’s growth in the foreseeable future. The global cloud computing market size is estimated to have a compound annual growth rate of just 21% through 2030. In the latest quarter, AWS’s revenue grew 19% year over year. If it can maintain similar growth rates over the next half-decade or so, Amazon will be in a great position.
As Amazon holds strong in the industries it currently leads in (e-commerce and cloud) and grows in newer industries (advertising and healthcare), it will be a force to reckon with for quite some time.
2. Coca-Cola
Coca-Cola (KO -0.56%) is one of Berkshire Hathaway’s oldest and largest holdings. It’s a staple in its stock portfolio and likely will be for the foreseeable future.
Coca-Cola doesn’t quite have the high-growth opportunities Amazon has, but it has one thing that makes it a no-brainer: an above-average, very reliable dividend. It has a $0.49 quarterly dividend, with a forward yield of around 2.8%.
It’s not just the dividend itself that makes it attractive; it’s knowing that you can expect it to increase every year you own the stock. Coca-Cola is a Dividend King with 62 straight years of increases, and this streak isn’t in any danger of ending anytime soon, considering how healthy Coca-Cola’s finances are.
In the second quarter, Coca-Cola generated $12.4 billion in revenue and $7.6 billion in gross profit, up 3% and 7% year over year, respectively. The increase isn’t eye-popping or the double or triple-digit percentage growth you’ll see from younger growth stocks, but it’s solid growth for a company of Coca-Cola’s size and maturity.
KO Revenue (Quarterly) data by YCharts
Aside from its dividend, one of the main reasons Buffett likes Coca-Cola so much is its competitive advantages. Two, in particular, stand out: Its world-class brand and distribution network.
You can probably count on one hand how many brands are as well-known globally as Coca-Cola and much of that has to do with the vast distribution network Coca-Cola has managed to develop. By utilizing independent distributors and bottlers, Coca-Cola is able to operate more efficiently and get its products in some of the most remote markets in the world.
When you’re looking for a company to invest in long-term — which is what Buffett preaches — having solid financials and sustainable competitive advantage are two things to look out for, and Coca-Cola has both.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Stefon Walters has positions in Microsoft. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
