Berkshire Hathaway (NYSE:BRKa)'s portfolio shows a significant allocation towards Apple (NASDAQ:AAPL) and Coca-Cola (NYSE:KO), accounting for 47% and 7% respectively, as of Wednesday. The companies' strong brand identities, consistent dividends, regular share repurchases, and steady cash generation are among the key factors contributing to this investment preference.
Apple is bracing for a fiscal slowdown in 2023 with projected decreases of 9% in revenue and 6% in EPS. This is attributed to iPhone market saturation, declining Mac shipments post-pandemic, and currency issues. The ongoing U.S.-China tech and trade war adds another layer of complexity to Apple's operations in China.
However, despite these challenges, Apple's services ecosystem showcases robust growth with over a billion paid subscribers and new products like Vision Pro. The tech giant also holds $166 billion in cash reserves. Over the past five years, it has repurchased nearly one-fifth of its shares, indicating potential for increased dividend payouts as the company matures.
On the other hand, Coca-Cola has made a strong recovery from the pandemic-induced downturn with a 16% growth in organic sales in both 2021 and 2022. This growth can be attributed to product diversification beyond carbonated drinks and the revival of its flagship sodas.
Despite inflationary pressures, Coca-Cola reported a 7% increase in adjusted EPS in 2022 and has been consistent in raising its dividend annually for 61 consecutive years. However, over the past five years, the company's share count grew about 1% due to stock-based compensation slightly offsetting buybacks. Coca-Cola also maintains more than $14 billion in cash reserves.
While both companies carry high valuations due to investor interest, they are considered reliable long-term investments. The decision on which of these cash-generating, dividend-paying behemoths represents a superior investment, however, remains a topic of ongoing discussion.
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