Warren Buffett likes playing bridge — and the ukelele. His favorite drink? Cherry Coke. Some might argue that the famous investor isn’t the most exciting guy around.
The ho-hum drum could be beaten even louder when it comes to many of Buffett’s Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) holdings. Twenty-five percent of Buffett’s portfolio is invested in just 10 boring stocks.
Here are the 10 stocks that I think many investors would view as at least somewhat boring:
Stock
Percent of Portfolio
American Express (NYSE: AXP)
6.6%
Coca-Cola (NYSE: KO)
6.6%
Kraft Heinz (NASDAQ: KHC)
3%
Moody’s (NYSE: MCO)
2.3%
Mitsubishi (OTC: MSBHF)
1.6%
Mitsui (OTC: MITSF) (OTC: MITSF)
1.3%
Itochu (OTC: ITOCY) (OTC: ITOCF)
1.2%
Davita (NYSE: DVA)
1%
HP (NYSE: HPQ)
1%
Kroger (NYSE: KR)
0.6%
Total
25.2%
Data source: Berkshire Hathaway 13F.
Granted, “boring” is a relative term. There are some stocks that make all 10 on the above list seem downright exciting. Let’s face it, though: Few investors are going to exhibit as much enthusiasm about these stocks as they would for a hot stock that has doubled or tripled this year.
American Express and Moody’s don’t capture the attention that up-and-coming fintech stocks do. Coca-Cola, Kraft Heinz, and Kroger all belong to the consumer defensive sector, which isn’t exactly the most electrifying part of the market.
Many Americans don’t even know who Mitsubishi, Mitsui, and Itochu are. Davita provides kidney dialysis services. Enough said.
Sure, HP is a tech stock. And tech stocks often do stir investors’ passions. However, it’s been a long time since anyone viewed HP like they do Apple or Nvidia today.
Buffett obviously likes these 10 boring stocks, though. Otherwise, they wouldn’t hold such prominent positions in Berkshire’s portfolio. But why does he like them?
Some of these stocks weren’t nearly as boring when Buffett first bought them. For example, he’s owned Coca-Cola and American Express for decades.
More importantly, Buffett has always preferred to invest in businesses that he understands. There’s no question whatsoever that he has a solid understanding of the underlying businesses of every company on our list.
The Oracle of Omaha also likes companies that generate relatively predictable earnings. Most, if not all, of the 10 boring stocks fall into that category.
We can’t leave out valuation. Mitsubishi, Mitsui, and Itochu are the only stocks on the list that Buffett has bought this year. It’s no coincidence that all three Japanese trading house stocks trade at attractive earnings multiples. If we went back to when Buffett invested in the other seven stocks, I’d bet that we’d find they were attractively valued at the time as well.
Buffett — like any other investor — buys stocks to make money. He doesn’t care whether or not a stock is “boring” if it can generate a solid return over the long run. Several of the stocks on our list have done just that.
Take Coca-Cola, for example. Buffett has consistently owned shares in the beverage giant since 1988. The stock has delivered a total return of close to 5,600% during the time it’s been in Berkshire Hathaway’s portfolio.
Not all of Buffett’s boring investments have been so lucrative. As a case in point, he bought shares of HP in early 2022. The stock has been a loser since then.
Still, it won’t be surprising if Buffett’s boring stocks as a group perform quite well given enough time. As Aesop noted in his famous fable, the tortoises can win races against the hares. Boring can be beautiful.
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American Express is an advertising partner of The Ascent, a Motley Fool company. Keith Speights has positions in Apple and Berkshire Hathaway. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, HP, Moody’s, and Nvidia. The Motley Fool recommends Kraft Heinz and Kroger and recommends the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool has a disclosure policy.
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