When a knowledgeable person speaks, people tend to listen. And when a renowned expert in their field speaks, people tend to both listen and follow their moves.
The latter has often been the case with Warren Buffett, who many people consider the greatest investor of his time. Amassing a net worth of more than $130 billion and making Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) an $850 billion-plus company (with the help of his partners along the way, of course), it's easy to see why investors would look to Buffett and Berkshire Hathaway's moves to get some investment inspiration.
These three stocks are good options if you have $1,000 available to invest. Dividing the $1,000 between them will give investors exposure to consistent income and growth opportunities.
1. Coca-Cola
Coca-Cola(NYSE: KO) has been one of Berkshire Hathaway's longest-standing investments, having bought its first stake in 1988. Berkshire Hathaway now owns 400 million Coca-Cola shares, representing over a 9% stake in the beverage giant.
Buffett likes Coca-Cola because of its competitive advantage, which is its brand power and distribution reach. Coca-Cola is one of the most recognizable brands in the world, and you could argue that its flagship Coca-Cola soda is the most recognizable consumer good worldwide. Coca-Cola is sold in more than 200 countries, and the company even notes that many entrepreneurs import it from neighboring countries to sell in places where it's not officially manufactured.
This vast distribution network has been the catalyst for the company's robust financials, and its focus on beverages (unlike its biggest competitor, PepsiCo, which also sells snacks) has allowed Coca-Cola to operate more efficiently. In their latest respective quarters, Coca-Cola's net income was higher than PepsiCo's, while its revenue was more than almost half of it.
KO Revenue (Quarterly) data by YCharts
Coca-Cola's position as the market leader gives it a strong foothold for lasting longevity. It's a blue-chip stock that can be productive in investors' portfolios for the long haul.
2. American Express
American Express(NYSE: AXP) (Amex) is Berkshire Hathaway's third-largest holding, with a more than 20% stake in the credit card company.
Amex has a unique business model that differs from competitors like Visa(NYSE: V) and Mastercard. Neither Visa nor Mastercard issues their own cards or lend directly to consumers. They operate the payment network and play middleman between financial institutions and consumers. On the other hand, Amex issues its own cards and operates its payment network.
Amex's business model allows it to earn revenue from cardholder fees, transaction fees, and interest on consumer balances. It's proved lucrative, too. Since a revenue drop caused primarily by the COVID-19 pandemic, Amex's revenue has been on an impressive upward trajectory.
AXP Revenue (Quarterly) data by YCharts
Amex's enticing rewards programs have positioned it uniquely in the credit card industry. The programs attract high-spending customers and people seeking premium perks, allowing the company to charge annual fees of up to $695. These programs also create loyalty with their customers, which has helped build Amex into the premium brand it's considered today.
That brand equity can't (and likely won't) be easily replicated.
3. Visa
Visa is another Buffett stock that thrives because of its competitive advantage. In Visa's case, its competitive advantage is its reach. Visa has more than 4.3 billion cards in circulation, with over 130 million merchant locations. That's far more than any of its competitors.
Visa's position as the top card issuer allows it to greatly benefit from the network effect. Few places that accept cards don't accept Visa, incentivizing consumers to go with the company. On the merchant's end, knowing Visa is the most common card incentivizes them to accept Visa, because not doing so could exclude many potential customers.
This reach didn't happen overnight, either. It's the by-product of decades of investments and strategic partnerships. All of these factors allow the company to operate with high gross profit margins that not many companies can compete with.
V Gross Profit Margin (Quarterly) data by YCharts
As digital payments become more common and widespread, Visa should continue to expand its reach and lead the charge for credit card companies -- especially as it continues to develop technologies to stay ahead of the curve.
It's a stock I'd hold on to for the long run without thinking twice.
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Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Mastercard and Visa. The Motley Fool recommends Discover Financial Services and recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
