The United States' economy is consumer-driven: Approximately 68% of America's gross domestic product comes from consumers. That means investors seeking ideas can look for inspiration at the products and services their family and friends use daily.
Famed investor Warren Buffett has made consumer-facing companies a big part of the portfolio of Berkshire Hathaway, his holding company. The following four fantastic stocks make up almost 60% of the entire portfolio.
As Buffett has done with Berkshire Hathaway, investors can confidently buy and hold these stocks for the long term.
1. Apple
It's hard to start this list with anything other than Apple(NASDAQ: AAPL), considering the stock is 44% of Berkshire's entire portfolio. It didn't start that large, but the stock has done very well since Buffett bought it in 2016.
He has sold very little over the years, letting his winners run instead. Buffett has gone as far as calling the iPhone maker the best business Berkshire owns.
He has a point. There are more than 2 billion iOS users worldwide, and those customers have proven to be loyal, upgrading their devices and subscribing to billions of dollars' worth of subscription services.
Until that changes, Apple is poised to generate lots of profit and to continue repurchasing shares and paying dividends.
2. American Express
Consumer spending drives the economy, but consumers don't always spend their cash. Credit cards have become a cultural staple, and American Express(NYSE: AXP) is one of the most recognizable names in the industry.
Not only does American Express lend money to its borrowers, but it's also a payment network, charging merchants on transactions that run on its network. Buffett has owned the stock since the late 1990s, and it's currently 9% of Berkshire's portfolio.
Notably, American Express' brand power seems to be holding up as spending power transitions from older generations to millennials and Gen Z. Management has stated in recent earnings reports that young users are a rapidly growing customer demographic, setting up the company for years of continued success.
3. Coca-Cola
Coca-Cola(NYSE: KO) is arguably Buffett's most famous investment. There are countless photos of him enjoying a Coke product over the years.
He has owned the stock since the late 1990s, and his son even sat on the company's board of directors for several years. Coca-Cola is Berkshire Hathaway's fourth-largest position at 6.4% of the portfolio.
Coca-Cola is a tried-and-true grinder. It sells beverages worldwide, and its steady growth comes from several levers, including population growth, new products, and price increases.
Coke is a legendary dividend stock that has paid and raised its payout annually for 62 consecutive years, making it a Dividend King, true investment royalty that's poised to continue enriching shareholders over the coming decades.
4. Diageo
You might not recognize Diageo's (NYSE: DEO) corporate name, but if you're 21 or older in the United States, you've probably enjoyed its products. The beverage maker owns several global spirits and alcohol brands, including Guinness Beer, Johnnie Walker, Tanqueray, Baileys, Captain Morgan, and Crown Royal.
Diageo isn't a prominent position for Buffett. At "only" $34 million, it's a rounding error in Berkshire's portfolio. He bought the stock early last year, one of Berkshire's most recent adds.
The company somewhat reminds me of Coca-Cola. It's another slow and steady grinder that holds stellar brand power and pays a dividend. Alcohol is a cultural staple, and many of Diageo's brands go back centuries.
It's a company you can probably expect to be around 100 years from now, which might be why it appealed to Buffett. It will be interesting to see if he expands his Diageo stake over time.
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American Express is an advertising partner of The Ascent, a Motley Fool company. Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool recommends Diageo Plc. The Motley Fool has a disclosure policy.
