I’ll admit it — I don’t understand most of Warren Buffett’s investments.
His Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) holds massive stakes in financial giants like American Express, Bank of America, and Chubb. If the subprime mortgage meltdown of 2008 taught me anything, it would be that I don’t get how the banking sector works and should never own banking stocks again.
It also holds gigantic positions in oil and energy giants such as Chevron (NYSE: CVX) and Occidental Petroleum (NYSE: OXY). I’m sure Buffett has his reasons, but it seems obvious to me that the world is moving on from the fossil fuels era. The only traditional energy titans I would consider buying shares of would be the ones best prepared to tackle renewable and alternative energy sources.
Again, Buffett has his reasons and what works for his enormous portfolio won’t always be good for my modest nest egg.
But when Warren Buffett’s picks make sense, they make a lot of sense.
One of Berkshire Hathaway’s largest holdings strikes me as a fantastic buy right now. Mind you, I understand why Buffett and Berkshire aren’t necessarily buying any more shares of Coca-Cola (NYSE: KO). At the same time, I highly recommend this no-brainer for new investors in 2025.
At first glance, you might think I’m being silly. Coca-Cola’s stock is trading at a modest price-to-earnings (P/E) ratio of 28.5. On the basis of cash profits, the stock is downright expensive at 63.6 times free cash flows.
I’m not pounding the table due to consistent market trends, either. The soft drink giant’s stock has underperformed the S&P 500 (SNPINDEX: ^GSPC) market index over the last year but outperformed in 2025.
And it’s not like Warren Buffett is sending out “buy” signals about this stock right now. Berkshire is buying Occidental Petroleum and selling Apple stock while leaving its Coca-Cola holdings untouched for years. Berkshire has neither bought nor sold any Coke shares in the last decade. Buffett’s company is simply collecting massive dividend payouts from its Coca-Cola position.
Now you’re starting to see why Coca-Cola is a buy today, right?
Coke is the living definition of a great dividend stock. This is the kind of steady income generator you want in your portfolio for those golden years. And the earlier you set up your dividend-generating position, the better it will serve you in the long run. Berkshire set up its Coca-Cola position in 1988 and 1989 at a split-adjusted $1.37 per share. The effective yield was a reasonable 2.7% in early 1989.
