Coca-Cola vs. American Express: which of Buffett's favorites does Morningstar advise?
While investors wait for Berkshire Hathaway to report on last quarter's deals, Morningstar analysts compared two key companies in Warren Buffett's portfolio - Coca-Cola and American Express - and named which one now looks more attractive to buy.
Buffett has previously called Coca-Cola and American Express "perpetual stocks" - that is, securities that Berkshire intends to keep in its portfolio indefinitely. In his opinion, both companies have achieved outstanding success in their respective fields, and their products and services easily "travel" around the world, turning the brands into global symbols and an integral part of modern life.
Which of Buffett's favorites does Morningstar favor?
- Coca-Cola has a tangible cost advantage over competitors and strong intangible assets, according to Morningstar analysts Michael Miller and Dan Su. The company has a solid balance sheet structure and cash flows are recognized as robust, allowing it to be assigned a low level of uncertainty, the analysts said. Coca-Cola recorded sales growth in the third quarter despite macroeconomic pressures. Morningstar plans to raise the fair value of the stock by a few percent to $72 a share after the report. Analysts' estimates suggest the stock will rise nearly 3 percent relative to its closing price on Oct. 27.
- American Express also pulled away from competitors, according to analysts, thanks to its unique "closed-loop" model that combines card issuance, payment network and direct relationships with merchants. The company posted strong third-quarter results - growing transactions and interest income - and its balance sheet remains strong. Morningstar analysts estimate the fair value of the stock at $265 - down 27% from the closing quote in recent trading.
Morningstar believes Coca-Cola looks more attractive as an investment in the current environment, with American Express securities trading at a notable premium to intrinsic valuation, while Coca-Cola shares are closer to fair value.
What about company stocks
Coca-Cola shares added about 1% in early trading on October 28, and have gained about 13% since the beginning of the year, lagging behind the broad market, which is up 17%. Shares of American Express were almost unchanged in trading on October 28, up 22% since the beginning of the year.
Of the 28 analysts covering Coca-Cola shares, 86% advise buying them (Buy and Overweight ratings) and none recommend investors sell the stock. As for American Express shares, only 36% of analysts advise buying them, while the rest recommend either holding or selling.
This article was AI-translated and verified by a human editor
