Warren Buffett is probably the most famous investor alive today, drawing followers who want to replicate his success. But, oddly enough, his investing portfolio is replete with what the market would label "boring" stocks, harboring a tiny subset of what could be called tech stocks. It has zero young, hyped-up tech or artificial intelligence (AI) stocks, and is chock-full of dividend-paying consumer goods stocks.
Investors getting their feet wet in the stock market would do well to actually heed Buffett's advice and buy some of his favorites instead of betting on the next big tech stock. There's a place for that, if done responsibly. But there's also a place for the solid, global industry giant -- that's what diversification is all about.
Coca-Cola (KO -0.15%) is Buffett's longest-held stock and one of his favorites, while Domino's Pizza (DPZ -0.23%) is one of his newest holdings. Which one is the better buy for 2025?
The case for Coke: The unmatched global brand
Berkshire Hathaway, Buffett's holding company, first bought shares of Coca-Cola stock in 1985. Today, it owns 9.3% of the company, and it accounts for 8.4% of Berkshire Hathaway's total portfolio, its fourth-largest position.
Buffett has made clear on many occasions why he's such a fan of the beverage king. It has an unmatched global brand presence, providing favored drinks for masses of worldwide consumers. It has a large and well-run distribution network bringing drinks to all kinds of retailers, with a packaged drink business as well as a concentrate business for away-from-home destinations like restaurants and movie theaters.
Although it's facing pressure due to inflation, it has been able to successfully raise prices because of its brand, and therefore pricing power. It might begin to ease up this year as inflation moderates and consumers feel more comfortable in their spending habits.
One of Coca-Cola's most compelling features is its dividend. It's a Dividend King, and it has raised its dividend annually for the past 62 years. When you think about everything that has happened in the world over that time frame, which began in 1963, you can start to imagine what kind of strength that implies. It covers periods of hyperinflation, economic instability, pandemics, and more.
And since Coca-Cola is a global company, it's not limited to challenges in one region. That means it has managed through multiple regional events without skipping a year of increasing its dividend and creating greater shareholder value. That's incredible durability and commitment.
Coca-Cola stock ended 2024 up 6%. At the current price, its dividend yields 3.1%, and although there are some general ups and downs over time, that's pretty much where it lands.
The case for Domino's: Higher growth
Buffett bought Domino's stock for the first time this year, and it's a small portion. Berkshire Hathaway owns 3.7% of the outstanding shares, and the position accounts for just 0.2% of its total portfolio.
Domino's is like the Coke of the pizza industry. It's the largest global pizza chain, operating in 94 global regions with more than 20,000 stores. Because it runs a franchise model, it's actually selling franchises rather than pizza, which is a higher-margin business. Like Coca-Cola, it has strength in the global brand, and because it's affordable, it has greater resilience under pressure than fine dining or premium takeout.
Unlike Coca-Cola, Domino's is experiencing strong sales growth, including comparable sales growth, despite worldwide economic volatility. It reported stellar results for the 2024 fiscal third quarter (ended Sept. 8), with a 5.1% revenue increase over last year and a 5% increase in operating income.
As large as it is, it continues to open stores at a steady pace, with 800 to 850 new stores expected for fiscal 2024.
Domino's also pays a dividend, and although it doesn't have the same track record as Coke, its dividend has grown much faster. It has raised the dividend annually since 2013, and it has increased 655% since that time, vs. 73% for Coca-Cola.
Domino's stock was roughly flat in 2024, up just a notch. Its dividend yields 1.4% at the current price, or less than half of Coke's.
Better stock for 2025
I think that sometimes it's hard to focus on what makes a really great stock, which is the ability to stand strong and weather tough times. This is Buffett's forte. In other words, headlining this as the best stock for this year is really a misnomer; a great stock is for any time.
Choosing one of these stocks for 2025 is acknowledging that whatever happens this year, the stock will be well-positioned to create long-term shareholder value. Both of these stocks fit the bill, and they trade at the same P/E ratio of 26.
Both of these stocks offer value for investors. In this contest, though, I'm going to choose Coca-Cola for its longer track record of reliability and higher dividend yield.