Warren Buffett Is One of the World's Most Successful Investors but These 3 Berkshire Stocks Have Vastly Underperformed the Market in the Past 5 Years

Key Points

• Coca-Cola, Kraft Heinz, and SiriusXM Holdings are some of the largest stocks in Berkshire Hathaway's portfolio.

• However, these stocks have delivered lackluster returns over the past five years.

• While they are well-known brands, their future growth prospects are questionable.

• 10 stocks we like better than Coca-Cola ›

Warren Buffett is one of the wealthiest and most popular investors in the world, so mimicking his moves is a strategy that many of his fans deploy. If his company, Berkshire Hathaway, invests in a stock, then that stock usually sees a boost in its value after investors learn about the new position.

But that doesn't mean that every stock in Berkshire's portfolio has been a winner. Three of the company's top holdings have been fairly underwhelming investments over the past five years. Coca-Cola (NYSE: KO), Kraft Heinz (NASDAQ: KHC), and SiriusXM Holdings (NASDAQ: SIRI) have all underperformed the market by a wide range.

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Here's why buying these stocks hasn't paid off for investors, and how they've performed over the past five years (the returns listed below are as of Sept. 29).

Image source: The Motley Fool.

Coca-Cola: Up 34% in five years

The top-performing stock on this list is that of beverage company Coca-Cola. But with gains of just 34% in five years, you would have been far better off just tracking the S&P 500, which has roughly doubled in value over that same timeframe.

Coca-Cola is a good, safe stock to own and it's also a great option for income investors as it offers a high yield of 3.1% (the S&P 500 average is only 1.2%). But while the business is stable and the Coca-Cola brand remains iconic, there's not much of a reason for growth investors to be bullish on it.

In recent years, it has been price hikes that have helped Coca-Cola grow its top line. And in the future, with weight loss drugs curbing appetites and just a general movement toward eating healthier, it may be even more difficult for Coca-Cola to grow its sales.

It is, however, a Dividend King and so it's still an attractive option if you want a reliable payout for your portfolio. But I wouldn't expect Coca-Cola's stock to generate market-beating gains over the next five years or beyond that. It trades at a price-to-earnings (P/E) multiple of 23, which may prove to be a bit rich for a company that may face challenges in growing its business in the years ahead.

Kraft Heinz: Down 14% in five years

A consumer goods company that is in far more trouble than Coca-Cola these days is Kraft Heinz. Its products are known for not being the healthiest options for consumers and its revenue has been relatively flat for multiple years. Its top line totaled $25.8 billion last year and back in 2021, Kraft's revenue was slightly higher at more than $26 billion.

The company recently announced plans to break up its business into two separate entities, one that will focus on spreads and sauces, and another that will center around its core grocery brands, including Oscar Mayer, Kraft Singles, and Lunchables. It's questionable whether that will generate better results for shareholders and Buffett himself isn't convinced that it's the right move going forward.

Kraft currently pays a dividend that yields more than 6% but there's considerable risk that it may not be safe, especially now that the company is in the midst of restructuring its operations in an effort to unlock more value for shareholders.

A wait-and-see approach might make the most sense with the food stock right now as there isn't a compelling reason to invest in Kraft given all the uncertainty.

SiriusXM: Down 57% in five years

Satellite radio company SiriusXM has performed dreadfully over the past five years as its revenue is in decline and there is a lot of doubt about its future growth potential. Currently it has 33 million total subscribers, which is down from more than 34 million subscribers five years ago.

While a SiriusXM subscription can make it easy for people to stream music, news, and other content to their cars, it's easier than ever to do that by just using a regular cellphone and connecting it via Bluetooth to a car's speakers. It may be an uphill battle for the company to grow its subscribers in the future, which is why I wouldn't be too optimistic that SiriusXM stock can turn things around, even despite its depressed valuation.

SiriusXM may look like a cheap buy, trading at a P/E multiple of just 7, but it resembles a value trap more than a compelling buying opportunity.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Kraft Heinz. The Motley Fool has a disclosure policy.