When it comes to investing success, Berkshire Hathaway ( NYSE:BRK.A )( NYSE:BRK.B ) CEO Warren Buffett is in a class of his own. Buffett may not be infallible, but he’s helped create more than $600 billion in shareholder value for the company’s shareholders since taking the helm in 1965. As a whole, Berkshire Hathaway’s shares have averaged an annual gain of 20% over the past 56 years, leading to an aggregate gain of better than 3,300,000%.
Interestingly, though, the Oracle of Omaha’s success isn’t the result of diversification. Buffett believes diversification is only a necessity if you don’t know what you’re doing. As of this past weekend, the cumulative value of the nearly four dozen stocks held by Berkshire Hathaway was $329.7 billion. However, just 10 companies made up $286.1 billion, or 87%, of Warren Buffett’s portfolio. Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool. 1. Apple: $134.9 billion
Innovation kingpin Apple ( NASDAQ:AAPL ) is often referred to by the Oracle of Omaha as Berkshire Hathaway’s “third business.” With over 907 million shares held and Apple regularly buying back its common stock, Berkshire’s stake in the company has grown to 5.5%.
Buffett’s Apple investment is all about the power of branding, innovation, and transformation . Apple is the leading smartphone brand in the U.S., is benefiting immensely from the introduction of 5G wireless capability, and is steadily transforming itself into a platforms’ company that’ll be focused on subscription services. This shift, led by CEO Tim Cook, will allow Apple to better weather product replacement cycles, and it should have a positive long-term effect on operating margins and customer loyalty. Image source: Getty Images. 2. Bank of America: $49.1 billion
There isn’t an industry Warren Buffett loves more than bank stocks . With permission from the Federal Reserve Bank of Richmond, Berkshire Hathaway has increased its stake in Bank of America ( NYSE:BAC ) to more than 1 billion shares, or 12.5% of outstanding shares. Normally, a 10% stake or higher would qualify an investor like Berkshire Hathaway as a bank holding company.
Bank of America is the most interest-sensitive of the money-center banks, which means it’s the best-positioned to take advantage of higher lending rates come 2023 (and beyond).
Also, BofA has done an enviable job of promoting digital banking. With more bank customers than ever transacting online or via mobile app, Bank of America has been able to cut costs by consolidating some of its physical branches. Image source: American Express. 3. American Express: $28.4 billion
A big theme within Buffett’s investment portfolio is that he loves financial stocks. Payment processor and lender American Express ( NYSE:AXP ) is the third longest-tenured company, with Berkshire holding a position since 1993.
AmEx’s success has long been tied to its ability to draw in affluent clientele . The well-to-do are less likely to alter their spending habits when minor economic contractions or recessions arise.
Further, American Express is what I call a “double-dipper.” In addition to processing credit transactions, it also acts as a lender, and is therefore able to collect interest income and fees from cardholders. Since economic expansions last for years, AmEx is a good bet to excel for long periods of time. Image source: Coca-Cola. 4. Coca-Cola: $21.8 billion
Beverage giant Coca-Cola ( NYSE:KO ) happens to be Buffett’s longest-turned holding. Berkshire Hathaway has held shares of Coke on an uninterrupted basis since 1988. With a cost basis on Coke of $3.25, Buffett and his investing team are now netting a 52% annual yield on cost .
While Coca-Cola isn’t the growth story it once was, it’s still quite dominant. Its products can be found in all but two countries worldwide (North Korea and Cuba), and it has more than 20 brands generating $1 billion or more in annual sales.
Coke also controls 20% of cold beverage market share in developed countries and 10% of cold beverage share in emerging markets. This gives the company highly predictable cash flow in established markets and organic growth potential in emerging regions. Image source: Getty Images. 5. Kraft Heinz: $11.8 billion
Consumer staples stocks no longer comprise a large percentage of Buffett’s portfolio like they did two decades ago. However, packaged-foods company Kraft Heinz ( NASDAQ:KHC ) is no slouch. At $11.8 billion, it’s Berkshire Hathaway’s fifth-largest holding.
Although Kraft Heinz is benefiting from the pandemic — i.e., more consumers are eating at home — it’s arguably been one of Buffett’s worst investments . The Oracle of Omaha freely admits that Heinz overpaid for Kraft Foods […]
source These 10 Stocks Make Up 87% of Warren Buffett’s Portfolio