With a market capitalization of more than $950 billion, Berkshire Hathaway ranks as the world’s eighth-largest company. Led by CEO and world-famous investor Warren Buffett, the company has delivered incredible returns for its long-term shareholders and continues to be massively influential in the investing world.
Notably, the Oracle of Omaha has never been much of a fan of portfolio diversification and has instead preferred to weight Berkshire’s stock holdings heavily toward a small number of high-conviction investments. But Buffett and Berkshire have actually been making some dramatic moves lately, and the balance of the company’s portfolio has shifted in some big ways.
Let’s take a look at two of the stocks where he’s most invested in now.
Despite big changes, this is still Buffett’s biggest bet
Keith Noonan (Apple): Berkshire Hathaway shocked the world with its recent 13F filing. With the disclosure report it submitted to the Securities and Exchange Commission (SEC) earlier this month, the investment conglomerate revealed that it had sold more than 389 million shares of Apple (NASDAQ: AAPL) stock. The move reduced Berkshire’s total investment in the tech giant by 49%, and immediately raised concerns that Buffett was losing faith in the tech leader.
On the other hand, Apple is still Berkshire Hathaway’s biggest stock investment by far. Even after the sell-off, the iPhone company’s stock still accounts for roughly 28.8% of Berkshire’s total stock portfolio — more than three times larger than its second-biggest position.
While Buffett has argued against diversification in the past, it’s not hard to see why his company opted to reduce its exposure to the tech giant. At its concentration and valuation peak, Apple accounted for more than half of Berkshire’s total stock portfolio.
The investment has been a massive winner for the Oracle of Omaha’s company, and the recent stock sale has generated enviable profits. But the question of whether Berkshire will continue to take profits on its Apple investment will likely remain a hotly contested issue until Buffett’s company publishes its next 13F filing.
Buffett has previously described Apple as “probably the best business” he knows of, but there are some big questions about what comes next for the mobile leader. For starters, it remains to be seen whether Apple will be able to deliver big wins in the artificial intelligence (AI) space. Investors and analysts are also wondering whether the company can serve up major new wins in mobile and other hardware categories that are capable of driving big growth.
Berkshire’s moves to trim its position in Apple stand out among this year’s most high-profile moves for institutional investors. But while Buffett has reduced his company’s exposure to the mobile leader, it seems like he’s still bullish on the stock overall.
The classic, forever Buffett stock
Jennifer Saibil (American Express): There are two stocks Warren Buffett has repeatedly said he would never sell: Coca-Cola (NYSE: KO), his longest-held stock, and American Express (NYSE: AXP), his second-longest.
Bank of America (NYSE: BAC), though, was his second-largest position for a long time. Recently, after Buffett sold a chunk of BofA and did some other reallocation of his portfolio, American Express has slid into that slot. It accounts for 12.2% of Berkshire’s total equity holdings as of this writing.
American Express is a great example of the classic Buffett stock. For starters, it trades at less than 19 times trailing 12-month sales. That’s well below the average S&P 500 price-to-earnings ratio of 27. Buffett loves undervalued stocks, and as long as American Express stock trades at a low valuation, he’s likely to stick with it.
It has an established, distinctive model. It’s different than credit card networks Visa (NYSE: V) and Mastercard (NYSE: MA) in a few important ways. It’s a closed-loop system, which means that it acts as its own bank and doesn’t rely on third-party relationships to fund the credit it provides shoppers to use when they spend. Since it has its own bank, it has an expanded set of services that give it more ways to make money. Buffett loves companies that have a varied set of earnings streams. He also loves bank stocks, since they tend to have lots of cash, which is the anchor of a long-term viable company.
American Express has a fee model. Its loyal cardholders pay annual fees for the privilege of using most of the company’s cards, which come with a slew of perks. It’s also known for its top rewards program, which keeps cardholders paying year after year and attracts new ones.
American Express has successfully refreshed its image and most of its cards to appeal to a younger, affluent cohort, and they have a long runway of spending ahead. The niche, upscale target market gives American Express a moat against challengers, as well as resilience under pressure.
That’s another way American Express fits into the Buffett model. It plays a large role in the development of the economy, and cardmembers rely on it for necessities and luxuries. Expect American Express to keep up its good work and keep providing value for Buffett and other shareholders.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Jennifer Saibil has positions in Apple. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Mastercard, and Visa. The Motley Fool recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
Warren Buffett’s Biggest Bets in 2024: 40% of Berkshire Hathaway’s $276.9 Billion Stock Portfolio Is Held in Just 2 Stocks was originally published by The Motley Fool
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