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Few names in the investing world carry more weight than Warren Buffett’s. Since taking over Berkshire Hathaway in 1965, Buffett has generated an estimated $690 billion in profit for himself and his investors. That results in an average return of roughly 20% per year for almost the last six decades. Benzinga looks at the top stocks in Buffett’s portfolio and whether they are right for you.
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Buffett’s Simple Strategy
Anyone with enough sustained success investing to earn a nickname like “the Oracle of Omaha” has crafted a winning investment strategy. That doesn’t mean that every decision Buffett has made over the years was correct, but he has been on the right side of more deals than not. Looking at his portfolio (based on recent SEC filings), one aspect of Warren Buffett’s strategy makes itself immediately apparent: Buy and hold winning stocks.
Buffett’s investing pattern shows that he strongly believes in picking companies with high visibility and large market share. This combination traditionally gives companies an advantage over their competition, allowing them to perform consistently over time, even if they have a bad quarter or year.
That is a marked contrast to some other traders who hit the sell or buy button with every fluctuation in stock price. It’s easy to see this strategy playing out when you look at the stocks that dominate Berkshire Hathaway’s Portfolio. Although Buffett firmly believes in diversification, over half his estimated $416 billion portfolio comprises just a few stocks.
Apple
In a world of tech giants, Apple (Nasdaq: AAPL) is one of the bona fide 800 lb gorillas. In many ways, Apple sparked the tech boom and helped turn Silicon Valley into the land of plenty for investors. Throughout its history, Apple has consistently delivered high-quality products to an intensely loyal customer base willing to pay a price premium for the brand.
They are also estimated to control over 50% of the American smartphone market (according to Statista). All those things make Apple a prime candidate for a Buffett investment. It is a highly visible company with a fervent customer base of largely affluent consumers. This company has become a near-permanent fixture in its consumers’ lives through innovations like the Apple Watch, Apple Vision Pro, and the iPad.
Benzinga estimates Apple’s current market cap at a massive $3.35 trillion. Buffett has been gobbling up Apple stock since 2016, and it helps explain why Buffett is estimated to own $180 billion in Apple Stock. That means Buffett’s holdings in Apple represent around 43% of his $416 billion portfolio.
Bank of America
Bank of America (NYSE:BAC) is one of the nation’s most recognizable financial institutions and has been around since the San Francisco Earthquake. Benzinga estimates B of A has $3 trillion in assets and a current market cap of $329 billion. B of A’s operations run the full gamut of financial services. It has branches throughout the country that do traditional banking and mortgage lending.
B of A also has a massive brokerage and wealth-management operation thanks to its 2008 acquisition of Merrill Lynch. In addition to its consumer credit arm, B of A has a robust commercial real estate and corporate lending wing. The bank’s size and scope of operations make it a fit for Buffett’s strategy.
That helps explain why his portfolio includes just under one billion B of A stock shares even after a recent sell-off. Earlier this month, Buffett liquidated 33.9 million shares of B of A for $1.48 billion, which somewhat lowered the percentage of B of A stock in his portfolio. However, Yahoo Finance estimates that his $40 plus billion worth of B of A Shares still accounts for almost 10% of Buffett’s portfolio.
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American Express
American Express (NYSE: AXP) is one of the world’s most well-known credit cards, and Buffett has been buying its stock since 1991. The company currently operates in over 120 countries around the world. That means its cardholders can charge for goods and services almost anywhere in the world, something Amex has even used as a selling point in its advertisements.
Amex owns and operates one of the world’s largest merchant payment networks. That allows them to make money on global credit card transactions even when the card used for the purchase isn’t American Express. Amex’s massive presence in the consumer credit business also allows it to double dip on transactions by charging a fee to both the cardholder and the merchant.
It is another stock that checks off significant boxes on Buffett’s list. Amex has tremendous market share, multiple revenue streams, and a loyal customer base it has spent years cultivating. According to a recent article in MSN, Buffett owns about $38 billion worth of Amex shares: roughly 9% of his total portfolio.
The Tale of the Tape
These three stocks account for over 60% of Warren Buffett’s investment portfolio, and his track record of picking winners is hard to argue with. Each of them is a blue chip stock that is a major force in its chosen business sector. So, should you follow this strategy and invest accordingly? That question is a bit harder to answer. Almost all these companies had lower stock prices when Buffett originally bought them than they do today.
It would be very expensive to load them up today, perhaps prohibitively expensive. It might be easier to invest in Berkshire Hathaway and let the Oracle of Omaha pick winners. With that said, duplicating Warren’s approach of buying and holding stocks that have the potential to develop a dominant market share might help you build your own rock-solid, diversified portfolio.
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This article Warren Buffett Is Loaded Up On These Three Stocks. Should You Be? originally appeared on Benzinga.com
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