Berkshire Hathaway (NYSE: BRK-B) Chairman Warren Buffett is closely followed as a share picker. That’s because he has amassed vast quantities of money during his decades-long run choosing shares. What’s right for Berkshire and Buffett isn’t necessarily right for my own portfolio. But there are a couple of Warren Buffett shares I would happily consider buying at their current prices.
Warren Buffett shares: Apple
One of the most interesting shifts in Buffett’s career in recent years has been his move into tech stocks. For decades he shunned them, most notably during the dotcom boom. That wasn’t because he didn’t think they might be a good investment, but because he felt tech was outside his circle of competence. Staying inside one’s circle of competence is an important part of Buffett’s approach to choosing shares.
Buffett learnt more about tech and invested in IBM, which didn’t perform well. By contrast, though, Buffett’s most notable tech investment — in Apple (NASDAQ: AAPL) — has been nothing short of spectacular. Between 2016 and 2018, Buffett spent around $36bn on Apple shares. He’s earned around $775m annually in dividends and made $11bn selling some of the stake. On top of that, Buffett’s Apple stake was worth $120bn at the time of Berkshire’s annual report this year.
Buffett’s gain on Apple is indicative of the strong Apple share price performance in recent years. Yet I’d still consider buying it for my portfolio today. It has strong pricing power thanks to its proprietary technologies and premium positioning. Even if future product launches are less successful than past ones, I reckon the company can do well for years or perhaps decades milking its current assets. There are risks, though: cheap competitors could push down profit margins in the tech industry overall.
The ultimate Warren Buffett shares: Berkshire Hathaway
Second among the Warren Buffett shares I would happily add to my portfolio are those of Berkshire Hathaway itself.
Buffett himself agrees. That is why the company has been buying back its own shares in recent years. That suggests that the Sage of Omaha considers the Berkshire Hathaway share price to be undervalued.
I like the company for its collection of high-quality businesses, substantial cashflows, and focus on shareholder value creation. Buffett has built it into its present form, but I think Berkshire is more than a one man show. The businesses it owns, such as Dairy Queen and US freight railways, are durable franchises with unique market positions and strong pricing power.
One risk is Berkshire’s large exposure to insurance. While that offers the benefit of funds the company can invest as well as underwriting profits in some years, it could also hurt profits severely. The company underwrites some catastrophic risks which, when they come to pass, will possibly decimate Berkshire’s profits at the time.
Despite the risks, I reckon Warren Buffett knows what he is doing. He has been happy buying Apple and Berkshire Hathaway. I would be similarly happy tucking these two great companies into my portfolio and holding them for years.
