Warren Buffett has amassed an enormous fortune by investing in stocks. He purchased Berkshire Hathaway in 1965, turning the former textile maker into a holding company for his investments. Today, he tops the list of the longest-serving S&P 500 CEOs.
So, what does Berkshire hold currently?
Let’s explore the company’s top five stocks, which represent over three-quarters of Buffett’s portfolio.
The top stock
At 41.4% of the portfolio, Apple (NASDAQ:AAPL) is Buffett’s largest position. Berkshire first took a stake in the US tech giant in 2016.
Apple’s share price is down 5% over the past year, but there are factors that could drive the stock higher. For instance, it has exciting product launches in its pipeline.
The company is expected to release a new AR/VR headset this spring, as well as the iPhone 15 in September. New products have added value for long-term investors via share price appreciation, and I think this year’s innovations could help the tech titan return to strength.
In addition, there’s huge potential to expand service offerings, such as Apple Pay. At 71%, the gross services margin is higher than the products’ gross margin of 37%.
That said, a price-to-earnings ratio of 25.66 is a risk, particularly if demand for the firm’s new products isn’t sufficient to justify a premium valuation.
Financial heavyweights
Finance is a Buffett investment favourite. Bank of America is his second-largest holding at 10.6% and American Express is his fourth-largest at 8.1%.
With Bank of America, I see Buffett’s logic in maintaining his stake. As the Federal Reserve continues to hike rates, the bank should benefit from a boost to its net interest income.
However, a US housing market slowdown poses significant risks. If defaults rise or activity slows, revenues could suffer.
American Express has been a longstanding cornerstone of Berkshire’s portfolio. I think the company’s future looks bright thanks to its popularity with younger customers. Over 60% of its new proprietary consumer account acquisitions in 2022 were Millennial or Gen Z consumers.
However, the fact that the business derives its income from interest rate spreads rather than transaction fees like Visa or Mastercard creates higher volatility risk than other stocks in the payments arena.
Dividend shares
Buffett also has big stakes in leading dividend stocks. Oil and gas giant Chevron is his third-largest position at 8.3% and soft drinks conglomerate Coca-Cola completes the quintet at 7.1% of the portfolio.
Chevron looks well placed to benefit from continued disruption in commodities markets caused by the war in Ukraine. It offers a 3.66% dividend yield.
Coca-Cola’s business model has stood the test of time. The company has hiked its dividend for 60 consecutive years. It offers a 3.1% yield.
Dividends can be cut or suspended. Both stocks face this risk. Nonetheless, in my view they look like reliable passive income generators as things stand.
How I’m following Warren Buffett
My preferred way to follow Warren Buffett is to hold Berkshire Hathaway stock.
Although I own Coca-Cola shares for passive income (Berkshire reinvests its retained earnings), I’m not buying the others at present.
That’s simply because I’m happy with the exposure my Berkshire shares already offer to these stocks.
