Warren Buffett’s Investment Strategy: A Closer Look at Key Holdings
Warren Buffett, the billionaire CEO of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), has long been a figure of fascination for investors. Over the past 60 years, his leadership has driven Berkshire Hathaway’s Class A shares to a staggering cumulative return of nearly 5,650,000% as of February 3. His profound success attracts attention to the stocks bought and sold by him and his trusted advisors, Todd Combs and Ted Weschler. Following Buffett’s investment approach has often yielded profitable returns for astute investors.
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Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
A Focused Approach to Investing
One critical aspect of Buffett’s investment success is his strategy of portfolio concentration. With a portfolio comprising 44 stocks valued at $297 billion, he prefers to concentrate investments in his top picks. Currently, about two-thirds—nearly $195 billion—of Berkshire’s invested assets are tied up in five major stocks.
Apple: $68.4 Billion (23% of Invested Assets)
For quite some time, Apple (NASDAQ: AAPL) has been Buffett’s largest holding. Despite selling over 615 million shares between October 1, 2023, and September 30, 2024, Berkshire still holds about 300 million shares, valued at $68.4 billion.
Apple’s sustained success can be attributed to its innovative products, including the best-selling iPhone in the U.S. Under the leadership of CEO Tim Cook, the company is transitioning towards a platform-based model, emphasizing subscription services to enhance sales stability and improve operating margins. Buffett values Apple’s strong brand loyalty and consumer behavior insights, even if he may not fully grasp the technicalities of the iPhone.
Moreover, Buffett likely admires Apple’s share buyback strategy. With nearly $750 billion in share repurchases since 2013, these actions significantly boost the company’s earnings per share (EPS).
American Express: $48 Billion (16.2% of Invested Assets)
Despite a long absence of new purchases, American Express (NYSE: AXP) now ranks as Berkshire’s second-largest holding, accounting for 16.2% of its invested assets. It has been a part of Buffett’s portfolio since 1991.
American Express stands out for its unique business model that allows it to profit from both transaction fees as a payment processor and interest income as a lender. It’s the third-largest payment processor in the U.S., providing reliable income, especially during economic expansions.
Notably, AmEx attracts higher-income customers who tend to maintain stronger spending habits, even during economic downturns. This focus helps buffer the company during challenging financial periods.
Image source: Getty Images.
Bank of America: $35.4 Billion (11.9% of Invested Assets)
Warren Buffett has a strong affinity for the financial sector, and his investment in Bank of America (NYSE: BAC) reflects this preference. Although he has sold over 266 million shares since July 2024, Bank of America still makes up about 11.9% of invested assets.
Bank stocks, particularly BofA, are cyclical, thriving in protracted periods of economic growth. After benefitting from the Federal Reserve’s rate hikes aimed at controlling inflation, BofA is poised to continue generating profitable loans as interest rates stabilize.
Additionally, BofA’s capital-return initiatives, including a $1.04-per-share base annual dividend, are projected to contribute nearly $797 million to Berkshire in 2025, alongside regular share buybacks.
Coca-Cola: $25.3 Billion (8.5% of Invested Assets)
Among Buffett’s longstanding investments, Coca-Cola (NYSE: KO) has remained in the portfolio for 37 consecutive years, now ranking fourth largest. Its enduring presence illustrates its reliability as a consumer staple.
Buffett appreciates the predictability of Coca-Cola’s business, which operates in nearly every country globally. This broad presence enables the company to capture growth in emerging markets while generating steady cash flow.
Exploring Coca-Cola and Chevron: Strong Performers in the Investment World
In the competitive landscape of consumer goods, Coca-Cola continues to stand out. The beverage giant has an impressive legacy, being recognized as the most popular brand on retail shelves for 12 straight years, according to Kantar’s “Brand Footprint” survey. By leveraging social media and artificial intelligence, Coca-Cola effectively tailors its advertisements to resonate with younger consumers while maintaining connections with its longtime customers through nostalgic holiday campaigns.
Additionally, Coca-Cola’s capital-return program is notable. While Apple leads in stock buybacks, few can match Coca-Cola’s impressive 62 consecutive years of increasing its annual dividend.
Chemical Powerhouse: Chevron’s Financial Strategy
Among the stocks that form two-thirds of Berkshire Hathaway’s $297 billion portfolio is Chemical Chevron (NYSE: CVX), an integrated energy company with a significant presence in the market. Its model focuses on both upstream drilling, where it achieves high margins, and downstream operations such as pipelines and refineries, which generate steady cash flow even when oil prices fluctuate.
Chevron has consistently improved production levels over the years. CEO Mike Wirth forecasts a 9% to 10% increase in output from the Permian Basin by 2025, with a planned capital expenditure of approximately $15 billion, down from $16.4 billion for 2024. This strategic move aims to enhance cash flow and profitability.
Moreover, Chevron’s commitment to returning value to shareholders shines through its substantial capital-return program. The company announced a $75 billion share repurchase initiative in 2023 and had recently increased its dividend for the 38th consecutive year.
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Bank of America and American Express are advertising partners of Motley Fool Money. Sean Williams has positions in Bank of America. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, and Chevron. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
