Warren Buffett’s Berkshire Hathaway Portfolio: A Deep Dive
Warren Buffett might describe Berkshire Hathaway‘s (NYSE: BRK.A) (NYSE: BRK.B) portfolio as remarkably diversified. Currently, it comprises 44 different publicly traded stocks along with numerous private companies and nonmarketable securities. This extensive portfolio contrasts sharply with his earlier statement, “If you know how to analyze businesses and value businesses, it’s crazy to own 50 stocks, or 40 stocks, or 30 stocks probably.”
The landscape has significantly changed since Buffett made that comment at the 1996 Berkshire shareholders’ meeting. The company’s impressive size now requires it to seize opportunities wherever they arise, regardless of their scale. However, opportunities are becoming rarer, yet Buffett still applies a fundamental investment philosophy from that meeting: “We like to put a lot of money into things we feel strongly about.”
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Within its $283 billion portfolio of publicly traded equities, an impressive 47% is concentrated in three major stocks.
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1. Apple: 22.7% of Invested Assets
Berkshire Hathaway remains heavily invested in Apple (NASDAQ: AAPL), despite Buffett selling over two-thirds of the company’s stake since late 2023. Apple stands out as the top equity holding thanks to robust performance and a remarkable price increase since Buffett initiated the investment in 2016. The stock price has surged nearly tenfold since then.
At the time of Berkshire’s initial purchase, Apple shares traded at approximately 10 times earnings. Given the success of the iPhone and iPad, which generated billions in free cash flow, Buffett invested $36 billion in Apple’s stock over the subsequent years.
Apple has consistently produced significant earnings growth and free cash flow since the acquisition. New product lines, such as the Apple Watch and AirPods, alongside a high-margin services segment, drive ongoing expansion. As Apple integrates more artificial intelligence (AI) features into its devices, this segment is set for further growth.
However, a majority of Apple’s price growth since 2016 can be attributed to multiple expansions rather than earnings growth. Currently, the stock trades at about 30 times forward earnings. Buffett’s decision to reduce Berkshire’s stake over the past year suggests he finds the current valuation excessive.
Apple’s expansive capital return program ensures shareholders receive increasing dividends annually, providing justification for its premium market valuation. While Buffett may seek a better entry point for the stock, he retains a substantial investment in Apple, demonstrating his confidence in the company.
2. American Express: 14.3% of Invested Assets
American Express (NYSE: AXP) represents one of Berkshire Hathaway’s oldest holdings, and Buffett has indicated no intentions to divest. Berkshire’s initial investment of $1.3 billion in the mid-1990s now holds a value of approximately $40.5 billion. Throughout this time, American Express has consistently paid substantial dividends to shareholders, with Berkshire expected to receive around $500 million over the coming year.
American Express uniquely issues credit cards while running the payment network for those cards. Unlike many banks that partner with external payment networks, Amex generates higher revenue per transaction, reducing reliance on interest from consumer debt.
Over time, American Express has diversified its offerings, targeting affluent consumers with a variety of credit products. Its portfolio now includes interest-bearing accounts, which contributed to an 18% revenue increase last year, comprising about a quarter of total revenue. Additionally, the popularity of annual fees for premium products, especially among younger consumers, suggests strong future growth for the company.
American Express shares currently trade at under 18 times forward earnings. Given its focus on wealthier clients, Amex’s growth in fees and loans can provide stable financial results with limited downside risks. This positions the stock as a compelling value opportunity.
3. Bank of America: 10.1% of Invested Assets
Another stock recently trimmed from Berkshire’s holdings is Bank of America (NYSE: BAC), where Buffett was an early investor in 2011. Berkshire initially invested $5 billion in the bank, receiving preferred stock with a 6% annual dividend and warrants for 700 million shares of common stock.
Following Bank of America’s dividend increase in 2017, the common shares became more valuable than the preferred shares. Buffett decided to exercise Berkshire’s warrants, a move reflecting his continuing confidence in the bank’s potential.
Bank of America Thrives Amid Rising Interest Rates and Solid Growth
Berkshire Hathaway’s investment in Bank of America remains strong as the bank continues to show resilience since the financial crisis. Over the last few years, Bank of America has expanded significantly by opening hundreds of new financial centers, which allowed it to gain 213,000 net new consumer checking accounts last quarter. This achievement marks six consecutive years of quarterly growth. Additionally, the bank is experiencing robust growth across its commercial and investment banking, credit card issuance, and wealth management sectors. Importantly, every revenue stream for Bank of America saw an increase last quarter.
Despite its overall success, Bank of America has faced challenges due to rising interest rates over the past two years. The bank’s portfolio includes longer-dated securities compared to many of its competitors. Therefore, when interest rates rose in 2022 and 2023, Bank of America experienced a decline in its net interest income. However, as interest rates begin to decrease, the bank is in a strong position to rebound, with its net interest income nearing previous peaks.
The impressive performance over the past year has not gone unnoticed. Bank of America’s stock has surged more than 50% since this time in 2023, which has increased its valuation to nearly 1.6 times its tangible book value. Although Warren Buffett sold some shares in the third and fourth quarters of last year when the valuation seemed high, the current valuation still reflects a reasonable investment considering the company’s current strength and momentum.
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American Express is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Adam Levy has positions in Apple. The Motley Fool has positions in and recommends Apple, Bank of America, and Berkshire Hathaway. 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.
