53% of Warren Buffett's $259 Billion Stock Portfolio Is Invested in Just 3 Stocks
Investors can always look for stock ideas in Berkshire's large equities portfolio.
Buffett and his team do their homework and are never afraid to go all in on stocks.
10 stocks we like better than Apple ›
Warren Buffett will likely go down as the greatest investor of all time. Unfortunately for the countless market watchers that have followed the Oracle of Omaha for decades, the 94 year old is set to retire as the CEO of Berkshire Hathaway at the end of the year. He will remain chairman of the board of directors.
Buffett has never been a big believer in portfolio diversification, calling it protection against ignorance. His strategy has certainly paid off. Between 1965 and 2024, Berkshire's stock generated compound annual gains of 19.9%, compared to 10.4% for the broader benchmark S&P 500 including dividends. Buffett and his team continue to deploy this strategy today.
At the end of the first quarter of the year, over half of Berkshire's $259 billion equities portfolio was invested in just three stocks.
Buffett and Berkshire began buying the consumer tech giant Apple (NASDAQ: AAPL) in 2016. Buffett reportedly first got interested in the stock after hearing how distraught one of his friends was after losing his iPhone. That made Buffett realize how strong the brand had become, something Buffett looks for in all of his major holdings. Berkshire eventually built its position in Apple to over 40% of the total portfolio.
However, since the fourth quarter of 2023, Berkshire has sold some two-thirds of its position in Apple. Berkshire may have sold for several reasons including the iPhone losing market share or the stock being overvalued, or Berkshire simply deciding to get more defensive -- the large conglomerate has piled into record levels of cash.
Berkshire also seems to have timed its sales of Apple right because the stock is down about 15% this year (as of July 3), largely due to tariffs. President Donald Trump's administration has levied high tariff rates in countries where Apple houses much of its production, such as China and Vietnam.
I wouldn't say that Apple concerns me too much because the company will always have one of the most desirable brands and some of the most desirable products in the world. However, I'm not particularly optimistic about the company right now. For one, recent trade deals with China and Vietnam include much higher tariff rates than in the past.
Analysts have also recently come out and said that the company's AI capabilities are not yet compelling enough to be a "game changer," particularly when it comes to the iPhone. Apple's current forward price-to-earnings ratio of 28.7 is right around its five-year average, another reason the stock is not at the top of my list right now.
It will be interesting to see if Berkshire continues to sell more of its Apple position this year.
Credit card powerhouse American Express (NYSE: AXP) is one of the longest-owned stocks by Buffett and Berkshire, with the company purchasing the bulk of its position in 1991.
In the past, Buffett has reportedly called the AmEx brand "special," and it's easy to see why. People not only buy AmEx cards because they are credit cards, but also because flashing the AmEx brand comes with a certain status, whether it's being well off or trendy.
Perhaps that's why AmEx's platinum card fetches close to a $700 annual subscription fee. AmEx also tends to attract higher-net-worth customers who are more resilient during economic downturns. This shows how AmEx's strong brand translates into a financial strength for the company.
AmEx also has a very unique and attractive business model. Not only does the company extend credit on its debit and credit cards, but AmEx runs a closed-loop payments system in which it facilitates most of the work required in completing card transactions, collecting significant fee income from facilitating these transactions. Strong payment networks can receive strong multiples from the market.
Despite trading around all-time highs, AmEx's unique business model and revenue diversification as well as looming deregulation in the banking sector (that should enable large banks to return more capital to shareholders) make the stock a buy.
Iconic beverage maker Coca-Cola (NYSE: KO) is another stock that Buffett and Berkshire have owned for many years, since 1988. When Buffett and Berkshire buy stocks, they look for companies that will be strong enough to weather an entire economic and interest rate cycle. Coca-Cola is one of these companies.
When Trump's tariff announcements crushed the market in April, Coca-Cola remained resilient and the stock has performed well this year, up over 15%. The company is guiding for 5% to 6% of organic growth this year and management also discussed how it has flexibility to offset some of the impact from aluminum tariffs by focusing on plastic packaging.
Coca-Cola also regularly innovates in the beverage space. In addition to its iconic brands, the company now owns coffee and tea brands, juices, water, alcohol, and much more.
The beverage king is also an excellent way for investors to generate passive income. Its dividend yield is close to 2.90%, and the company has paid and raised its annual dividend for 63 straight years. Coca-Cola has returned over $93 billion in dividends to shareholders since 2010. Expected free cash flow of $9.5 billion this year exceeds the projected nearly $8.8 billion of estimated dividend payments.
Coca-Cola will never be a fast-growing AI stock, but it's good to have some exposure to the consumer staples sector, which tends to outperform during economic downturns. Coca-Cola is definitely one of the higher-quality consumer staple stocks and when you factor in the dividend, it's an easy buy.
Before you buy stock in Apple, consider this:
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American Express is an advertising partner of Motley Fool Money. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool has a disclosure policy.
53% of Warren Buffett's $259 Billion Stock Portfolio Is Invested in Just 3 Stocks was originally published by The Motley Fool
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