When Warren Buffett speaks, investors listen. The 89-year-old guru has lived by a few important investment tenets which include investing in businesses with strong economic moats, transparent and accountable management, and companies that pay dividends. His company, Berkshire Hathaway (NYSE: BRK-A) is valued at nearly half a trillion dollars and has seen revenue growth of over 87% in the last decade. Here, we include the top five holdings in the Berkshire portfolio.
|Company||% of Berkshire’s Portfolio|
|Bank of America||10.85|
Buffett has always been a fan of his $20 flip phone; that is, until February of this year, when he chose to invest in an Apple (NASDAQ: AAPL) iPhone. He also brought his total ownership in the company to approximately 5.5%. Buffett, never a fan of tech companies, was introduced to Apple by one of his portfolio managers in 2016 and found value in the company after seeing his great-grandchildren’s fidelity to the brand. Good thing too, as Apple’s growth and resilience to the pandemic has been notable.
The first $2 trillion organization in the U.S. has had incredible sales of not only its insanely popular iPhone and iPad products, but also of its wearables like the Apple Watch and AirPods. Here’s a breakdown of its global market share:
|Global Market Share(%)||14.6||58.48||55||41|
Apple’s revenue has grown nearly 300% in the last decade and it offers a quarterly dividend of $0.82. As of August 21, its stock price is $491 and will be splitting 4-to-1 on August 31.
2. Bank of America
In the last few months, Berkshire Hathaway has added to its Bank of America (NYSE: BAC) holdings by purchasing $1.7 billion worth of the company’s stock to have an approximately 11.8% ownership of the bank. A strange move considering that banks are facing some serious headwinds thanks to the pandemic, but the stock price is considered cheap considering the quality of the company. Bank of America has a Common Equity Tier 1 (CET1) ratio of 11.6%, 2.1% over what it should have. This number is used to measure a bank’s capital strength and even if the company covered all of its losses in its loan book (roughly 4.7%), it would still be at 10.25%. Additionally, the stock is trading at $24.90 on August 21, less than ten times earnings.
Buffett is rumored to consume no less than five cans of Coca-Cola (NYSE: KO) every day; he has been a fan of the product since selling bottles for a profit at six years of age. As Berkshire’s longest-held and never sold equity, the company’s stock price has surged 1750% since 1988, the year Buffett first took a position. It holds approximately a 9.31% stake in the beverage company and has received nearly $7 billion in dividends alone since 1995. Buffett understands that the company is facing obstacles in a more health-conscious market but feels that Coca-Cola has the world’s best distribution system and that should serve it well as it expands to other products like energy drinks and alcoholic beverages.
4. American Express
Buffett first invested in American Express (NYSE: AXP) in 1964 following a scandal involving vegetable oil futures that drove its stock price down. Buffett understood that the company’s brand encouraged loyalty and a sense of belonging to a special club and has over time acquired nearly 19% of AMEX. It was a great investment since AMEX’s stock price began to grow once the scandal subsided and will grow even more as the company is the first foreign credit card company to be allowed to operate in China starting this year, the world’s highest populated country with a multi-trillion dollar market; in fact, China’s mobile transactions alone exceeded $27 trillion in 2018. The company has had steady revenue growth of nearly 57% in the last decade and offers a quarterly dividend of $0.43.
5. Kraft Heinz
With nearly a 27% stake in Kraft Heinz (NASDAQ: KHC), Berkshire Hathaway is the company’s biggest shareholder. This is problematic as the company hasn’t been doing well lately and Buffett regretted purchasing shares of the company but will find it difficult to unload with such a huge position. Although the company got a boost from the pandemic, long-term outlook doesn’t look good as people are shifting from pre-packaged foods and shelf staples for healthier options. Fortunately, it’s the only company along with Apple in Buffett’s top five that has seen a nice YTD gain this year of over 16%.
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