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How Warren Buffett’s net worth rose above Elon Musk and Jeff Bezos

Warren Buffetts Berkshire Hathaway has returned 5.9% year-to-date, against the performance of other billionaire-owned companies like Tesla and Amazon, which are down 44.7% and 43.5%, respectively. Strategic investments in energy stocks this year have helped the investing powerhouse outperform not only other billionaires but also the major index.

- Energy stocks have been key in lifting Berkshire Hathaway this year

- Tech companies like TSMC and Activision Blizzard should help drive long-term growth for Berkshire Hathaway

- The Financials Select Sector SPDR Fund offers exposure to much of Berkshire Hathaway’s portfolio

Warren Buffetts net worth has recently risen to $110bn, up almost $774m over the past year, thanks to strong performance from Berkshire Hathaway [BRK-A]. According to Bloomberg, Buffetts success comes in striking contrast to other billionaires like Bill Gates and Jeff Bezos, who have experienced huge drawdowns this year of $20.8bn and $74.9bn, respectively.

Despite commentary that Buffett has 'lost his touch' due to recent years of underperformance, Berkshire Hathaway is demonstrating how investment in businesses with strong fundamentals continues to pay off in uncertain times.

Buffetts largest investment is Apple Inc [AAPL], with 41% of Berkshire Hathaways assets under management (AUM) in the tech companys stock. Alongside Apple, Buffetts attraction to value and quality has led to investments in staples like Coca Cola [KO] and American Express [AXP] over the years. More recently, Buffett and Charlie Munger, vice chairman of the board of Berkshire Hathaway, have invested in Chevron [CVX] and Occidental Petroleum [OXY]. Most recently, there has been a notable $4bn investment into Taiwan Semiconductor Company (TSMC) [TSM].

An energy boost for investments

Although Apple has performed better than most this year with losses of only 16.3% year-to-date, energy stocks have been on a tear. The rising cost of energy over the last year, as well as the cheap valuations of many companies in this sector, has meant Chevron and Occidental have significantly boosted performance for Berkshire Hathaway. Share prices for the energy giants have surged 52% and 134% respectively in the past year.

Meanwhile, strategic investments in companies like Activision Blizzard [ATVI] have performed well. Microsoft [MSFT] recently made a $69bn bid for the video game creator of Call of Duty. Though the US Federal Trade Commission (FTC) is likely to block the move, Buffetts acquisition of Activision Blizzard’s stock prior to the Microsoft bid is a sign of his foresight.

With Buffetts quality bias, many staples such as Coca Cola, Moodys [MCO] and Bank of America [BAC] also sit in Berkshires portfolio. The lower volatility and more assured revenues of such companies has meant they have largely outperformed in this years market sell off. Coca Cola has gained 11.9% year-to-date, while Moodys and Bank of America have had relatively modest losses at 22% and 17% respectively.

Staples will smooth tech investment

In recent years, Berkshire Hathaway has surprised onlookers, with its interest in tech companies like Activision Blizzard and TSMC. Previously, Buffett would have regarded these investments as more of a risk, leading some to suspect the recent moves have been initiated by Buffetts prodigy and expected successor, Greg Abel. Buffett has traditionally invested in businesses that he understands well, and tech isnt an area of expertise for him.

Although Berkshire Hathaway has made investments in the IT sector, this only accounts for a small portion of its total revenue. Also on its books are its insurance conglomerate, as well as its railroad, utilities and energy companies. These businesses produce significant cash flows for Berkshire Hathaway and are in staple industries, providing confidence for continued performance. The conglomerates insurance arm produced $62.7bn in revenue for its third quarter (Q3) this year. Low growth and huge cash piles in these industries should help smooth the performance of Berkshire Hathaways tech investments in the future and help the business continue to grow.

Fund in focus: Financials Select Sector SPDR Fund

The simplest way to gain exposure to Berkshire Hathaway via an ETF is through the Financials Select Sector SPDR Fund [XLF]. This ETF invests in all major financial stocks in the US, with Berkshire Hathaway as its largest holding at 14.39% of AUM as of 1 December. It also holds JPMorgan [JPM], Bank of America [BAC] and Morgan Stanley [MS] among its top 10 holdings.

For exposure to Berkshire Hathaway with a broader basket of stocks, the iShares Core S&P 500 Trust ETF would also fit the bill. The multinational conglomerate is currently the fifth largest holding in the fund at a weighting of 1.66%, mirroring the S&P 500 as of 2 December. The simplest way to gain exposure to Buffetts huge business is by purchasing the stock outright.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

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