The amount of data available to investors on Wall Street can sometimes be overwhelming. A relatively constant stream of earnings reports and economic data releases can make it easy for something important to fall through the cracks.
On Feb. 14, what's arguably the most important data dump of the entire first quarter occurred -- and you might have missed it. February 14 marked the deadline for institutional investors with at least $100 million in assets under management to file Form 13F with the Securities and Exchange Commission. A 13F provides a concise way for investors to see which stocks Wall Street's most-prominent money managers purchased and sold in the latest quarter (in this instance, the December-ended quarter).
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Though there are dozens of high-profile asset managers, none is more closely monitored than Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett. The aptly dubbed "Oracle of Omaha" has run circles around the benchmark S&P 500 since becoming CEO of Berkshire six decades ago.
Perhaps most important, Berkshire's chief is a big believer in portfolio concentration. This is to say that Buffett piles Berkshire Hathaway's invested capital into his best ideas. Following the release of Berkshire's 13F on Feb. 14, we now know that 60% ($180 billion) of the $299 billion portfolio Buffett oversees at his company is invested in just four magnificent stocks.
Apple: $73.4 billion (24.6% of invested assets)
Despite selling more than 615 million shares of tech goliath Apple(NASDAQ: AAPL) from Oct. 1, 2023 through Sept. 30, 2024, it's still the unquestioned largest holding in Buffett's portfolio at Berkshire Hathaway.
One of the reasons Buffett appreciates Apple is the company's rock-solid management team. In addition to improving the physical products that made Apple a household name across the world (e.g., iPhone, Mac, and iPad), CEO Tim Cook is overseeing a steady transformation that emphasizes subscription services. A services-driven platform will enhance Apple's already impressive customer loyalty, improve its operating margin over time, and help smooth out the revenue peaks and valleys that typically accompany major iPhone replacement cycles.
Further, Cook is leaning into the artificial intelligence (AI) hype by deploying Apple Intelligence into its physical devices. Apple Intelligence is the company's AI model that can help users with summarizing text and creating images, among other tasks.
Apple also stands out for its world-leading capital-return program. Specifically, no publicly traded company has repurchased more of its own stock. Since the start of 2013, Apple has bought back almost 43% of its outstanding shares at a cost of close to $750 billion. For companies with steady or growing net income, buybacks can increase their earnings per share (EPS).
On the other hand, Apple stock is historically pricey. Its trailing-12-month price-to-earnings (P/E) ratio of almost 39 represents a 33% premium to its trailing-five-year average. With Buffett being an unwavering value investor, this might help explain why 67% of Berkshire's stake in Apple was sent to the chopping block.
Image source: American Express.
American Express: $47.2 billion (15.8% of invested assets)
The No. 2 holding in the Oracle of Omaha's $299 billion portfolio at Berkshire Hathaway is the second longest-tenured stock: credit-services provider American Express(NYSE: AXP). "AmEx," as it's better known, has been a continuous holding since 1991.
Arguably the biggest catalyst behind AmEx's decades of success is its ability to benefit from both sides of a transaction. In the U.S., it holds the third-highest share of credit card network purchase volume, which allows it to collect fees from merchants for facilitating payments.
But it's also a lender, with more than 141 million American Express credit cards issued globally. These cards provide high-margin annual fees and/or interest income that can pad American Express's bottom line. Long periods of economic expansion are the ideal recipe for AmEx to shine.
However, it's ideally positioned to navigate rough patches, as well. The reason being that AmEx has an uncanny ability to attract high earners as cardholders. The well-to-do are less likely to fail to pay their bills or meaningfully alter their spending habits during periods of mild economic turbulence. For AmEx, it means a quick bounce-back from economic downturns.
The icing on the cake is that Berkshire's low cost basis in AmEx (around $8.49 per share) produces a 33% annual yield relative to cost -- i.e., Buffett is doubling his initial investment in AmEx from dividend payouts alone every three years.
Bank of America: $31.9 billion (10.7% of invested assets)
The third magnificent stock that makes up a sizable percentage of Buffett's 44-stock portfolio at Berkshire Hathaway is Bank of America(NYSE: BAC). Even after Buffett green-lit the sale of 352.6 million shares of BofA since July 17, 2024, it still accounts for more than 10% of Berkshire's invested assets.
No sector is more beloved by the Oracle of Omaha than financials, and their cyclical nature is the reason why. Though recessions are a normal and unavoidable aspect of the economic cycle, they're historically short-lived. Whereas the average recession since the end of World War II resolved in 10 months, the typical period of expansion lasts around five years. The nonlinearity of the economic cycle allows Bank of America to benefit by generating high-quality loans and expanding its loan portfolio.
Another reason investors tend to gravitate to Bank of America stock is its interest rate sensitivity. Among America's largest banks by total assets, none is more sensitive to changes in the Federal Reserve's monetary policy. When the nation's central bank aggressively raised rates in 2022 and early 2023 to combat a 40-year high in the prevailing rate of inflation, BofA saw its net interest income soar.
Lengthy periods of economic growth also allow big banks to return plenty of capital to their shareholders. Berkshire is on track to receive $707.4 million in dividend income from BofA in 2025.
But in similar fashion to Apple, Bank of America isn't the screaming bargain it once was. BofA's premium to its book value is nearly at a three-year high, which might be what's encouraged Buffett to sell 34% of Berkshire's stake in the company.
Coca-Cola: $27.5 billion (9.2% of invested assets)
The fourth magnificent stock that, collectively with Apple, American Express, and Bank of America, accounts for 60% of Warren Buffett's invested assets at Berkshire Hathaway is beverage behemoth Coca-Cola(NYSE: KO). Coca-Cola is the only stock that's been held longer (since 1988) than AmEx.
One of the factors that makes Coca-Cola such a surefire long-term investment is that it's a consumer staples stock. No matter how well or poorly the U.S. and global economy are performing, consumers are still going to purchase basic need goods, which includes beverages. In short, Coca-Cola's sales and cash flow tend to be highly predictable in any economic climate.
Its geographic diversity doesn't hurt, either. With the exception of Cuba, North Korea, and Russia (the latter has to do with its invasion of Ukraine in 2022), Coca-Cola has ongoing operations in every country. This means its brand-name products are producing consistent cash flow in developed markets, while faster-growing emerging markets are pushing its sales needle higher.
Coca-Cola's premier marketing plays a key role in its success, too. It leans on its more than one century of history to connect with its mature consumers, while utilizing social media channels and artificial intelligence to tailor its message to a younger audience.
Like Berkshire's other top holdings, Coca-Cola rounds things out with a fantastic capital-return program. As of this writing on Feb. 17, its board has increased the base annual dividend for 62 consecutive years. Buffett's company is enjoying a 60% annual yield on its Coca-Cola position, relative to its cost basis.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Nvidia:if you invested $1,000 when we doubled down in 2009,you’d have $361,026!*
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $46,425!*
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $562,659!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
American Express and Bank of America 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, and Berkshire Hathaway. The Motley Fool has a disclosure policy.
