For nearly 60 years, Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett has been delivering outsized returns for his investors. Whereas the benchmark S&P 500 has gained a little over 34,000%, including dividends paid, since the "Oracle of Omaha" took over as Berkshire's CEO in the mid-1960s, Buffett has overseen an aggregate return in his Class A shares (BRK.A) that surpassed 5,100,000%, as of the closing bell on April 5.
Buffett's secret to handily outpacing Wall Street's major stock indexes is really no secret at all. For decades, he and his investment team -- which until his recent passing included the affably named "Architect of Berkshire Hathaway," Charlie Munger -- have sought out brand-name, time-tested businesses with well-defined competitive advantages and exceptional management teams.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
But the other piece of the puzzle that's not given nearly enough credit for Berkshire Hathaway's long-term outperformance is Warren Buffett's preference for portfolio concentration. Although his company's $370 billion portfolio holds stakes in 45 stocks and two index funds, a majority of invested assets has been put to work in a small number of companies.
Let's take a closer look at all 27 companies Warren Buffett and his investment team have at least $1 billion of Berkshire's capital invested in.
Berkshire Hathaway's seven core holdings
There's absolutely no question the Oracle of Omaha and his closest aides, Todd Combs and Ted Weschler, favor putting a lot of money to work in their top investment ideas. As of the closing bell on April 5, nearly 81% of Berkshire's $370 billion portfolio could be traced to seven core holdings:
- Apple(NASDAQ: AAPL): $153,564,865,800 in market value
- Bank of America(NYSE: BAC): $38,329,137,943
- American Express(NYSE: AXP): $33,727,316,322
- Coca-Cola: $23,804,000,000
- Chevron(NYSE: CVX): $20,376,681,482
- Occidental Petroleum(NYSE: OXY): $17,175,255,364
- Kraft Heinz: $12,068,026,355
Tech stock Apple was described by Warren Buffett as "a better business than any we own" during Berkshire's annual shareholder meeting last May. Aside from exceptional branding, a loyal customer base, and an unbeatable share repurchase program, innovation has been the company's driving force.
Apple's iPhone is the clear leader in domestic smartphone market share, and CEO Tim Cook has been overseeing his company's steady transition toward a subscription services-driven future. Subscriptions should allow Apple to generate a higher operating margin and more consistent revenue during iPhone upgrade cycles.
These core holdings also demonstrate Buffett's longtime love of financial stocks, as well as his newfound favor toward energy stocks.
The beauty of financial stocks like Bank of America and American Express is that they benefit from disproportionately long periods of economic growth. Whereas recessions last mere months, most expansions endure for multiple years. This allows Bank of America to grow its interest income-generating loan portfolio over time, while American Express can double-dip and collect higher fee revenue as a payment processor for merchants, as well as interest income from its cardholders.
The more than $37 billion invested in Chevron and Occidental Petroleum, on a combined basis, looks to be a clear indication that Buffett and his team expect the spot price for crude oil to remain above its historic average. Years of capital underinvestment by major energy companies during the COVID-19 pandemic has led to tight global oil supply. As long as this tightness persists, the high-margin drilling segments for Chevron and Occidental should benefit.
Image source: Getty Images.
Warren Buffett's other billion-dollar bets (and potential future core holdings)
Beyond the Oracle of Omaha's seven core bets are 20 additional holdings that currently have a market value exceeding $1 billion. Some of these stakes are well on their way to becoming core holdings:
- Moody's: $9,682,147,772
- Mitsubishi(OTC: MSBHF): $8,210,607,679
- Mitsui(OTC: MITSF): $5,831,542,812
- Itochu(OTC: ITOCF): $5,300,908,992
- DaVita: $4,822,729,108
- Citigroup: $3,403,079,495
- Kroger: $2,865,500,000
- Sumitomo(OTC: SSUM.Y): $2,447,556,628
- Marubeni(OTC: MARUY): $2,425,730,018
- VeriSign: $2,407,028,434
- Visa(NYSE: V): $2,299,558,064
- BYD: $2,238,515,778
- Mastercard(NYSE: MA): $1,902,229,093
- Amazon: $1,850,700,000
- Capital One Financial: $1,789,842,226
- Liberty SiriusXM Series C: $1,786,465,937
- Aon: $1,307,859,000
- Nu Holdings: $1,283,283,032
- Ally Financial: $1,113,020,000
- Charter Communications: $1,024,203,428
What stands out most about these "other" billion-dollar bets is Warren Buffett's faith in the five Japanese trading houses: Mitsubishi, Mitsui, Itochu, Sumitomo, and Marubeni. These are businesses that somewhat mirror Berkshire Hathaway in that they have their hands in multiple aspects of their domestic (Japan) economy, including food/consumer products, energy (petroleum/natural gas), and chemicals.
All five Japanese trading houses are expected to be longtime holdings for Berkshire Hathaway, according to Buffett's latest annual letter to shareholders, and they all trade at reasonably low price-to-earnings ratios.
These billion-dollar bets also provide broader scope of just how much the Oracle of Omaha and his team favor financial stocks. While BofA and AmEx are the cream of the crop, there's sizable representation (in dollar figures) from payment processors (Visa and Mastercard), credit-service providers (Capital One Financial and Ally Financial), and big banks (Citigroup) in Berkshire's $370 billion portfolio.
Visa and Mastercard are, arguably, the steadiest growth stocks Berkshire Hathaway holds stakes in. Though they both benefit from lengthy periods of domestic and global expansion, their avoidance of lending and sole focus on payment facilitation is what makes them great.
Since neither Visa nor Mastercard lend money, neither company is forced to set aside capital to cover loan losses and/or credit delinquencies during recessions. This financial flexibility allows both companies to quickly bounce back from downturns in the economy.
The tail-end of Berkshire's billion-dollar bets is also where you begin to see the undeniable influence of Combs and Weschler creep in. As an example, the $1.85 billion position Berkshire has in e-commerce titan Amazon isn't Buffett's doing. Rather, Combs and/or Weschler built up this position. Although Buffett will, on rare occasion, put his company's capital to work in high-growth companies, seeking out plain-as-day value stocks has long been his area of expertise.
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American Express, Ally, Bank of America, and Citigroup are advertising partners of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Sean Williams has positions in Amazon, Bank of America, Mastercard, and Visa. The Motley Fool has positions in and recommends Amazon, Apple, BYD, Bank of America, Berkshire Hathaway, Chevron, Mastercard, Moody's, VeriSign, and Visa. The Motley Fool recommends Kraft Heinz, Kroger, Nu Holdings, and Occidental Petroleum and recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
