The Top 5 Stocks In Berkshire Hathaway’s Portfolio
The top 5 Warren Buffet stocks are:
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Apple Inc. (AAPL): Global brand, loyal customer base, strong financials
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Bank of America Corp. (BAC): Strong financial performance, undervalued, economic tailwinds
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American Express Co. (AXP): Premium brand, superior credit quality, wider revenue stream.
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Coca-Cola Co (KO): Iconic brand, competitive moat, consistent dividend growth.
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Chevron Corp (CVX): Strong financials, dividend track record, diversified operations.
In this article, TU experts break down the key aspects of the top Warren Buffett stocks for 2024. The article explores interesting details about Berkshire Hathaway's portfolio, such as its surprising investment choices, including a significant stake in a major tech company. Readers will gain insights into Warren Buffett's approach to investing, focusing on enduring and high-quality businesses.
The article also highlights the success stories behind Buffett's strategic investments in well-known companies, showcasing the dynamics of Berkshire Hathaway's diverse holdings, from insurance giants to positions in the oil and gas sector. Throughout the discussion, the article emphasizes how Buffett's principles, humility, and commitment shape the landscape of top stocks in 2024.
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How does Warren Buffett choose his stocks?
Buffett looks for businesses with strong brands, competitive advantages, and trustworthy management, applying a value investing strategy.
Warren Buffett's best 2024 investments
| Stock | Berkshire’s Stake | Value of Stake | Share of Berkshire’s Portfolio |
|---|---|---|---|
Apple Inc. (AAPL) |
5.90% |
$177.8 billion |
48.80% |
|
Bank of America Corp. (BAC) |
13.00% |
$31.7 billion |
8.70% |
|
American Express Co. (AXP) |
20.80% |
$25.6 billion |
7.00% |
|
Coca-Cola Co (KO) |
9.30% |
$23.5 billion |
6.50% |
|
Chevron Corp (CVX) |
5.90% |
$15.7 billion |
4.30% |
|
Occidental Petroleum Corp. (OXY) |
25.90% |
$12.8 billion |
3.50% |
|
Kraft Heinz Co. (KHC) |
26.50% |
$11.9 billion |
3.30% |
|
Moody’s Corporation (MCO) |
13.50% |
$9.2 billion |
2.50% |
|
Mitsubishi Corp. (MTSUY) |
8.30% |
$5.7 billion |
1.60% |
|
Itochu Corp. (ITOCY) |
7.50% |
$4.8 billion |
1.30% |
Apple Inc. (AAPL)
Warren Buffett made a surprising move by putting almost half of Berkshire Hathaway's money into Apple stock, even though it's unusual to concentrate investments this much. He did it because Apple is a globally renowned tech company with a strong track record and reasonable value.
People love Apple for its trusted and iconic brand, making customers stick around and pay more for its products. This loyalty led to a massive increase in Apple's revenue, from $183 billion in 2014 to an impressive $383 billion in 2023. Apple's ecosystem, where devices work seamlessly together, makes it hard for users to switch to other brands.
Apple's strategy of charging premium prices worked well, as seen in its operating income jumping from $53 billion to $114 billion. Despite Apple's stock price surging 600% under Berkshire's ownership, the stock's price-to-earnings ratio remains reasonable. This stability gives Berkshire little reason to sell or reduce its investment in Apple. Experts agree, citing various reasons to invest in Apple.
In 2023, he stated that "we'll never own a business that makes so many people happier and useful for 'em" as Apple.
| Investment Criteria | Apple's Attributes | Explanation |
|---|---|---|
High-Quality Business |
Consistent Financial Performance |
Apple consistently generates high free cash flow and maintains a healthy balance sheet. This financial strength aligns with Buffett's preference for companies with strong intrinsic value. |
|
Captive Market |
Loyal Customer Base |
Apple has a dedicated and loyal customer base, creating a competitive advantage and making it challenging for competitors to disrupt its dominant market position. |
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Excellent Management |
Competent Leadership |
Apple's leadership, particularly under CEO Tim Cook, has a proven track record of making strategic decisions and navigating complex markets successfully. Buffett values trustworthy and capable management. |
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Massive Defensive “Moat” |
Protective Barrier |
Apple has built a substantial “moat” around its business, preventing competitors from easily challenging its dominant position. This defensive barrier contributes to the company's long-term stability. |
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Brand Strength |
Powerful and Recognizable Brand |
Apple's brand strength and recognition contribute to customer loyalty, recurring revenue, and a sustainable competitive advantage. Buffett values brands that resonate deeply with consumers. |
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Ecosystem Growth |
Integrated Ecosystem |
Apple's tightly integrated ecosystem of hardware, software, and services creates customer lock-in, fostering loyalty and generating recurring revenue streams. Buffett understands the value of ecosystems in driving profitability. |
|
Services Segment Potential |
Diversification and Growth Potential |
Apple's services segment, including offerings like Apple Music and iCloud, is expected to be a significant driver of future growth. Buffett likely saw potential for diversification and additional revenue streams. |
|
Utility and Indispensability |
Essential Products in Daily Life |
Buffett emphasized the utility of Apple's products, considering them almost indispensable for individuals and businesses. The widespread use and daily relevance of Apple's products contribute to their value. |
Bank of America Corp. (BAC)
Imagine this: back in 2007, Warren Buffett, often referred to as the Oracle of Omaha, made a move that didn't initially seem like a winner. He bought shares in Bank of America, a decision that turned into one of his most significant investments. However, it wasn't all smooth sailing. By 2010, amidst economic challenges and the aftermath of the Great Recession, Buffett had completely sold off his Bank of America stocks.
But here's where the story takes an interesting turn. In 2011, Buffett approached the CEO of Bank of America with an unexpected offer. Instead of walking away, he decided to provide the struggling bank with a substantial amount of investment capital — $5 billion worth, to be exact. In return, Berkshire Hathaway, Buffett's company, received preferred stock and warrants.
Fast forward to 2017, and Bank of America had not only recovered but thrived. The stock, once in the doldrums, was now trading well above what Buffett initially paid. Berkshire exercised its warrants, turning a $12 billion paper profit almost instantly. As if that wasn't sweet enough, Bank of America's improving financial performance also meant increasing dividends.
Today, Bank of America stands as the second-largest holding in Berkshire Hathaway's portfolio, making up about 9.5% of its investments. The annual dividends alone now generate almost $1 billion for Buffett's company, showcasing how a seemingly rocky start transformed into a massive win. And with expectations of further payout increases, it seems like Bank of America will continue to be a key player in Berkshire's portfolio well into the future.
| Factors Driving Buffett's Investment in Bank of America (BAC) | Explanation |
|---|---|
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Strong Financial Performance |
Bank of America consistently demonstrates solid financial results, with increasing net income, revenue, and profitability. This stability aligns with Buffett's preference for predictable long-term returns. |
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Undervaluation |
Buffett likely perceives Bank of America's stock as undervalued compared to its historical metrics and future growth prospects. His investment strategy often involves identifying stocks trading below their intrinsic value. |
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Economic Tailwinds |
Rising interest rates benefit banks like Bank of America by widening net interest margins. This economic trend aligns with Buffett's long-term view and can contribute to increased profitability for the bank. |
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Dominant Market Position |
Bank of America holds the second-largest position among U.S. banks, providing a competitive advantage in terms of a large customer base, a recognized brand, and access to significant resources. Buffett values businesses with strong market positions. |
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Improved Efficiency |
Bank of America's commitment to cost-cutting and operational efficiency has enhanced its overall performance. Buffett appreciates businesses that focus on operational excellence to improve profitability. |
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Potential for Further Growth |
Despite being a large bank, Bank of America has opportunities for growth in areas like technology, wealth management, and international markets. This aligns with Buffett's strategy of investing in businesses with long-term growth potential. |
American Express Co. (AXP)
Warren Buffett's investment in American Express (AXP) has seen a remarkable turnaround, thanks to the strategic efforts of a new management team brought in between 2017 and 2018. Faced with challenges in the early 2010s, including market share loss to Visa and Mastercard, American Express focused on expanding its merchant distribution, a pivotal move to compete effectively. The shift paid off, with merchant distribution now comparable to its competitors, leading to a resurgence in active users.
Fast forward to 2022, and the company's revenue has grown significantly, reaching $52.9 billion, a 25% year-over-year increase. This growth is attributed to a surge in active American Express users, totaling 133.3 million by the end of 2022. Notably, the majority of new cardholders come from the millennial and Gen Z demographics, setting the stage for continued spending growth.
Berkshire Hathaway's stake in American Express, currently standing at over 20%, is expected to increase organically due to the company's consistent share repurchases. Over the last decade, American Express has reduced its shares outstanding by 32%, and it plans to continue this strategy. If Berkshire holds its existing shares, its ownership stake could potentially grow from 20% to 40%.
| Investment Criteria | American Express's Attributes | Explanation |
|---|---|---|
|
Strong Brand and Loyal Customer Base |
Premium brand image, loyal customer base, especially affluent individuals and businesses |
American Express's premium brand image and strong customer loyalty ensure consistent revenue, aligning with Buffett's focus on enduring customer relationships. |
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Superior Credit Quality |
Tighter underwriting process, focus on wealthier clientele |
American Express's stringent underwriting process and focus on a wealthier customer base result in lower credit loss rates, making it more resilient to economic downturns, a key factor for Buffet. |
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Wider Revenue Stream |
Acts as a payment network and a lender |
Unlike competitors like Visa and Mastercard, American Express not only operates as a payment network but also functions as a lender, providing an additional revenue stream and capturing more economic value. |
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Attractive Valuation |
Relatively undervalued compared to historical benchmarks |
Despite recent share price increases, American Express remains relatively undervalued, making it a potentially attractive long-term investment according to Buffett's value investing principles. |
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Management Execution |
Focus on improving merchant partnerships, attracting younger demographics, and expanding into high-growth markets |
Buffett admires the current management team's strategic focus on improving partnerships, attracting younger demographics, and entering high-growth markets, reflecting effective leadership. |
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Positive Future Outlook |
Well-positioned with Fed's pivot to lower rates, settled inflation, diversified revenue streams, and lower borrowing costs |
American Express is well-positioned for growth with favorable economic conditions, settled inflation, diversified revenue streams, and lower borrowing costs, contributing to a positive future outlook. |
Coca-Cola Co (KO)
In 1988, Warren Buffett, through his company Berkshire Hathaway, invested over $1 billion in Coca-Cola. This represented a 6.2% ownership stake in the company. Buffett saw Coca-Cola as a strong and valuable company that could withstand challenges and recover well. This decision marked the beginning of a significant and long-lasting investment in Coca-Cola by Warren Buffett. The below table summarizes reasons for investment by Warren Buffet.
| Investment Criteria | Coca-Cola’s Attributes | Explanation |
|---|---|---|
|
Strong Brand and Competitive Moat |
Globally recognized brand, near-monopoly in cola market |
Coca-Cola’s iconic brand and near-monopoly in the cola market create a “brand moat,” providing pricing power and customer loyalty, acting as a shield against competition. |
|
Durable High-Quality Business |
Simple, resilient business model, consistent global cash flow |
Coca-Cola’s straightforward business model generates consistent cash flow globally through a vast distribution network. A diversified product portfolio strengthens its market position. |
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Confident Management |
Shareholder-friendly, focus on improving profitability |
Buffett viewed Coca-Cola’s management as shareholder-friendly, commending their efforts in refocusing on core brands, cost-cutting measures, and commitment to increasing dividends. |
|
International Growth Potential |
Dominance in developed markets, untapped potential in emerging markets |
Buffett foresaw growth opportunities in emerging markets, leveraging Coca-Cola’s existing infrastructure for global expansion. |
|
Dividend Growth (More Recent Influence) |
Consistent dividend increases, a Dividend Aristocrat |
Coca-Cola’s 60-year streak of dividend increases makes it attractive to income investors like Buffett. In the year 2022 alone, Berkshire Hathaway, Warren Buffett’s investment firm, received a substantial $704 million in dividend income from its holdings in Coca-Cola. Looking back over 35 years, these dividend payouts from Coca-Cola have added up to an impressive sum of nearly $10.2 billion for Berkshire Hathaway. |
|
Adaptability and Innovation (More Recent Influence) |
Diversification into healthier options, innovation |
Coca-Cola has adapted to changing consumer preferences by diversifying its offerings with healthier options and zero-sugar drinks, showcasing its ability to innovate and cater to evolving trends. |
Chevron Corp (CVX)
In 2020, amidst the challenges faced by the oil and gas industry, Warren Buffett's Berkshire Hathaway seized the opportunity to invest in Chevron. The oil giant had hit a 10-year low early in the year, prompting Berkshire to initiate its stake during Q3 2020. The real buying momentum, however, surged in Q1 2022, catapulting Berkshire's Chevron position from 38.25 million shares at the end of 2021 to a substantial 161.44 million shares by March 31, 2022. While Berkshire has gradually reduced its stake since Q3 2022, as of September 2023, it still holds 110.25 million Chevron shares.
This investment move, though somewhat surprising given the volatility of the oil and gas sector, aligns with Berkshire's broader strategy. Berkshire Hathaway Energy, a major Berkshire subsidiary, has interests in utilities and oil and gas assets. Despite the industry's unpredictability, Buffett's value investing approach led to this strategic allocation, showcasing the flexibility of Berkshire's investment strategies over time.
| Investment Criteria | Chevron's Positive Attributes | Explanation |
|---|---|---|
|
Strong Financials and Profitability |
Long history of profitability, record-high earnings in 2022 |
Chevron's consistent cash flow and record-high earnings in 2022 showcase financial stability, aligning with Buffett's value investing principles that prioritize well-established companies with reliable earnings. |
|
Dividend Track Record |
Increased dividend for 39 consecutive years |
Chevron's commitment to consistently increasing dividends for 39 consecutive years appeals to Buffett's focus on long-term income generation, a key aspect of his investment strategy for Berkshire Hathaway shareholders. |
|
Efficient Operations and Cost Control |
Demonstrated efficiency and strong cost control |
Chevron's efficient operations and robust cost control, even during periods of oil price volatility, resonate with Buffett's preference for companies exhibiting a history of prudent capital allocation and operational excellence. |
|
Diversification |
Operations across the entire oil and gas value chain |
Chevron's diverse operations, spanning exploration, production, refining, and marketing, provide a well-rounded approach that helps mitigate risks associated with specific segments of the industry. Buffett values such diversification. |
|
Growth Potential |
Opportunities in renewable energy and exploration projects |
Despite being a mature company, Chevron has identified growth opportunities through ventures in renewable energy and exploration projects. This forward-looking approach to future growth aligns with Buffett's inclination towards long-term investment prospects. |
Best Stock brokers
How To Invest in Warren Buffett Stocks
Investing in Warren Buffett's stocks involves a straightforward process that aligns with general stock market investment principles.
Opening and Funding Your Brokerage Account:
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If you decide to buy individual stocks, you'll need to open a brokerage account. Choose a brokerage firm based on your preferences, considering factors like fees and features.
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After opening your brokerage account, you'll need to fund it. This involves transferring money into the account, which you can then use to buy stocks.
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Once your account is funded, you can start placing orders for the stocks you've chosen from Warren Buffet’s Portfolio. Use the information gathered during your research to make informed decisions.
Consider Berkshire Hathaway Index Funds
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If you prefer a diversified approach without researching individual stocks, consider investing in a Berkshire Hathaway index fund.
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Popular options include the Vanguard Berkshire Hathaway Index Fund Investor Shares (VBR) and the SPDR S&P 500 Berkshire Hathaway ETF (BRK.A).
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You can purchase these index funds through most major brokerage firms.
Consult a Financial Advisor:
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If you have questions or uncertainties about which stocks align with your financial goals, it's advisable to consult a financial advisor.
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A financial advisor can provide personalized guidance based on your individual circumstances and investment objectives.
Why Do Investors Love Warren Buffett?
People love Warren Buffett because he's not a quick-buck investor. He's patient and values stable, long-term growth. Buffett focuses on strong companies with lasting value, not just temporary market hype. His calm and disciplined approach, avoiding emotional decisions, resonates with those seeking stability.
Despite his success, Buffett stays humble, admitting mistakes and sharing his insights openly. Investors appreciate his emphasis on quality businesses and his commitment to improving them for the long term. His dedication to philanthropy adds another layer, showing a focus beyond personal gain to long-term societal impact.
Overall, Buffett's proven principles, consistency, and values make him a trusted figure for many investors.
About Berkshire Hathaway
Berkshire Hathaway Inc., based in Omaha, Nebraska, stands as one of the world's largest conglomerates with a market capitalization exceeding $800 billion as of January 2024. Established in 1839 initially as a textile manufacturer, the company underwent a significant transformation in 1965 under the leadership of Warren Buffett, its chairman and CEO, along with vice chairman Charlie Munger. Known for its enduring investment approach, Berkshire Hathaway prioritizes acquiring and holding onto high-quality businesses across diverse sectors, such as insurance, railroads, utilities, consumer products, and manufacturing.
Led by Warren Buffett, widely regarded as one of the most successful investors in history, Berkshire Hathaway has consistently outperformed the market. The company's substantial revenue stems primarily from its insurance business, featuring well-known companies like Geico, General Re, and Berkshire Hathaway Specialty Insurance. Beyond insurance, Berkshire Hathaway owns and manages various non-insurance businesses, including Burlington Northern Santa Fe railroad, BNSF, Dairy Queen, McLane Company, and Fruit of the Loom. The company's decentralized management style grants autonomy to its subsidiaries, contributing to its appeal for long-term investors seeking a track record of success and a commitment to quality businesses.
Expert Opinion
Buffett is renowned for his patient, value-oriented approach and ability to identify enduring businesses trading at attractive prices. The stocks highlighted, such as Apple, Bank of America, and Coca-Cola, exemplify his strategy of focusing on high-quality companies with strong management teams and long-term growth potential.
Buffett's investment decisions offer invaluable insights into time-tested principles of finding solid businesses, run by trustworthy leaders, that can weather changing economic conditions. By studying his portfolio choices over decades, we gain perspective on evaluating a company's intrinsic qualities beyond short-term fluctuations. Overall, Buffett's stock selections showcase how maintaining a long-term mindset and focusing on quality may reward investors who remain committed through market cycles.
Glossary for novice traders
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1
Broker
A broker is a legal entity or individual that performs as an intermediary when making trades in the financial markets. Private investors cannot trade without a broker, since only brokers can execute trades on the exchanges.
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2
Trading
Trading involves the act of buying and selling financial assets like stocks, currencies, or commodities with the intention of profiting from market price fluctuations. Traders employ various strategies, analysis techniques, and risk management practices to make informed decisions and optimize their chances of success in the financial markets.
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3
Investor
An investor is an individual, who invests money in an asset with the expectation that its value would appreciate in the future. The asset can be anything, including a bond, debenture, mutual fund, equity, gold, silver, exchange-traded funds (ETFs), and real-estate property.
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4
Diversification
Diversification is an investment strategy that involves spreading investments across different asset classes, industries, and geographic regions to reduce overall risk.
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5
Index
Index in trading is the measure of the performance of a group of stocks, which can include the assets and securities in it.
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Parshwa is a content expert and finance professional possessing deep knowledge of stock and options trading, technical and fundamental analysis, and equity research. As a Chartered Accountant Finalist, Parshwa also has expertise in Forex, crypto trading, and personal taxation. His experience is showcased by a prolific body of over 100 articles on Forex, crypto, equity, and personal finance, alongside personalized advisory roles in tax consultation.
Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.
Tobi Opeyemi Amure is an editor and expert writer with over 7 years of experience. In 2023, Tobi joined the Traders Union team as an editor and fact checker, making sure to deliver trustworthy and reliable content. The topics he covers include trading signals, cryptocurrencies, Forex brokers, stock brokers, expert advisors, binary options.
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