For the better part of six decades, Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) Warren Buffett, CEO has been giving a master class on investing for Wall Street. Since taking over as CEO in the mid-1960s, he has overseen a cumulative return on his company’s Class A shares (BRK.A) of 5,561,176%, as of the close on December 12, nearly doubling the annual average. total return, including dividends, of the benchmark index S&P 500.
Vastly outperforming Wall Street’s most followed stock index has earned the Oracle of Omaha quite a few achievements. That’s why investors eagerly await Berkshire’s Form 13F filings each quarter so they can see what stocks Buffett has been buying and selling.
While the Berkshire boss has historically invested in companies with sustainable moats and strong management teams, perhaps the most defining characteristic of Buffett’s investment philosophy is his penchant for concentration. He believes his best ideas are worth a huge investment.
Warren Buffett, CEO of Berkshire Hathaway. Image source: The Motley Fool.
As we prepare to turn the page on a new year, Warren Buffett appears poised to enter 2025 with 66% ($199.1 billion) of the $301 billion portfolio he oversees at Berkshire Hathaway invested in the following five unstoppable stocks.
Although the technological goliath Apple(NASDAQ:AAPL) remains the largest stake in Berkshire by a considerable amount, it’s worth noting that Buffett has overseen the sale of more than 615 million Apple shares, in total, over the previous four quarters ending September 30.
During Berkshire Hathaway’s annual shareholder meeting in May, Buffett opined that tax purposes were behind the recent selling activity. He hinted that the corporate income tax rate was likely to rise, which would make locking in considerable unrealized gains with a favorably low corporate income tax rate a smart move.
In retrospect, this has not worked as planned. With Donald Trump’s victory in November, the corporate income tax is likely to remain at its lowest level since 1939, or perhaps even lower.
Despite reducing two-thirds of Berkshire’s stake in Apple, Warren Buffett continues to appreciate consumers’ love for the Apple brand, as well as Tim Cook’s top-notch leadership. Cook is overseeing an ongoing transformation that sees his company focus on higher-margin subscription services.
Additionally, Buffett is a big fan of vigorous capital return programs. In addition to Apple paying out $1 per share in dividends each year (Berkshire is on track to collect $300 million in dividend income from its Apple stake in 2025), it has the largest stock buyback program on the planet. It has repurchased $700.6 billion in common stock since the beginning of 2013.
The second-largest holding by market value in Berkshire’s portfolio happens to be the second-longest held stock: credit services provider. American Express(NYSE: AXP). “AmEx”, as the company is more commonly known, has been a continuous holding company since 1991.
There’s no industry where Warren Buffett likes putting his company’s cash to work more than finance. The simple reason for this is that financial stocks are cyclical. Buffett astutely recognizes that while economic crises are normal and inevitable, they don’t last long. Companies like American Express can take advantage of a disproportionately longer period of growth.
AmEx’s secret ingredient is its ability to benefit from both sides of the trading counter. It is the No. 3 payment processor by purchase volume in the credit card network in the US, meaning it charges fees when processing payments for merchants. But it’s also a lender, allowing it to generate annual fees and/or interest income from its cardholders. Long periods of growth benefit both aspects of your operations.
Additionally, AmEx has traditionally attracted high-income earners. Affluent cardholders are less likely than average-income consumers to alter their purchasing habits during minor economic shocks or to miss paying their bills.
Finally, thanks to a cost basis of approximately $8.49 per share in AmEx, Berkshire Hathaway is earning a net dividend yield of 33% relative to its cost.
The Oracle of Omaha’s third largest holding company, bank of america(NYSE: BAC)is another stock that has been selling more frequently lately. According to Form 4 filings, Buffett has sold more than 266 million BofA shares since July 17.
The reason for this sales activity could be similar to that of Apple. Berkshire Hathaway has considerable unrealized gains from its stake in Bank of America, and Buffett may be looking to lock in those gains with a favorably low tax rate.
On the other hand, we may be witnessing Warren Buffett’s discontent with stock valuations in the broader market. Buffett has overseen more stock sales than purchases for eight consecutive quarters, which is a pretty strong indication that he and his top advisors are struggling to find value in a historically expensive stock market. While BofA isn’t particularly expensive, it’s no longer the bargain, relative to book value, that it once was.
The bright side is that Bank of America is the most interest-sensitive of America’s largest banks by total assets and has benefited immensely from the steepest rate-hike cycle by the Federal Reserve since the early 2000s. 1980. Even after the country’s central bank recently initiated a rate easing cycle, this slow process should allow BofA to continue reaping the benefits of higher interest rates.
Continuing with the theme, BofA also offers a healthy capital return program. Berkshire is on track to collect nearly $797 million in dividend income from Bank of America in 2025. Additionally, BofA’s board doesn’t hesitate to approve share buybacks when the U.S. economy is expanding.
Image source: Coca-Cola.
Consumer goods colossus Coca-cola(NYSE: KO) should enter the new year as Berkshire Hathaway’s fourth-largest holding by market capitalization. It is also the oldest stock (since 1988) in the $301 billion portfolio overseen by Warren Buffett.
Buffett is a fan of keeping things simple and not overthinking his investments. Coca-Cola has an exceptionally strong and recognized brand, and sells a basic need (beverages) that will be purchased no matter how well or poorly the US or global economy is performing. This leads to highly predictable and transparent operating cash flow year after year.
Another thing that improves the predictability of Coca-Cola’s operating results is its virtually unmatched geographic diversity. With the exception of North Korea, Cuba and Russia, Coca-Cola has ongoing operations in all other countries. This means steady cash flow in developed markets, as well as the ability to drive organic growth in emerging markets. According to Kantar’s annual “Brand Footprint” report, Coca-Cola products have been the most chosen in retail stores for 12 consecutive years.
Credit must also be given to Coca-Cola’s marketing team, which has done a masterful job of bridging generational gaps to engage with consumers. The company relies on digital channels and artificial intelligence (AI) to reach its younger audience, while leaning on well-known brand ambassadors and its long-standing Christmas ties to connect with its mature consumers.
Would you be surprised if I also mentioned that Coca-Cola has a shareholder-friendly capital return program? The company has increased its payout for 62 consecutive years. Based on Berkshire’s Coca-Cola cost of just under $3.25 per share, Buffett’s company is earning a 60% net annual return on cost.
Warren Buffett’s fifth holding company, which combined with Apple, American Express, Bank of America and Coca-Cola, will represent 66% of Berkshire Hathaway’s more than $300 billion portfolio in 2025 is none other than the energy giant . Chevron(NYSE: CVX).
With more than $18 billion at stake in Chevron, along with another $12.3 billion in Western OilIt’s a pretty clear indication that the Berkshire boss expects the spot oil price to remain elevated or rise further, and there are certain macro factors that favor this sentiment.
For example, the Russian invasion of Ukraine in February 2022 calls into question Europe’s energy supply needs. Additionally, three years of reduced capital investment by major energy companies during the COVID-19 pandemic will likely make it difficult to increase global crude oil supply in the near term. When the supply of a demanded good is limited, it tends to drive up the price of that good.
However, Chevron is also an integrated energy company. Although it generates its best margins from drilling, it also operates transmission pipelines, along with chemical plants and refineries. These ancillary segments serve as a hedge in case the spot price of crude oil declines.
Like Buffett’s other major holdings, Chevron has a rich capital return program. Its board has approved dividend increases for 37 consecutive years and it has a $75 billion share buyback program.
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Bank of America and American Express are advertising partners of Motley Fool Money. Sean Williams He has positions in Bank of America. The Motley Fool has positions and recommends Apple, Bank of America, Berkshire Hathaway and Chevron. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
