62% of Warren Buffett’s $314 billion portfolio is invested in these 4 unstoppable stocks

on wall street Berkshire Hathaway (BRK.A 0.67%) (BRK.B 0.54%) CEO Warren Buffett is truly in a class of his own. Without using fancy software or trading algorithms, the Oracle of Omaha has nearly doubled the annualized total return, including dividends paid, of the benchmark over nearly six decades. S&P 500. On an aggregate return basis, we’re talking about shares of Berkshire Class A (BRK.A) which have increased in value by about 5,387,100% under Buffett’s watch.

When you offer huge returns on Wall Street, you tend to attract a crowd. Berkshire Hathaway’s annual meeting regularly draws in the neighborhood of 40,000 investors eager to hear Buffett talk about the U.S. economy, Berkshire’s holdings and his investment philosophy.

Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.

But thanks to quarterly Form 13F filings, we don’t have to wait a whole year to understand what Warren Buffett and his best investment assistants, Ted Weschler and Todd Combs, have been buying and selling.

Although Berkshire Hathaway ended the June quarter with 45 stocks and two exchange-traded funds in its roughly $314 billion investment portfolio, one of the key traits that has allowed Buffett and his team to outperform the S&P 500 for so long a lot of time is concentration. In other words, Buffett and his team strongly believe in putting additional capital to work on their best ideas.

As of the closing bell on Aug. 16, 62 percent ($193.3 billion) of the $314 billion portfolio that Warren Buffett oversees at Berkshire Hathaway was invested in just four unstoppable stocks.

Apple: $90.42 billion (28.8% of invested assets)

As has been the case for many years, the technology stock Apple (AAPL -0.83%) remains Berkshire’s main holding.

However, the Oracle of Omaha and his team have given up on one significant percentage of their company’s stake in Apple over the past three quarters. This position briefly accounted for up to 50% of Berkshire’s invested assets.

While Buffett opined during his company’s most recent annual shareholder meeting that he thinks Apple is a great company, he also suggested that corporate tax rates are likely to rise in the coming years. With Berkshire Hathaway sitting on a mountain of unrealized earnings from its Apple stake, Buffett assumed investors would eventually come to appreciate that he and his team are locking in earnings and paying a historically low tax rate.

Warren Buffett is also a die-hard fan of Apple’s market-leading stock buyback program. Adding the $26.5 billion spent on share buybacks during the company’s fiscal third quarter (ended June 29, 2024), Apple has invested $700 billion to buy back its stock since the start of the year 2013. Buybacks can incrementally increase investors’ ownership stakes as well as provide earnings per share growth.

But the cautionary tale with Apple is that its growth engine has largely stalled. While revenue related to its subscription ecosystem has grown steadily, sales for physical devices, including the iPhone, have been less than impressive.

American Express: $38.2 billion (12.2% of invested assets)

The second longest-running stock in Berkshire Hathaway’s portfolio, the credit-services Goliath American Express (AXP 0.59%)it is currently Buffett’s second largest holding. AmEx, as American Express is commonly known, has been an ongoing holding company since 1991 and is considered by Buffett to be one of his company’s eight “indefinite” holdings.

Financials are Buffett’s favorite sector to put his company’s money to work in, and the reason why is simple: they’re cyclical.

The Oracle of Omaha and his top advisors are fully aware that economic contractions and recessions are normal and inevitable. Instead of foolishly trying to (“f”) guess when these recessions will happen, the brightest minds in Berkshire are playing a numbers game that is very much in their favor. Because recessions are short-lived — nine out of 12 recessions since the end of World War II resolved in less than 12 months — and most booms last several years, it pays to buy and own high-performing businesses quality that grow in step with the US economy.

What makes AmEx special is its ability to benefit both sides of the transaction aisle. It is currently the third-largest payment processor by credit card network purchase volume in the US, which allows it to collect fees from merchants.

But it is also a lender to consumers and businesses through its various credit cards. This helps facilitate the collection of annual fees and interest income. Being able to double down during long periods of economic expansion and play both sides of the retail counter was his not-so-subtle secret to success.

Image source: Getty Images.

Bank of America: $37.08 billion (11.8% of invested assets)

The third-largest holding in Berkshire Hathaway’s 45-stock, $314 billion portfolio overseen by Buffett is the money center giant Bank of America (BAC 1.26%). Following the sale of more than $3.8 billion of BofA stock by Berkshire’s investment team between July 17 and August 1, Bank of America trailed AmEx in the waiver order.

Buffett’s love for bank stocks also revolves around their cyclical nature. During recessions, banks typically experience higher loan losses and loan defaults. By comparison, their loan portfolios typically expand during substantially longer periods of economic growth.

What has made Bank of America such an attractive investment over the past couple of years is its sensitivity to changes in interest rates.

Beginning in March 2022, the Federal Reserve began its steepest rate hike cycle since the early 1980s. No money center bank benefited more, in terms of net interest income added, than BofA. Conversely, an expected rate easing cycle has the potential to negatively impact Bank of America’s net interest income more than its peers. This may be why Buffett has been selling his crew lately.

In addition, Bank of America’s management team has not been shy about investing in digitalization. By mid-2024, 77% of its consumer households were banking digitally and 53% of all consumer loans were completed online or through the mobile app. Digital transactions are considerable cheaper for banks than in-person interactions, which should ultimately lead to improved operational efficiency for BofA.

Coca-Cola: $27.67 billion (8.8% of invested assets)

The fourth-largest holding in Buffett’s $314 billion portfolio at Berkshire Hathaway, which, along with Apple, American Express and Bank of America, collectively accounts for 62 percent of invested assets, is the beverage mainstay. Coca cola (K.O -0.34%). Coca-Cola is Buffett’s longest continuously held investment at 36 years (since 1988).

The nice thing about consumer staples stocks is that they are a must, no matter what happens to the US/global economy or the stock market. As a supplier of branded beverages, demand for the company’s products tends to be very predictable from year to year.

It also doesn’t hurt that Coca-Cola is one of the most recognizable brands in the world. Its marketing team relies on digital media channels and artificial intelligence (AI) to reach a younger audience, while relying on well-known brand ambassadors and over a century of history to connect with consumers its mature.

To add to this point, Kantar’s annual “Brand Footprint” study found that Coke products were the most chosen products on retail shelves for 12 consecutive years. Having a strong brand usually translates into exceptional pricing power.

The cherry on top for Coca-Cola is that it is a geographically diversified company. With the exception of Cuba, North Korea and Russia, it has ongoing operations in every country. This ensures consistent operating cash flow from developed markets as well as the ability to move the organic growth needle in emerging markets.