Warren Buffett's company, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), holds dozens of different stocks in its portfolio. But there is a high level of concentration at the top, with just seven stocks accounting for approximately 84% of its total holdings as of its latest quarterly report. And these companies can tell investors a lot about Buffett's broad, long-term strategy.
Strong consumer brands at the top
Buffett's top holding is Apple (NASDAQ: AAPL). It has long been one of his favorite stocks, with its popular products and strong customer base.
Buffett loves great brands, and Apple has proved that it is among the best of the best. In the past, he's called Apple the "best business I know in the world." In the trailing 12 months, the company has generated more than $100 billion in free cash flow.
Given his admiration for the stock, it's hard to imagine any other investment could take the top spot in Berkshire Hathaway's portfolio. At 40.3% of Berkshire's holdings, the iPhone and iPad maker is far and away the top position, even after a little trimming in the first quarter.
Another company that Buffett loves is Coca-Cola (he's often spotted drinking its products). Its strong brand has allowed the company to fight off the effects of inflation by passing along higher costs to consumers while still being able to generate growth.
Last year, sales rose by 6%, and earnings per share were even more impressive, rising by 13%. At around 7.3%, Coca-Cola is the fourth-largest holding in Berkshire's portfolio, based on its value at the end of the first quarter.
The final consumer goods stock within Berkshire's top seven is Kraft Heinz. Buffett has admitted in the past that Berkshire overpaid for the stock, but like Coca-Cola and Apple, it has been a fixture amid its top holdings. At 3.6% of the portfolio's total weight, it's barely hanging on to the No. 7 spot. It has many strong brands, including Oscar Mayer, Philadelphia cream cheese, and Jell-O.
In total, these consumer products companies account for a little over 51% of Berkshire's total portfolio, highlighting the value that Buffett places on companies with strong, iconic brands.
Financial stocks are a great way to bet on the economy
He is also fond of financial institutions and insurance companies, viewing them as a way to bet on the long-term health of the U.S. economy -- a good move, in Buffett's eyes.
The top two financial stocks in Berkshire's portfolio are Bank of America (11.7%) and American Express (10.3%). They are the largest holdings after Apple and account for right around 22% of the portfolio's weight.
Bank of America, one of the nation's top banks, is in a great position to benefit from a growing economy. And while there have been concerns with regional banks in the past few years, a top bank stock such as Bank of America provides a lot of long-term stability for Berkshire's portfolio.
Buffett loves credit card companies (Visa and Mastercard are in his portfolio as well), but Amex has an elevated status. Part of the reason could be that, like Apple, it caters to an affluent customer base, making it a safer option, especially amid a challenging economy.
Oil and gas stocks can add some important diversification during inflationary periods
There are also two stocks in Berkshire's top seven devoted to the oil and gas industry:Chevron (5.8%) and Occidental Petroleum (4.8%). Energy stocks can provide investors with some good returns amid inflation, and many of them -- like Chevron and Occidental -- also pay dividends.
Over the past three years, these two stocks have generated market-beating returns, with Occidental surging 160% and Chevron rising by 58% -- far higher than the S&P 500's 22% gains during that time frame.
For investors worried about persistent inflation, or looking for a way to diversify, these are a couple of solid stocks within the oil and gas industry; both generate double-digit profit margins.
Should your portfolio follow the Berkshire mold?
Berkshire's portfolio has some good diversification among its top seven stocks. There are good reasons for investors to buy the same or similar stocks. Together, they can provide you with diversification, dividends, help in fighting inflation, and safety even in a challenging economy.
If you're not sure which stocks to buy, Berkshire's top seven can be a great place to start looking.
Should you invest $1,000 in Berkshire Hathaway right now?
Before you buy stock in Berkshire Hathaway, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $544,015!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of May 3, 2024
Bank of America is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Chevron, Mastercard, and Visa. The Motley Fool recommends Kraft Heinz 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.
