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Nearly 38% of Warren Buffett's Portfolio Is Invested in This 1 Sector If Apple Is Left Out of the Mix

Motley Fool - Sun Aug 27, 2023

Apple(NASDAQ: AAPL) makes up a huge part of Berkshire Hathaway's (NYSE: BRK.A)(NYSE: BRK.B) portfolio. It's possible for the sheer size of this position to completely overshadow all of the other stocks that Buffett owns.

But what if we factored Apple out of the equation? Nearly 38% of Buffett's portfolio is invested in one sector if Apple is left out of the mix.

A clear winner

Berkshire owns positions in 54 stocks plus two exchange-traded funds (ETFs). Ten of those stocks are in the financial services sector.

Stock% of Portfolio With Apple Included% of Portfolio Excluding Apple
Bank of America(NYSE: BAC)8.5%15.8%
American Express(NYSE: AXP)6.9%12.8%
Moody's(NYSE: MCO)2.3%4.3%
Citigroup(NYSE: C)0.7%1.3%
Visa (NYSE: V)0.6%1.1%
Mastercard(NYSE: MA)0.5%0.9%
Capital One Financial(NYSE: COF)0.4%0.7%
Ally Financial(NYSE: ALLY)0.2%0.4%
Nu Holdings(NYSE: NU)0.2%0.4%
Jefferies Financial(NYSE: JEF)<0.1%<0.1%

Data source: Berkshire Hathaway 13F filing.

Even with Apple included, these 10 stocks make up more than 20% of Berkshire's portfolio. However, their importance is underscored even more with Apple excluded.

Buffett isn't as enamored with bank stocks now as he has been in the past. But he's still heavily invested in the group, with Bank of America ranking as the second-largest overall position for Berkshire. The legendary investor also likes Capital One Financial, Latin American digital bank Nu Holdings, and investment bank Jefferies Financial.

He's also big on companies in the credit services industry. Berkshire's significant stakes in Visa, Mastercard, Capital One, and Ally prove it.

Moody's is also in the financial services sector but is something of an outlier. It ranks as one of the top financial data and credit rating service providers.

Why Buffett likes financial services

Buffett often insists that he and his longtime business partner Charlie Munger aren't stock-pickers but are instead business-pickers. He likes so many financial services stocks, therefore, because he likes their underlying businesses.

The Oracle of Omaha knows that people will always need somewhere to park their money both over the short term and long term. And he knows that individuals and businesses will always need access to additional capital.

Buffet also no doubt appreciates the fact that financial services is a heavily regulated sector. One advantage of this is that it's more onerous for financial companies to take on excessive levels of risk (albeit not impossible to do so).

This regulation also makes it more difficult for new companies to enter the financial services market. Buffett has and always will prize the stocks of companies with solid business moats.

Buffett's favorite sector

Of course, the reality is that Apple still dominates Berkshire's portfolio. As a result, Buffett's favorite sector is obviously technology.

Apple isn't the only tech stock that Berkshire owns. There's also HP, Verisign, Activision Blizzard, Snowflake, and StoneCo.

It might be surprising that Buffett has invested so heavily in tech stocks. After all, he's readily admitted in the past that technology isn't in his wheelhouse.

However, as is the case with financial services and any other sector Buffett invests in, he focuses on individual businesses. He owns Apple and the other tech stocks because he likes their fundamentals and growth prospects. That's a good reason for any investor to buy a stock.

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Ally is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Keith Speights has positions in Apple, Bank of America, Berkshire Hathaway, and Mastercard. The Motley Fool has positions in and recommends Activision Blizzard, Apple, Bank of America, Berkshire Hathaway, HP, Jefferies Financial Group, Mastercard, Moody's, Snowflake, StoneCo, VeriSign, and Visa. The Motley Fool 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.

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