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72% of Warren Buffett's $378 Billion Portfolio Is Invested in These 5 Stocks

For nearly 60 years, Warren Buffett has been dazzling Wall Street with his investing prowess. Whereas the widely followed S&P 500 has delivered a hearty total return (including dividends paid) of around 34,700% since the Oracle of Omaha became CEO of Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), Buffett has generated aggregate returns in excess of 5,000,000% for his company's Class A shareholders.

Though past performance is no guarantee of future results, Warren Buffett has demonstrated an ability to continually outperform the benchmark indexes over extended timelines.

The catalysts that fueled his phenomenal investment returns are well documented. Many books have been written describing the attributes he looks for when investing, such as sustainable moats, top-notch management teams, and strong capital-return programs.

But the one factor that deserves far more credit than it's given for Berkshire Hathaway's otherworldly returns over the past six decades is portfolio concentration. Despite stakes in 44 stocks and two exchange-traded funds, the vast majority of Berkshire's invested assets have been put to work in just a handful of Buffett's top ideas.

A jovial Warren Buffett surrounded by people at Berkshire Hathaway's annual shareholder meeting.

Berkshire Hathaway CEO Warren Buffett has every reason to smile after running circles around the S&P 500 for nearly six decades. Image source: The Motley Fool.

Following the release of Berkshire Hathaway's latest Form 13F, which updates buying and selling activity from the quarter ended in March, 72% ($272.3 billion) of the $378 billion portfolio Warren Buffett oversees is invested in just five stocks.

Apple: $149,766,876,019 (39.7% of invested assets)

Despite selling nearly 116.2 million shares of tech stock Apple (NASDAQ: AAPL) during the first quarter, the second-largest publicly traded company by market cap still accounts for close to 40% of Berkshire's invested assets.

Buffett justified paring down Berkshire's very much in-the-money stake in Apple by referencing historically low corporate income tax rates. He believes that it's likely peak corporate income tax rates will rise from where they currently sit at 21%. Therefore, locking in gains now will, eventually, be looked at favorably by investors.

Yet even with this selling activity, Buffett views Apple as one of Berkshire Hathaway's best businesses. That's because it has an incredibly loyal customer base, a rock-solid management team, and it has allowed its innovation to do most of the talking. The iPhone is the domestic smartphone market-share leader, and CEO Tim Cook is overseeing a successful transition that emphasizes higher-margin subscription services.

But Buffett's favorite thing about Apple might just be its capital-return program. Besides being on track to pay out more than $15.4 billion in dividends to its shareholders over the next year, Apple has repurchased $674 billion worth of its common stock since initiating a buyback program in 2013. That $674 billion is greater than the market cap of 492 of the 500 companies that make up the S&P 500 -- and one of the remaining eight is Apple.

Though this stake could be pared down a bit more, Apple is likely to remain Berkshire's top investment holding by a significant percentage.

Bank of America: $40,529,112,715 (10.7% of invested assets)

The second-largest holding in Berkshire's portfolio is money-center behemoth Bank of America (NYSE: BAC), best known as BofA. Its shares have rallied 56% since touching a 52-week low on Oct. 27.

What Warren Buffett has often appreciated about financial stocks is their cyclical nature. Instead of trying to time when economic downturns are inevitably going to occur, he has packed his company's portfolio with businesses that can take advantage of lengthy expansions. Since periods of growth last substantially longer than recessions, bank stocks like BofA are able to prudently expand their loan portfolios.

Speaking of loans, Bank of America is the most interest-sensitive among America's biggest banks by assets. With the Federal Reserve raising interest rates at the fastest pace since the early 1980s, BofA has brought in billions of dollars in added net-interest income each quarter. The longer the nation's central bank holds pat on adjusting interest rates, the more money Bank of America is liable to make.

It made significant headway with its technology investments as well. On the consumer side of its business, digital banking adoption for households rose to 76% by the end of March, which is up 6 percentage points from the comparable period three years ago. Online and mobile-based transactions are considerably less costly for banks, which should lead to improved operating efficiency for BofA.

A person holding a gold American Express business credit card.

Image source: American Express.

American Express: $36,794,400,783 (9.7% of invested assets)

Have I pointed out yet that Warren Buffett is a huge fan of financial stocks? If I haven't, note that credit-services provider American Express (NYSE: AXP) is Berkshire's third-largest holding by market value and accounts for close to 10% of invested assets.

Similar to BofA, American Express is a logical beneficiary of disproportionately long periods of growth. Whereas nine of 12 U.S. recessions since the end of World War II were resolved in less than a year, most economic expansions have lasted for years. Lengthy periods of growth encourage consumers and businesses to spend, which is precisely what AmEx wants.

American Express' recipe for sustained growth has everything to do with its ability to benefit from both sides of a transaction. It's the clear No. 3 payment processor in credit-card network purchase volume in the U.S., which allows it to generate fees from merchants. But it's also a lender, which enables AmEx to potentially collect interest income from its cardholders.

Furthermore, American Express has historically attracted cardholders with higher incomes. Well-to-do cardholders are less likely to alter their spending habits during minor economic disruptions. In theory, this better positions AmEx to deal with downturns in the U.S. and global economies, when compared to other lending institutions.

Coca-Cola: $25,244,000,000 (6.7% of invested assets)

Perhaps it's no surprise that Buffett's longest-held stock, Coca-Cola (NYSE: KO), is also one of Berkshire Hathaway's largest holdings. Coca-Cola has been a continuous holding since 1988 and is viewed as one of the eight companies Buffett and his team plan to hold "indefinitely."

The beauty of Coca-Cola is that it's a consumer staples stock. It provides a basic necessity (beverages) that consumers are going to buy no matter how well or poorly the U.S. economy is performing.

Brand-name consumer staples stocks tend to deliver predictable operating cash flow year after year. This is a big reason Coca-Cola has raised its dividend for 62 consecutive years, which in turn has increased Berkshire's annual yield relative to its own cost basis in Coke to about 60%!

Despite its size, Coca-Cola offers a nice blend of growth and predictability. It's able to generate transparent cash flow from its more than two dozen billion-dollar brands in developed markets, and can lean on faster-growing emerging markets to organically increase its sales. With the exception of North Korea, Cuba, and Russia, it has ongoing operations in every country.

What's more, Coca-Cola's marketing team is truly top-notch. The company has been leaning on digital media and artificial intelligence (AI) to tailor advertisements to younger audiences. Meanwhile, the company's rich history and well-known brand ambassadors allow it to stay engaged with its more mature customers.

Chevron: $19,983,053,835 (5.3% of invested assets)

The fifth stock -- along with Apple, Bank of America, American Express, and Coca-Cola -- that collectively accounts for 72% of the Berkshire Hathaway portfolio is Chevron (NYSE: CVX).

Buffett and his leading investment aides, Ted Weschler and Todd Combs, have piled into two energy stocks since this decade began, with Chevron accounting for the larger weighting of the two. Having more than 9% of Berkshire's portfolio devoted to energy stocks is an indication that its smartest investment minds expect the spot price of oil to remain elevated, or perhaps head even higher.

The top catalyst for crude oil is the lack of capital investment that occurred globally for three years during the height of the pandemic. With Chevron and other global energy majors forced to sit on their hands due to demand uncertainty, increasing the supply of crude oil following the worst of the pandemic has become a challenge. When the supply of an in-demand commodity is constrained, it's pretty typical for the price to rise.

Though Chevron generates its best margins from drilling, and will undoubtedly benefit if the spot price of crude stays above its historic norm, it's important to recognize that it's also an integrated energy company.

This is to say that it owns transmission pipelines, chemical plants, and refineries, in addition to its upstream drilling assets. These midstream and downstream assets help to hedge against downside in the spot price of crude oil, as well as produce predictable operating cash flow in almost any economy.

To keep with the theme, Chevron's board approved a $75 billion share repurchase program in 2023 and has raised its base annual payout for 37 consecutive years.

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Bank of America and American Express are advertising partners of The Ascent, a Motley Fool company. Sean Williams has positions in Bank of America. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, and Chevron. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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