To say that Warren Buffett has had some investing success over his lifetime would be a gross understatement. Between 1965 and 2018, the book value of Buffett's company, Berkshire Hathaway (NYSE: BRK-B)(NYSE: BRK-A), grew by nearly 1.1 million percent. And over the past six-plus decades, Buffett's own net worth has climbed from around $10,000 to roughly $80 billion, not including the tens of billions of dollars the Oracle of Omaha has given to charity over the years.
The CEO of Berkshire has created wealth for himself and his shareholders two ways.
First, Berkshire Hathaway has been used as a vessel to acquire other businesses. To date, Berkshire has made in the neighborhood of five dozen purchases across a myriad of industries and sectors. These businesses, which include the likes of railroad operator BNSF, insurer Geico, and fast-casual dining chain Dairy Queen, all contribute toward Berkshire's bottom-line performance.
However, Buffett doesn't buy every company he lays his eyes on. The second means of generating wealth for his company and shareholders is through asset management. Buffett and his team at Berkshire Hathaway manage a portfolio of 47 securities (as of the end of the second quarter) that's currently worth more than $206 billion. Though not every one of these stocks will head higher, most of them do over the long run, netting Buffett and investors a healthy return.
Thus far in 2019, five Buffett holdings have increased in value by more than $1 billion, inclusive of dividends paid. In fact, the aggregate increase in market value from these five stocks surpasses $23 billion, which trounces the losses Berkshire has taken from the likes of Kraft Heinz and Teva Pharmaceutical Industries.
In descending order, these are the real stars of Buffett's portfolio, through Sept. 3.
Apple: $12.44 billion gain in market value
Given that Apple (NASDAQ: AAPL) is Berkshire's largest holding by a long shot, it should come as no surprise that it's usually either Buffett's biggest aid or drag in a given year. Holding nearly 250 million shares (about a 5.5% stake in the company), Berkshire has realized a 30.5% return on its investment since the year began, or $12.44 billion, including dividends.
Aside from the fact that Apple has been steadily increasing its dividend and buying back its own stock, Buffett is clearly a fan of the company's innovation and cash flow potential. Even with a relatively lackluster performance for the iPhone during the first quarter of 2019, it continues to hold 40% of North American market share. Presumably, this share could rise with the expected launch of 5G-capable smartphones during the second half of the year in 2020.
When combined with Apple's growing wearable and streaming services, it becomes apparent that the company has consistent cash flow as a result of its strong branding, as well as an intriguing growth runway as a services company. In other words, it's a moneymaking machine that Buffett has no intention of selling.
American Express: $3.53 billion gain in market value
Long since removed from its breakup with Costco Wholesale -- another Buffett holding -- American Express (NYSE: AXP) has been virtually unstoppable this year. Shares of the financial services and lending giant are up almost 24%, translating into a paper gain of more than $3.5 billion for Berkshire Hathaway.
Despite increased pressure from the likes of Square, American Express has held its own thanks to increased consumer spending. In the company's most recent quarter, it saw spending rise 7% in the U.S. and 5% globally. This benefits AmEx doubly, because it can charge merchants a fee for using its network, as well as collect interest and fees on consumers who don't pay their balance in full each month or who simply use their card. It's a win-win for American Express anytime the U.S. and global economy is expanding.
Also, don't overlook the fact that American Express typically targets more affluent consumers. The well-to-do tend to be less likely to rein in spending when there are economic hiccups, thereby shielding American Express from minor economic turbulence.
Coca-Cola: $3.49 billion gain in market value
Beverage and snack giant Coca-Cola (NYSE: KO), a Buffett holding for more than three decades, is another top performer for Berkshire Hathaway in 2019. Normally known for its exceptionally low volatility, shares of Coca-Cola have gained nearly 17% this year, resulting in an unrealized gain of almost $3.5 billion.
Growth in the company's core brands, as well as market share gains internationally, can both be attributed to the Coca-Cola's fantastic 2019. In July, when the company popped the top off its second quarter, investors were rewarded with organic sales growth of 6% and adjusted operating income growth of 14%, excluding currency fluctuations. While higher pricing and improved product mix did help organic sales growth, two-thirds of the increase was the result of stronger consumer demand for its products.
As a consumer staple, Coca-Cola also benefits when investors are nervous. With the yield curve inverting and trade war tensions picking up, Wall Street is clearly fearful of a possible growth slowdown or recession. Since U.S. Treasury bonds are yielding practically nothing on a real basis (i.e., including inflation), low-volatility stocks with solid dividends like Coca-Cola have become an attractive place for investors to park their money.
Bank of America: Greater than $2.2 billion gain in market value
Bank of America (NYSE: BAC), Buffett's second-largest holding by market value, has also helped to line Berkshire's pockets this year. Based on the number of shares with which Berkshire Hathaway entered the year, Buffett has seen a $2.39 billion paper gain, including dividends paid. However, Berkshire has added more than 53 million shares of B of A since April, and there's no telling exactly what price was paid for those shares. Even under a worst-case scenario (i.e., buying at a near-term peak), Berkshire should have at least a $2.2 billion paper gain on Bank of America this year, if not higher.
As one of the most interest-sensitive banks, B of A has benefited in recent years from a steady uptick in interest rates. That, however, changed when the Federal Reserve lowered rates for the first time in over a decade in late July. Nevertheless, the Fed's relatively slow and deliberate actions have given money center banks like Bank of America plenty of lead time to maneuver their income streams to maximize profitability.
Bank of America has also done an exceptionally good job of cutting operating expenses since the Great Recession. By focusing more on the digitization of banking services, as well as avoiding costly litigation by beefing up internal controls, B of A has created a much leaner bank where more revenue flows to its bottom line.
Moody's: $1.83 billion gain in market value
Last, but certainly not least, analytics and investor services company Moody's (NYSE: MCO) has delivered one of the strongest gains in Berkshire's portfolio in 2019. Shares of the company are up 52%, leading to a gain, including dividends, of about $1.83 billion.
Similar to the other holdings listed here, Moody's has benefited from stronger-than-expected operating results. The $1.2 billion in revenue generated during the second quarter was a record for the company, with analytics revenue leading the charge. Specifically, research, data, and analytics sales surged 14% to $315.3 million, with credit research and rating demand seemingly very strong. All told, Moody's was able to increase its full-year profit-per-share forecast to a new range of $7.95 to $8.15, up from a previous forecast of $7.85 to $8.10.
Whereas market turbulence can be bad news for most companies, it can actually work in Moody's favor as an analytics provider. With the company's business model hedged to outperform in nearly any economic environment, Moody's is a good bet to rise in value over the long term.
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Sean Williams owns shares of Bank of America and Teva Pharmaceutical Industries. The Motley Fool owns shares of and recommends Apple, Berkshire Hathaway (B shares), Moody's, and Square. The Motley Fool has the following options: short January 2020 $155 calls on Apple, long January 2020 $150 calls on Apple, short September 2019 $70 puts on Square, short January 2020 $180 calls on Costco Wholesale, long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), long January 2020 $115 calls on Costco Wholesale, short January 2020 $155 calls on Apple, and long January 2020 $150 calls on Apple. The Motley Fool recommends Costco Wholesale. 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.