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Image source: The Motley Fool
Warren Buffett has amassed a huge fortune by investing in stocks. He bought it Berkshire Hathaway in 1965, turned the former textile manufacturer into a holding company for investment. Today, he tops the longest list S&P 500 CEO.
So, what is Berkshire holding now?
Let’s take a look at the company’s top five holdings, which represent more than three-quarters of Buffett’s portfolio.
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In 41.4% of the portfolio, Apple (NASDAQ:AAPL) is Buffett’s largest position. Berkshire first took a stake in the US tech giant in 2016.
Apple’s stock price is down 5% over the past year, but there are factors that could push the stock higher. For example, there are exciting product launches in the pipeline.
The company is expected to release a new AR/VR headset this spring, as well as the iPhone 15 in September. New products have added value to long-term investors through stock price appreciation, and I think this year’s innovations could help the tech titan return to strength.
In addition, there is great potential to expand service offerings, such as Apple Pay. At 71%, gross service margin is higher than product gross margin of 37%.
That said, the price-to-earnings ratio of 25.66 is a risk, especially if demand for the company’s new products isn’t enough to justify the price premium.
Financial heavy weight
Finance is Buffett’s favorite investment. Bank of America it holds the second largest at 10.6% and American Express it is the fourth largest at 8.1%.
With Bank of America, I see Buffett’s logic in keeping his stock. As the Federal Reserve continues to raise rates, banks should benefit from a boost to net interest income.
However, the slowdown in the US housing market poses significant risks. If standards rise or activity slows, profits may suffer.
American Express has long been a cornerstone of Berkshire’s portfolio. I think the future of the company looks bright thanks to its popularity with young customers. More than 60% of new consumer account acquisitions by 2022 will be Millennial or Gen Z consumers.
However, the fact that businesses earn income from interest rates spreads rather than transaction costs visa or MasterCard create more volatility risk than other stocks in the payment arena.
Dividend share
Buffett also owns large holdings in leading dividend stocks. Oil and gas giants Chevron it is the third largest position at 8.3% and is a soft drink conglomerate Coca Cola completing the quintet at 7.1% of the portfolio.
Chevron looks poised to benefit from the continued disruption in commodity markets caused by the war in Ukraine. 3.66% paid dividends.
Coca-Cola’s business model has stood the test of time. The company has raised its dividend for 60 consecutive years. It offers a yield of 3.1%.
Dividends can be cut or suspended. Both stocks face this risk. However, in my view, they look like reliable passive income generators.
How I follow Warren Buffett
His favorite way to follow Warren Buffett is to hold shares of Berkshire Hathaway.
Although I own Coca-Cola stock for passive income (Berkshire reinvests retained earnings), I’m not buying any more right now.
That’s simply because I like the exposure Berkshire has offered for the stock.
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