58% of Warren Buffett’s portfolio is in these 3 stocks. Should I follow him?

Warren Buffett invests through companies, Berkshire Hathaway. Every quarter, it must report its current holdings, including the size of each investment. From this, I can see not only what Buffett invests in, but how much the overall pot is put to work. As of the most recent 13F filing, three stocks make up more than half the portfolio. Should I buy in equal proportions?

The top three

The dominance of the overall portfolio is Apple. Buffett holds 38.6% of the funds in this one company. This is a lot, even given Apple’s market cap, owning a tiny 5.8% stake in the tech giant.

Something that highlights the large share of money in Apple shares is that the second largest holding is only 10.6% of the portfolio. This is invested in Bank of America stock. It’s a classic Buffett-style stock, which generates good cash flow and returns equity. The banking sector has been rented by 2008. But it is still an area that has been profitable for a long time.

Finally, 8.8% of the portfolio is allocated to Chevron sharing. This is a position that will initially start in the fall of 2020, which is growing over time. Due to the strong performance of oil over the past year, the business has seen rapid gains.

A point does not follow

Although I respect Buffett, I would not want to have this amount of exposure to just three companies. When I first started investing, I would put a lot in just one stock. But as I learned more, I realized that the risks involved in doing this could be avoided by diversifying and owning more stocks.

The reason for this is that the overall return will be affected disproportionately if I hold a lot of money in some stocks. For Buffett, even if the other 20-30 stocks he owns do well this year, the return could be wiped out if the top three stocks do well.

If I held the same stocks in the same percentage, the poor performance of Apple, Bank of America and Chevron would be a drag on me. But it won’t have anywhere near as much of a negative impact, as the allocation is much lower.

Positive takeaways from this

What I am looking at when looking at the current portfolio is the sector it is targeting. In short, they focus on technology, finance and commodities. Although I don’t own the same stocks, I think these are three hot sectors for the year ahead.

Tech has a tumultuous 2022 as investors set negative growth expectations. With this now reflected in the stock price, I think it’s a good time to start buying.

As for finance, I think this is a stable area to invest in despite the recession. I can also find attractive dividend payers from this place.

Due to the reopening of China, demand for oil is expected to increase. With supplies from Russia still artificially limited, I think oil stocks could last a year.

That’s why, although I don’t copy Warren Buffett with the size of my purchases or specific stocks, I like the areas I target.