There's little question that Berkshire Hathaway (BRK.A 2.24%) (BRK.B 1.97%) CEO Warren Buffett is among the greatest investing minds of our time. Covering a span of more than six decades, Buffett has transformed $10,000 into a net worth of more than $86 billion and, in the process, earned himself the nickname "Oracle of Omaha." Not to mention he's also created more than $400 billion in value for his shareholders over the years.
Buffett has made his fortune two ways. First, his conglomerate Berkshire Hathaway has acquired about five dozen businesses from a variety of industries and sectors, including insurer Geico and railroad operator BNSF. And second, Buffett and his team are investors. Right now, Buffett's Berkshire Hathaway owns 48 securities that had a total value of $233.5 billion as of Nov. 21.
Curious what one of the greatest buy-and-hold investors has in his portfolio? Let's take an in-depth look by breaking down Buffett's ownership by sector. (Note: the percentage breakdown is based on the 13F filing for the end of the third quarter.)
Financials: 46.04% of portfolio
There should be no surprise here that financials, which includes everything from money center banks to insurance companies, are Buffett's favorite investment. At approximately 46% of Berkshire's portfolio, Buffett owns stakes in the following financial names (listed in order of dollar amount owed, from highest to lowest):
- Bank of America (BAC 3.35%)
- Wells Fargo
- American Express
- US Bancorp
- JPMorgan Chase
- Goldman Sachs
- Bank of NY Mellon
- PNC Financial
- M&T Bank
- Synchrony Financial
- Globe Life
Banks and insurers are moneymaking machines, which is why Buffett tends to gravitate to them. Although he's owned companies like Wells Fargo for 30 years and AmEx for well over 25, it's Bank of America that's the crown jewel. Currently the second largest holding in Berkshire's portfolio, Bank of America is arguably the bank that's the most interest-sensitive among money center banks. If interest rates do return to historic norms, the assumption is that BofA would be swimming in plenty of added interest income. For now, though, simply having put its Great Recession one-time charges in the rearview mirror seems to be more than enough to put some pep in its operating earnings step.
Information technology: 25.96%
Let's be clear that when I say "information technology," I mean one thing: Apple (AAPL 0.48%).
With the closure of IBM's acquisition of Red Hat in the previous quarter, the only tech stock Berkshire Hathaway owns nowadays is Apple. Of course, it also happens to be the largest holding in Buffett's portfolio by a long shot. More than $1 out of every $4 in invested assets is tied up in Apple.
For his part, Buffett has stated that he has no intention of selling his mammoth stake in the company. Although you may see small sales from time to time (a minute amount of Apple was sold in the third quarter), that probably means Buffett's other investment team members are making trades.
The Oracle of Omaha has gone on record as being particularly pleased with Apple's desire to repurchase its own stock, and is certainly not complaining about the tech kingpin's growing dividend.
Consumer staples: 15%
Nine years ago, consumer staples made up more than 45% of Berkshire Hathaway's investment portfolio. Today, that number is down to just 15%, which represents at least a two-decade low, based on available data at 13F aggregator website WhaleWisdom.com. Buffett's ownership in this sector is as follows:
- Coca-Cola (KO 1.93%)
- Kraft Heinz
- Costco Wholesale
- Procter & Gamble
- Mondelez International
There's no question that the anchor here is Coca-Cola, which made up just over 10% of Berkshire Hathaway's portfolio at the end of the third quarter. Coca-Cola doesn't have anywhere near the growth potential of Apple, but it sure does have geographic and portfolio diversity on its side. This is a company that's operating in all but one country worldwide (North Korea being the exception) and that has at least 21 billion-dollar beverage brands. It also doesn't hurt that Coca-Cola is a Dividend Aristocrat that's raised its annual payout for 57 consecutive years.
Between the fourth quarter of 2010 and the third quarter of 2016, Berkshire's portfolio was virtually barren of transportation stocks. But that changed in 2016, with Buffett gobbling up stakes in a number of airline companies:
- Delta Air Lines
- Southwest Airlines
- United Airlines Group
- American Airlines Group
On one hand, I understand Buffett's desire to buy into airlines in late 2016. The price of crude oil plunged, and since jet fuel is the single greatest cost to airlines, this decline suddenly made them all very profitable. On the other hand, it's an industry that requires a lot of capital to make very little money. Airlines also have a very poor track record when it comes to surviving moderate recessions. Long story short, Buffett's fascination with airlines is a bit of a head-scratcher.
Communications is one of those sectors that's always played a relatively small role for Buffett, even though dividends associated with communications companies can sometimes be robust. Right now, the Oracle of Omaha owns the following nine:
- Charter Communications
- Liberty Sirius XM Group Class C
- Sirius XM Holdings
- Liberty Global Class A
- Liberty Global Class C
- Liberty Sirius XM Group Class A
- Liberty Latin America Class A
- Liberty Latin America Class C
This certainly isn't the most exciting group of communications companies by any means. Perhaps most interesting is what's missing: Walt Disney. Buffett has owned a stake in Disney on two separate occasions throughout his life and sold very shortly after coming into possession of his investments. Both early sales have cost the Oracle of Omaha around $16 billion in forgone future capital gains and dividends, making it perhaps the costliest mistake of Buffett's investing career.
Consumer discretionary: 2.07%
Similar to communications, the consumer discretionary sector has always played a relatively minor role in Buffett's portfolio, with his ownership in the sector typically ranging from 2% to 6% over the past decade, with a few quarters outside this range. Berkshire Hathaway currently owns four consumer discretionary companies:
- General Motors
- Amazon.com (AMZN 1.21%)
- Restaurant Brands International
Despite representing just a little over 2% of invested assets, this has been an area of interest in 2019. Earlier this year we witnessed Amazon get added to the portfolio, as well as had RH (the company formerly known as Restoration Hardware) added during the third quarter.
For what it's worth, Buffett regrets not buying into Amazon a lot earlier. The e-commerce giant is expected to control more than a third of all online sales in the U.S. in 2019, and Amazon Web Services (AWS), the company's cloud platform, has been growing sales and operating income at an extraordinary pace. AWS, not e-commerce, is what'll lead Amazon higher in the decade to come.
The lack of healthcare exposure should surprise no one, given that Buffett has little desire to keep up with clinical trial data or to try and understand highly complex businesses. Nevertheless, Berkshire does own three healthcare stocks:
- Teva Pharmaceutical Industries (TEVA 0.42%)
- Johnson & Johnson
With Buffett mostly selling out of his J&J position years ago, it's mostly an afterthought here. The real surprise was the Teva Pharmaceutical purchase in the fourth quarter of 2017. Teva has been dealing with all sorts of issues, ranging from bribery settlements and opioid lawsuits to generic competition for its top-selling branded drug, Copaxone. It should be known, however, that Teva wasn't Buffett's idea, but rather a member of his investing team. Either way, it's one of Berkshire's worst percentage performers this year.
The Oracle of Omaha is the type of investor who acquires energy companies, rather than investing in them. Currently, Buffett owns stakes in three that make up just a fraction of Berkshire's $233.5 billion in invested capital:
- Phillips 66
- Suncor Energy
- Occidental Petroleum
Although oil is a key cog that keeps the U.S. and global economy strong, Buffett has often chosen to invest in industries or sectors that benefit from higher or lower oil prices, rather than investing directly in oil players themselves. This is why, collectively, this trio only makes up around 0.6% of invested assets.
Another industry that's pretty much been an afterthought in Buffett's portfolio for two decades and counting is materials. At 0.34%, Axalta Coating Systems is Berkshire's only stake in this sector. Buffett first bought into Axalta four years ago and owns slightly more than 10% of the company's outstanding shares.
Real estate: 0.32%
Finally, there's real estate, which also consists of just one company in Buffett's portfolio, STORE Capital. STORE is a net-lease real estate investment trust that owns more than 2,400 properties across the United States. Buffett first took a position in the company a little over two years ago.