Please ensure Javascript is enabled for purposes of website accessibility

These 3 Stocks Are Warren Buffett's Biggest Winners

By Dan Caplinger - Mar 1, 2020 at 6:59AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Find out which companies have contributed the most to Berkshire Hathaway's gains.

Berkshire Hathaway (BRK.A 3.75%) (BRK.B 4.02%) owes much of its success to the prowess of its chief executive officer, Warren Buffett. With a long-term investing strategy that emphasizes finding top-quality companies and owning their shares as long as possible, Buffett has been able to put the power of time and compounding to work in building an immense fortune for his shareholders.

Every year, Buffett catalogs his investment prowess in his annual letter to investors. Even though the Berkshire CEO has branched out recently and added positions in new companies, it's interesting to see that the three stocks that have given him the biggest percentage gains tend to stay the same year after year. Here, we'll look at the top three performers in Berkshire's portfolio to try to discover the secret of their success.

3. American Express

American Express (AXP 3.18%) has a long history with Buffett, with his initial investment dating all the way back to the days of the Buffett Partnership in the 1960s. Berkshire's current position in the charge card company started in 1994, with a substantial purchase of nearly 10% of AmEx's outstanding shares. Over time, that stake has built up to nearly 19%, and an initial outlay of $1.29 billion is now worth almost $18.9 billion, for a gain of 1,367%.

American Express still stands out from its fellow payment network rivals by catering to higher-end clients, with membership privileges that cardholders are willing to pay pricey annual fees to obtain. With recent efforts to build out its mobile platform while retaining its leadership status in commercial payments, American Express refuses to rest on its laurels and recognizes the need to keep up with the latest innovations in the payments space. That should bode well for Berkshire's position going forward.

2. Coca-Cola

Berkshire's stake in beverage giant Coca-Cola (KO 1.88%) goes back even further than its American Express position, with Buffett having started to buy shares of Coke back in the late 1980s. Taking advantage of low prices following the stock market crash of 1987, Buffett added more shares in 1994 but has since left the position unchanged. In total, Buffett spent just under $1.3 billion for his Coca-Cola shares, and they're now worth a whopping $22.1 billion, for a gain of 1,604%.

Semi trailer with bottles of Coca-Cola on side.

Image source: Coca-Cola.

Coca-Cola has faced some tough times in recent years, as consumer preferences moved away from its namesake sugary soft drinks. However, the beverage giant was able to pivot effectively by coming out with new product lines including water, tea, juice, and low- or no-sugar soft drinks. With a healthy dividend yield approaching 3%, Coca-Cola continues to pay off for Buffett and Berkshire's shareholders.

1. Moody's

Surprisingly, Buffett's biggest success has come from credit rating agency Moody's (MCO 2.78%). Having first gotten shares in 2000 following Moody's spinoff from Dun & Bradstreet, Berkshire's cost basis in its Moody's position is just $248 million. However, the stake is currently worth almost $5.9 billion, for a total return of 2,262%.

The interesting thing about Buffett's treatment of Moody's is that his gains could have been even larger if he had followed his usual precepts about holding onto his positions as long as possible. During the financial crisis, Berkshire actually sold significant portions of its Moody's stock, as concerns swelled over the credit rating agency's possible role in the rise and fall of the housing market. Had Berkshire held onto those shares, it would have seen even larger gains. Nevertheless, Buffett still has a 13% stake in Moody's, and it's done extremely well for the insurance giant's overall results lately.

Think long-term

Warren Buffett's experience highlights the value of having a long-term investing strategy. By letting your best winners keep running, you can squeeze every penny of profit you can from your portfolio -- all while setting the stage for even further gains down the road.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Coca-Cola Company Stock Quote
The Coca-Cola Company
KO
$63.04 (1.88%) $1.16
American Express Company Stock Quote
American Express Company
AXP
$146.15 (3.18%) $4.50
Moody's Corporation Stock Quote
Moody's Corporation
MCO
$277.50 (2.78%) $7.50
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$417,401.43 (3.75%) $15,101.43
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$278.28 (4.02%) $10.76

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.