On Wall Street, few if any investors can match Berkshire Hathaway (BRK.A -0.43%) (BRK.B -0.20%) CEO Warren Buffett's prowess for making money. Since taking over as CEO in 1965, he's created over $720 billion in market value for shareholders (himself included), and led the company's Class A shares (BRK.A) to an aggregate gain of nearly 3,960,000%, through this past weekend.
What's perhaps most surprising about Warren Buffett's investing success is that, despite his company holding close to four dozen securities, only a small number of stocks account for the lion's share of Berkshire Hathaway's unrealized gains. Of the approximate $211 billion in unrealized gains Buffett's company ended with last week, more than $182 billion of these gains (86%) came from just four stocks.
Keep in mind that these figures don't include the dividends Berkshire Hathaway has been receiving from these companies.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Apple: $109.3 billion in unrealized gains
It probably comes as little shock that Berkshire Hathaway's largest holding by a mile also happens to have generated most of its unrealized investment gains. All told, Buffett's company has turned a nearly $31.1 billion investment in Apple (AAPL 0.18%) into a cool $140.4 billion.
When speaking about what makes his company tick, Buffett has been crystal clear that his Apple investment is viewed as a pillar. The Oracle of Omaha, as Buffett has come to be known, highly values Apple's easily recognized brand, the company's innovation, and CEO Tim Cook's leadership.
For instance, Apple's iPhone has consistently been the most popular smartphone in the United States. Following the introduction of 5G-capable iPhones, Apple's shares of the U.S. market grew from 40% in the third quarter of 2020 to 56% by the fourth quarter of 2021, according to data from Counterpoint. The introduction of faster download speeds for the first time in a decade should encourage a multiyear device replacement cycle. Not surprisingly, Apple hit new highs for sales and profits following the rollout of 5G-capable iPhones.
Apple's innovation is also on display via its push to become a subscription services company. This operating shift, overseen by Cook, should help the company improve its operating margins over the long run, as well as boost brand loyalty.
I'd be remiss if I didn't also mention that Warren Buffett is a big fan of Apple's capital return program. In addition to its $0.88 base annual dividend, Apple has been aggressively repurchasing its common stock for years.
Image source: Getty Images.
Bank of America: $27 billion in unrealized gains
Warren Buffett loves bank stocks, and money-center giant Bank of America (BAC 1.58%) tops that list. Since taking a $14.6 billion aggregate stake in BofA, this core Berkshire Hathaway holding has climbed to $41.6 billion in value, as of this past weekend.
The great thing about bank stocks like BofA is that they allow Buffett to take advantage of a numbers game that very clearly works in favor of patient investors. Banks are cyclical businesses, which means they thrive when the U.S. and global economy are expanding, and they struggle when recessions rear their head. The thing is, periods of economic expansion last substantially longer than recessions. Simply being patient allows Buffett to take advantage of the U.S. economy expanding over time.
Something else Buffett is certain to like about Bank of America is the company's interest rate sensitivity. Among the big banks, none see bigger fluctuations to their net interest income from shifts in the interest rate yield curve than BofA. That's great news considering the Federal Reserve's intention of raising interest rates to combat historically high inflation. According to estimates from Bank of America, a 100-basis-point parallel shift in the interest rate yield curve (four 25-basis-point hikes) would generate an estimated $6.5 billion in added net interest income over the next 12 months.
Warren Buffett can also appreciate CEO Brian Moynihan's efforts to reward BofA's shareholders. Although capital return programs for U.S. money-center banks first need to be approved by the Fed, Bank of America has a history of huge share buybacks and hearty dividend increases.
Image source: American Express.
American Express: $24.2 billion in unrealized gains
Another financial stock that's made Warren Buffett and his company a lot richer is credit services behemoth American Express (AXP 2.09%). Berkshire Hathaway's cost basis on AmEx is only $1.29 billion, which compares to its market value of $25.5 billion, as of last weekend. AmEx has been a continuous holding for Berkshire since 1993.
Similar to BofA, American Express is a smart way to bet on America and the long-term growth of the U.S. economy. It's able to take advantage of economic expansions by raking in fee-based income as a payment processor and acting as a lender. Since the U.S. economy spends far more time expanding than contracting, AmEx is able to reap the rewards of interest income and credit card-based annual fees.
American Express has also been able to successfully differentiate itself by targeting affluent clientele. Although recessions are inevitable, the well-to-do are less likely to change their spending habits or fail to make their payments during minor economic disruptions. This focus on high-income individuals has helped AmEx weather the economy's ebbs and flows better than most financial stocks.
What's more, Buffett's company has enjoyed a huge dividend windfall from its stake in American Express. Considering AmEx's $2.08 base annual payout, and Berkshire Hathaway's $8.49 cost basis on shares of the company, Buffett is netting a yield on cost of 24.5%!
Image source: Coca-Cola.
Coca-Cola: $21.9 billion in unrealized gains
Last but not least, Warren Buffett is sitting on quite the unrealized profit from beverage company Coca-Cola (KO -0.53%). Coke, which is Berkshire Hathaway's longest continuous investment (34 years), has a cost basis of just shy of $1.3 billion. But as of this past weekend, the company's Coca-Cola stake was worth about $23.2 billion.
Warren Buffett is a big fan of boring businesses, and Coke fits the bill. It has a presence in all but two countries (North Korea and Cuba -- however, its operations in Russia are currently suspended), which allows Coca-Cola the opportunity to take advantage of faster growth in emerging markets and steadier demand in developed markets. While its sales growth is relatively modest, the company has excellent pricing power on its products and its operating cash flow is highly predictable.
One of the things that makes Coca-Cola so special, aside from its vast product portfolio and geographic reach, is its marketing expertise. It's one of the most recognized brands in the world and it consistently transcends generational gaps to connect with consumers. Everything from Coca-Cola's holiday tie-ins to its social media campaigns filled with well-known brand ambassadors help the beverage giant stay relevant and connected with consumers.
And let's not beat around the bush: The Oracle of Omaha loves Coca-Cola's dividend. Coke has increased its base annual payout for 60 consecutive years, with Berkshire Hathaway netting a 54% annual yield on cost following the latest increase.
