It's been a challenging year for investors, but as we prepare to turn the calendar to 2023, this would be a good time to pause and reflect on what investments might work next year. And there are few better places to look for inspiration than in the portfolio of Warren Buffett's Berkshire Hathaway (BRK.B 0.93%) (BRK.A 0.68%). The legendary investor's portfolio is as concentrated as ever, and unlike many professional money managers, he's not weighting it in line with the S&P 500's sector weights. Here are three conclusions for investors drawn from looking at the contrasts between Berkshire Hathaway's portfolio and the S&P 500.

Berkshire Hathaway's holdings versus the S&P 500

Let's start by looking at Berkshire Hathaway's holdings by sector compared to the S&P 500 by sector weighting. The conglomerate's portfolio is overweight in information technology, finance, energy, and consumer staples. It's significantly underweight in consumer discretionary, healthcare, industrials, telecommunications, utilities, materials, and real estate. 

Berkshire Hathaway versus the S & P 500

Data sources: Berkshire Hathaway SEC filings, S&P Global. Chart by authot

1. Don't stress about the Federal Reserve and the interest rate cycle

The first conclusion I draw from what's been happening with the Berkshire Hathaway portfolio is that it doesn't look like Buffett is playing the game of trying to guess the Federal Reserve's next move on interest rates. Rightly or wrongly, markets are always volatile during rate-hiking/fiscal-tightening cycles. Traders pore over the minutiae of every Federal Open Market Committee report and parse every public utterance made by the Federal Reserve governors to guess their next moves. 

In such an environment, it's reasonable for money managers to turn defensive and buy into "safe" sectors such as healthcare, consumer staples, and utilities. Yet Berkshire Hathaway remains underweight in healthcare, and Buffett hasn't put new money into utilities in recent years.Meanwhile, the share of the portfolio in consumer staples is lower now than it's been over the last few years.

Meanwhile, its overweight position in financials (an interest rate-sensitive sector) remains in place. 

All told, there's no hard evidence to suggest Buffett is micro-adjusting his portfolio to guess where interest rates are heading over the near term.

2. Go big on companies you believe in

The portfolio's overweight position in information technology sticks out a mile. Still, that comes down to its one massive position in Apple (AAPL 0.02%), which represented around 42% of the value of the overall equity portfolio as of the end of the third quarter. While taking such a "farm bet" on one stock is probably not the best choice for retail investors, the company's Apple stake highlights the benefits of holding onto shares of companies with dominant market positions and strategies in place fully take advantage of them.

Apple has a 55% share of the smartphone market in the U.S. and a 16% share worldwide. Best known for its iconic hardware products (the iPhone, iPad, Macs, and Apple Watch, among others), it continues to further monetize its valuable brand by growing its subscription services offerings. Apple's services revenue grew by 14.2% to $78.1 billion in 2022 compared to product sales growth of 6.3% to $316 billion.

The strong business moat and cash-generating potential of its increasing services revenue, coupled with a free-cash-flow yield above 5% (which implies that Apple could potentially pay a dividend yielding 5% and still keep growing) is a compelling investment case, and it's enough to make Buffett go big on one stock. 

AAPL Free Cash Flow Yield Chart

Data by YCharts.

3. Oil and natural gas still have significant roles to play

Berkshire Hathaway's overweight position in energy is almost entirely comprised of its positions in Chevron (CVX 0.98%) and Occidental Petroleum. Its Chevron stake now represents over 8% of the portfolio -- and would on its own be enough to make the conglomerate overweight in energy.  Despite the considerable attraction of its fortress-like balance sheet, its downstream (refining and distribution) activities, and its investment in lower carbon activities, Chevron is, for now, still essentially a play on the price of oil.

CVX Chart

Data by YCharts.

As such, Buffett's overweight position in the stock and the energy sector suggests to investors that the oil and natural gas sector should remain attractive in 2023. 

All told, a practical investing framework for 2023 would be to avoid being pushed around by speculation over where we are in the interest rate cycle, be willing to invest in well-run businesses that you believe in, and not be afraid to buy into the energy sector.