Warren Buffett is one of the greatest investors of all time. His company, Berkshire Hathaway (BRK.A +0.16%)(BRK.B +0.14%), has made shareholders a boatload of money through decades of wise acquisitions -- and an equities portfolio that's nearing a massive $329 billion.
Buffett and Berkshire are known for investing in "wonderful businesses at wonderful prices," as he put it in his latest shareholders letter, and what often makes a company wonderful in the eyes of Buffett is one that is highly profitable over a long period of time. Here are five stocks Berkshire owns that have averaged more than $5 billion in annual profits over the past eight years.
Apple: $63.5 billion average annual profits
The consumer tech giant Apple (AAPL +2.08%) is by far the largest holding in Berkshire's portfolio, making up about 41% of invested assets. Since 2015, Apple has averaged annual profits of about $63.5 billion -- but in recent years, annual profits have surged in excess of $95 billion as the company has greatly benefited from pandemic-era trends.
As people have worked from home more, they have stocked up on Apple devices. And the iPhone has an incredibly loyal customer base that not only helps the company hedge inflation to a certain extent but also generates predictable revenue as people upgrade their phones every few years.
NASDAQ: AAPL
Key Data Points
Bank of America: $22.25 billion average annual profits
The second-largest bank by assets in the U.S., Bank of America (BAC 2.79%) has also been an incredibly profitable entity that is currently the second-largest position in Berkshire's portfolio.
Bank of America saw its profits dip early on in the pandemic as interest rates dropped to zero and the bank set aside hefty provisions for potential loan losses. But those losses never materialized and the bank was able to release those reserves back into earnings, which swelled to $32 billion in 2021. Earnings have remained elevated as the bank has benefited from soaring interest rates over the last year and benign credit quality.
While earnings may come under pressure as deposit costs rise and credit quality normalizes, large banks are typically very profitable organizations, and Bank of America is certainly a strong performer.
Chevron: $8.76 billion average annual profits
The large U.S. oil and gas producer Chevron (CVX 0.48%) has averaged $8.76 billion in annual profits since 2015 -- but in 2022, its profits soared to over $35 billion as the company benefited from rising oil prices, which just a few years ago were at zero dollars per barrel. The price of oil has taken off in the wake of Russia's invasion of Ukraine last year (which led to embargoes on Russian oil imports) and as the world's energy demands have normalized with the pandemic's effects easing. At the beginning of 2022, brent crude oil prices shot up to roughly $139 per barrel before settling back down to their recent levels around $84 per barrel.
Chevron's management team has said that the company can cover its capital expenditures and dividend as long as brent crude oil prices stay at or above $50 per barrel, a scenario that Buffett and Berkshire seem to feel quite confident about.
NYSE: CVX
Key Data Points
Coca-Cola: $7.05 billion average annual profits
While Berkshire has been invested in the iconic beverage brand for decades, Coca-Cola (KO +0.00%) has also done quite well in recent years, boosting profits to $9.5 billion in 2022. Similar to Apple, Coca-Cola has a lot of branding power, which helps it with pricing. As costs go up due to inflation, the company is able to raise prices on its products without a lot of pushback from its customers. But there are concerns about consumer demand and how the economy will fare this year, although Coca-Cola should be able to navigate a modest recession scenario.
American Express: $5.65 billion average annual profits
The credit card and payments company American Express (AXP 0.90%) has also served Buffett and Berkshire very well for decades. While annual profits have averaged $5.65 billion since 2015, net income jumped to about $7.5 billion in 2022 as the company benefited from a rebound in travel and lodging spending and higher interest rates.
American Express has also done a great job of capturing a premium customer base that spends at high levels and is less vulnerable to a recession. Management is also guiding for strong revenue and earnings growth this year and in 2024, which has impressed Wall Street.
