Warren Buffett's stock portfolio is one of the most scrutinized in the world. Each quarter there are several news stories about what the Oracle of Omaha purchased for his company Berkshire Hathaway (BRK.A +0.23%) (BRK.B +0.42%). Interest in this portfolio shouldn't be a surprise, considering Buffett's track record of success.
Investors should never make a trade only based on what Buffett did, but the Berkshire portfolio is a great place to get ideas. There are many outstanding companies that have been long-term winners for Buffett and Berkshire, but here are three that stand out as stocks worth buying for the long haul.
Apple
There was some surprise when Berkshire added Apple (AAPL 0.70%) to its portfolio in 2016. Buffett often speaks about how investors should stay within their circle of competence, and technology was a departure for him. However, in the intervening years, Buffett has praised Apple and its CEO Tim Cook numerous times. At the Berkshire Hathaway annual meeting earlier this month, Buffett called Apple the best business Berkshire owns.
NASDAQ: AAPL
Key Data Points
This praise for Apple makes sense considering Buffett's preference for iconic brands with massive consumer appeal. In the most recent quarter, the results suggest there's plenty of room for growth, despite Apple being one of the largest companies in the world.
The headline number was that Apple saw its year-over-year revenue growth decline for the second consecutive quarter. However, that's only part of the story. Apple's two largest product categories, iPhones and Services, saw slight increases compared to the year-ago quarter.
The most exciting story for shareholders is Apple's aggressive return of cash to shareholders. Over the past five years, Apple has grown its free cash flow by 64% and its dividend by 32%. At the same time, the company has repurchased stock and reduced its outstanding share count by 18%. In his 2021 letter to shareholders, Buffett illustrated the impact of this shareholder-friendly activity by pointing out that Berkshire's stake in Apple increased by almost $200 million due to share repurchases alone.
Bank of America
Berkshire's second-largest position by market value is Bank of America (BAC 1.32%), which Buffett added to during the first quarter of 2023. Buffett's interest in banking is no secret, and Bank of America has been in the Berkshire portfolio since 2017.
Considering Buffett is a value investor, the recent increase in Berkshire's Bank of America stake shouldn't be surprising. During Q1, Bank of America's valuation fell pretty steadily, and at times the stock traded for a price-to-book value of less than 1. We don't know when Buffett bought it, but it's reasonable to assume he took advantage of this decrease in valuation.
NYSE: BAC
Key Data Points
The Q1 2023 results featured some bright spots. Revenue grew by 13% and net income increased by 15% year over year. This was led in part by a 25% increase in net interest income as a result of rising interest rates. The consumer banking segment set records for its number of checking and investment accounts.
The record consumer accounts are notable because these smaller consumer accounts are stickier. They also provide some insulation against a bank run because most accounts are smaller and fall under the $250,000 Federal Deposit insurance coverage. In light of the recent bank failures, a large consumer deposit base is a strength.
General Motors
Buffett may have sold part of Berkshire's stake in General Motors (GM 3.96%), but that doesn't mean it's not still worth consideration. The first thing that may come to mind is legacy auto manufacturing, but GM is also worth keeping an eye on when it comes to electric vehicles (EVs) and autonomous driving.
NYSE: GM
Key Data Points
General Motors owns a majority stake in autonomous driving company Cruise, which is operating in a handful of U.S. cities and completing more than 1,000 driverless trips per day. This driverless technology is being brought to GM's fleet of consumer vehicles as well. GM is currently the only automaker with level 2 (partial driving automation) and level 4 (high driving automation) autonomous vehicle offerings in consumer vehicles.
GM is now No. 2 in the U.S. EV market and its market share increased by 8% year over year during Q1 of 2023. The pace of EV sales is impressive. In Q1 of 2023, GM sold approximately 20,700 electric vehicles, compared to 16,300 in the previous quarter. The company is building toward the capacity to produce 1 million EVs annually by 2025.
GM may not get the headlines when it comes to electric vehicles, but there's a case to be made that it's on the path to being a major player in this space for years to come.
