The clock is ticking on what has been one of Wall Street's most-successful investing careers. In three months, billionaire Warren Buffett will step down from his role as CEO of Berkshire Hathaway (BRK.A +0.18%)(BRK.B +0.18%) -- a role he's held for the last 60 years -- and hand the reins over to predetermined successor Greg Abel.
There's little question the Oracle of Omaha's presence will be missed on a day-to-day basis as CEO. In his six decades as Berkshire's boss, he's overseen a cumulative return that's topped 6,000,000% for his company's Class A shares (BRK.A), as of the closing bell on Sept. 25. Riding Buffett's coattails has been a highly profitable venture for everyday investors.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
When Warren Buffett cedes the CEO role at the end of the year, he'll be handing over a near-record treasure chest to Abel of more than $344 billion, as well as a highly concentrated investment portfolio. Berkshire's billionaire chief has always been a fan of piling into his best investment ideas, and is currently on track to leave Abel with a $307 billion portfolio, of which more than 50% has been put to work in just three stocks.
Apple: $71.9 billion (23.4% of invested assets)
At the midpoint of 2023, tech heavyweight Apple (AAPL -0.28%) came very close to accounting for half of Berkshire Hathaway's invested assets. But following the disposition of more than 635 million shares since Sept. 30, 2023 (a 69% reduction), it "only" comprises close to a quarter of Berkshire's invested assets, as of Sept. 25.
While most investors are focused on Apple's artificial intelligence aspirations and its incorporation of Apple Intelligence into its physical devices, such as iPhone, Mac, and iPad, Warren Buffett's interest in Apple had everything to do with consumer buying habits and behaviors. Apple has an exceptionally loyal customer base that's demonstrated a willingness to pay a premium for its physical devices, compared to less-costly peers. This represents a well-defined pricing and margin advantage.
NASDAQ: AAPL
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Buffett is also a fan of top-notch management teams -- and Apple certainly fits the bill. CEO Tim Cook has done a stellar job of steering the ship in his 14 years as CEO. In recent years, he's been shifting the company's focus toward higher-margin subscription services, which will only enhance existing brand loyalty, as well as minimize the revenue ebbs-and-flows that often occur when introducing major upgrades to iPhone (Apple's top-selling device).
Additionally, Berkshire Hathaway's boss has always had a soft spot for companies with robust capital-return programs. Apple's share repurchase program is unmatched. Since initiating buybacks in 2013, it's spent north of $796 billion to retire more than 43% of its outstanding shares. Not only does this help boost the company's earnings per share (EPS), but it incents the long-term investing that's at the heart of Buffett's investment thesis.
What remains to be seen is if Apple stock sticks around in a post-Buffett era. The company's lack of physical device growth over the previous three fiscal years, coupled with its historically higher price-to-earnings ratio, is the opposite of what Greg Abel would typically look for in a core investment.
Image source: American Express.
American Express: $51.6 billion (16.8% of invested assets)
The second-largest holding by market value in the portfolio Warren Buffett (soon to be Greg Abel) oversees at Berkshire Hathaway is credit-services colossus American Express (AXP -1.32%), which is commonly referred to by its shorthand, "AmEx." Only Coca-Cola (since 1988) has been a longer continuous holding by Berkshire than AmEx (since 1991).
AmEx is one of eight companies the Oracle of Omaha referred to in his 2023 annual letter to shareholders as an "indefinite" holding. With Abel claiming that he'll stick to Buffett's investment ideologies, it's unlikely that Berkshire's stake in American Express will be altered in any way.
The recipe for success for AmEx has been double-dipping. It's the third-largest payment services provider in the U.S., based on credit card network purchase volume, which means it's generating a healthy amount of fee revenue from merchants. But American Express is also a lender, with its credit cards bringing in annual fees and interest income on carried balances. Being able to benefit from both sides of the transaction aisle has sent its shares considerably higher over multiple decades.
NYSE: AXP
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It also doesn't hurt that American Express has a knack for luring high-earning individuals as cardholders. Compared to the average-earning individual, high earners are less likely to alter their spending habits or fail to pay their bill when minor economic disruptions arise, including a spike upwards in the prevailing rate of inflation. When inevitable economic downturns do arrive, AmEx is, on paper, better positioned than most lending institutions.
Furthermore, American Express offers a mouthwatering dividend yield, relative to Berkshire Hathaway's cost basis in the company (known as "yield on cost"). AmEx's $3.28 base annual payout per share, compared to Berkshire's roughly $8.49-per-share basis in AmEx, works out to a yield on cost that's approaching 39% annually.
Bank of America: $31.4 billion (10.2% of invested assets)
The third magnificent company responsible for an outsized percentage of Berkshire Hathaway's invested assets is money-center juggernaut Bank of America (BAC +0.45%), which is often known by its acronym, "BofA." Similar to Apple, Buffett has been noticeably paring down his company's position in BofA, with over 427 million shares (41% of the peak position) getting the heave-ho between July 17, 2024, and June 30, 2025.
Among the stock market's 11 sectors, none has garnered Warren Buffett's attention more consistently over six decades than financials. As a long-term investor, the Oracle of Omaha has come to appreciate the nonlinearity of economic cycles and how they disproportionately benefit cyclical businesses, like bank stocks.
NYSE: BAC
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On one end of the spectrum, there have been a dozen U.S. recessions since World War II ended 80 years ago. None of these downturns surpassed 18 months in length, and the average time from start to completion is about 10 months. In comparison, the average economic expansion has stuck around for five years, which allows banks like BofA to prudently lend and expand their loan portfolios over time.
Bank of America also holds the distinction of being Wall Street's most interest-sensitive money-center bank. When the Federal Reserve rapidly increased interest rates to combat the effects of historically high inflation from March 2022 to July 2023, BofA's net interest income soared. It's possible that at least some of Buffett's persistent selling activity in Bank of America stock over the last year may relate to the nation's central bank now being in a rate-easing cycle, which can disproportionately lower BofA's net interest income.
Like Apple, Bank of America might not remain a top-three holding for long under Abel's leadership. Although the company continues to fire on all cylinders, it's not the screaming bargain it was when Buffett initially purchased $5 billion worth of preferred stock in August 2011. Over 14 years, Bank of America's common stock has jumped from a 62% discount to its listed book value to a 39% premium to book (as of Sept. 25).
