Market Commentary: What’s Inside Buffett’s Portfolio?

In its latest 13F filing, Berkshire Hathaway bought and sold some stocks that paint a clear picture of what Buffett thinks the future of the economy will look like. Some old favorites he left untouched while others he sold off with abandon. Yet other stocks, he accumulated in spades.

What is Buffett buying and selling now? We explore.

Key Points

• In Q2, Berkshire transacted heavily, demonstrating that Buffett is anything but a passive investor.
• Surprising many, Berkshire Hathaway initiated positions in homebuilders D.R. Horton, Lennar, and NVR.
• It also increased its stake in OXY, suggesting Buffett believes oil prices will remain elevated.

Buffett’s Recent Investment Moves

Notably, Buffett initiated positions in leading homebuilders such as D.R. Horton, Lennar, and NVR. These moves highlight Buffett’s conviction that real estate will not suffer as much as many suspect from a rising interest rate environment.

Simultaneously, Berkshire Hathaway increased its stake in Occidental Petroleum while reducing its position in Chevron. These changes offer insights into Buffett’s perspective on the energy sector – he appears to be forecasting that energy prices will rise.

Berkshire’s Unwavering Pillars

Buffett’s investment portfolio has a stable foundation built on long-term principles. Two companies, Apple and Bank of America, remain the bedrock of his holdings.

Apple, in particular, stands as the top holding in terms of market value, constituting more than half of Berkshire’s equity portfolio. This substantial growth from just 6% in 2016 underscores the transformative power of Tim Cook’s firm.

One of the lesser-known secrets to Buffett’s success is his penchant for concentrated portfolios. Despite holding a diverse range of stocks, just two core holdings—Apple and Bank of America—comprise a staggering 56% of Berkshire Hathaway’s invested assets. This level of focus underscores Buffett’s unwavering confidence in these companies.

Apple, often hailed as the epitome of Warren Buffett stocks, shines brightly in Berkshire’s portfolio. Its brand value, sleek product lines, and focus on subscription-based services combine to form a company with operating margins second only to Microsoft. The decision by Apple’s board to engage in substantial buybacks further cement Apple’s position in Buffett’s portfolio.

Bank of America, another fundamental holding, aligns very well with Buffett’s affinity for financials. Its sensitivity to interest rate fluctuations, ongoing digitization efforts, and a robust capital-return program make it an attractive choice.

A Buyer of Dividends

Warren Buffett’s investment philosophy revolves around long-term thinking and a preference for dividend-growers. For example, Coca-Cola, a stock he’s held since 1988, has paid dividends for over half a century consecutive years. Interestingly, he doesn’t actually pay shareholders of Berkshire Hathaway a dividend, preferring to re-invest the capital in opportunities he sources.

His recent investment decisions, unwavering faith in core holdings like Apple and Bank of America, and his mastery of portfolio concentration are vital factors contributing to his extraordinary track record.