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Berkshire Hathaway beats S&P 500 with focused investment strategy

Published Nov 24, 2023 07:08AM ET
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Warren Buffett's Berkshire Hathaway (NYSE:BRKa) has achieved a notable annualized return of 19.8%, significantly outperforming the S&P 500. This success can be attributed to its concentrated investment approach, with nearly three-quarters of its $357 billion portfolio invested in just four cornerstone companies: Apple (NASDAQ:AAPL), Bank of America, American Express (NYSE:AXP), and Coca-Cola (NYSE:KO).

Apple stands as Berkshire's crown jewel, commanding a staggering $173.7 billion stake, which is 48.6% of the entire portfolio. The tech giant's nearly 90% iPhone loyalty rate and diversification into subscription services have been pivotal in its performance. Additionally, an aggressive repurchase program with over $600 billion in buybacks since 2013 has further cemented Apple's position as a valuable asset for Berkshire.

Bank of America is another significant holding, valued at $31 billion or 8.7% of the portfolio. The bank benefits from the Federal Reserve's rate hikes due to its sensitivity to interest rates. It has also streamlined costs and improved efficiency through technological advancements in banking services.

The portfolio's exposure to the financial sector is further strengthened by a $24.6 billion stake in American Express, which represents 6.9%. The company attracts affluent customers less impacted by economic downturns and generates substantial returns from both transaction processing and credit lending.

Coca-Cola adds to Berkshire's strategic allocation with a $22.9 billion investment, accounting for 6.4% of the total portfolio. The beverage company offers stable cash flow and consistent demand as a consumer staple with an extensive history of dividend increases. Its products are purchased nearly six billion times annually worldwide, with the exception of North Korea, Cuba, and Russia due to current conflicts.

In addition to these stock holdings, Berkshire fully owns assets like the BNSF railway system and GEICO insurance, which complement its stock investments and showcase Buffett and Munger's robust investment strategy characterized by high-conviction bets within an expansive portfolio.

Buffett's investment philosophy emphasizes long-term growth and shareholder value through focused asset allocation in high-performing companies with strong market positions—a strategy that continues to yield impressive results for Berkshire Hathaway's shareholders.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Berkshire Hathaway beats S&P 500 with focused investment strategy
 

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