Warren Buffett Reveals Why Berkshire's Portfolio Hasn't Changed Much in Recent Years
Key Points
Buffett admits he isn't familiar with many new stocks.
Berkshire's portfolio has largely centered around a handful of stocks.
Buffett invests heavily in businesses he knows very well.
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Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB)'s portfolio has largely centered around a handful of stocks. While it has dumped stocks and added new ones in recent years, the bulk of its portfolio remains tied up in five key names: Apple, American Express, Coca-Cola, Bank of America, and Chevron. Combined, those stocks make up around 60% of the total portfolio. And in the past, the percentage has been even higher.
Warren Buffett, who was the CEO of Berkshire for decades up until this year (Greg Abel has since taken over), has been relatively cautious despite the stock market being strong in recent years. And for investors familiar with Buffett's approach, it may not be much of a surprise.
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Buffett sticks with what he knows
Financials, consumer goods, and oil and gas are the three areas that encompass the bulk of Berkshire's portfolio. Those are the stocks that are in Buffett's wheelhouse and that he feels comfortable investing in. And in a recent interview with CNBC, Buffett admitted that "I understand, fewer of the businesses as a percentage of the whole than I did 10 years ago."
Without sufficient knowledge to make sound investing decisions, Buffett hasn't been loading up on emerging technologies and new up-and-coming businesses. He also says that he hasn't "learned new industries" for quite a while, and thus, Berkshire's portfolio may look fairly stale for many growth-oriented investors.
One big winner may be all that investors need
Although Berkshire's portfolio hasn't changed dramatically, it has continued to perform well, and the company's cash has grown significantly.
Buffett points to Apple as an example of why you don't need to know too many businesses if they are incredibly successful. Having even just one top-performing stock can easily transform a portfolio, and Apple has undoubtedly been a big reason for Berkshire's strong gains, with its 10-year returns dwarfing not only the S&P 500 but Berkshire's other major holdings as well.
AAPL data by YCharts
The takeaway for investors is clear from Buffett's approach: invest heavily in what you know best. While Berkshire's portfolio contains many different types of stocks, it remains largely concentrated in just a handful of stocks that Buffett knows very well and is comfortable hanging onto for the long haul. And for now, anyway, Abel is content with continuing with that strategy.
Not every stock can be as great an investment as Apple has been over the years, but even if you just have one that delivers amazing returns, it can have a dramatic effect on your portfolio's overall performance.
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Bank of America is an advertising partner of Motley Fool Money. American Express is an advertising partner of Motley Fool Money. David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends American Express, Apple, Berkshire Hathaway, and Chevron. The Motley Fool has a disclosure policy.
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