2 Stocks to Buy From the 5 That Make Up Roughly 61.5% of Berkshire Hathaway's Portfolio

Whether under Warren Buffett or now under Greg Abel, Berkshire Hathaway's (NYSE: BRKA) (NYSE: BRKB) stock portfolio has always operated with a concentrated approach: When the team sees a stock they really like, they load up.

Buffett has always believed that diversification is an excuse for ignorance, and while he understands that most general investors use the practice, it's not something the Oracle of Omaha has ever deployed.

Abel has no intention of departing from the concentrated approach in Berkshire's roughly $365 billion portfolio. Roughly five stocks make up 61.5% of this portfolio, as of this writing. Here are the two to buy.

Image source: The Motley Fool.

Five stocks that Berkshire loves

While every stock is treated differently, Buffett and Berkshire have always considered themselves long-term investors. Buffett always said that the Berkshire team looks for stocks they can hold forever. This is especially evident in Berkshire's top five holdings, which collectively account for roughly two-thirds of the portfolio:

• Apple (NASDAQ: AAPL) -- 21.5%
• American Express (NYSE: AXP) -- 13%
• Coca-Cola (NYSE: KO) -- 10.3%
• Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) -- 9.9%
• Bank of America (NYSE: BAC) -- 6.8%

Buffett and Berkshire initially bought American Express and Coca-Cola in the 1980s and 1990s and haven't sold a share since completing those initial buying sprees.

Berkshire first initiated Apple in 2016 after Buffett reportedly saw how upset one of his friends got when he thought he lost his iPhone. Strong branding has always been a big part of Buffett's investment thesis because it can build strong moats and, in turn, pricing power.

At one point, Apple made up roughly 40% of Berkshire's portfolio. Berkshire built up its Bank of America stake heavily during the pandemic, clearly choosing it as its big bank.

The large conglomerate first got involved with the stock following the Great Recession in 2011, when it injected $5 billion of capital into Bank of America in exchange for preferred stock with a 6% annual dividend and warrants that enabled the company to purchase 700 million common shares at a strike price of $7.14.

Bank of America stock now trades around $51 per share. It's just one example of how Buffett took advantage of a distressed situation.

However, in his first letter to shareholders, Abel did not list Bank of America among its "core holdings," and Berkshire has trimmed its Bank of America positions in recent quarters, so it may end up selling the stock.

Alphabet is Berkshire's newest large position, which Abel has boosted by tens of billions of dollars this year. It's also, interestingly, Berkshire's first heavy bet on an AI hyperscaler.

Buy these two

The two I like the most in this group right now are Apple and Coca-Cola. While Apple is a "Magnificent Seven" company, it also hasn't invested hundreds of billions into building data centers.

Sure, it may not benefit in the same way as hyperscalers that provide compute for AI, but its popular consumer devices are still likely to incorporate AI heavily and serve as a bridge between the technology and consumers.

Not investing so much in AI infrastructure also makes Apple less risky should the AI trade come crashing down. Apple is also a very shareholder-friendly company and has repurchased over $850 billion worth of stock since 2013. I suspect this will continue.

While Coca-Cola is not necessarily a fast-growing AI stock, it's one of the best consumer staples stocks that should provide consistent performance through an entire economic cycle.

Investors tend to rotate into these when they are concerned about the economy or market froth. That's evident this year, with Coca-Cola's stock up nearly 35%. Coca-Cola has also generated solid growth this year and is one of the most consistent dividend payers in the entire stock market.

Coca-Cola is a Dividend King, meaning it has increased its annual dividend for at least 50 years; Coca-Cola has done so for 64 years. The trailing dividend yield of nearly 2.3% is also quite solid when you consider the appreciation in the stock this year.

American Express is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, American Express, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.