Warren Buffett's Successor, Greg Abel, Has 54% of Berkshire Hathaway's $365 Billion Portfolio Invested in 4 Proven Winners
Key Points
Greg Abel wasted little time overhauling Berkshire Hathaway’s portfolio following the Oracle of Omaha’s retirement as CEO at the end of last year.
Three of the top four holdings Abel oversees are legacy purchases from Warren Buffett’s tenure.
However, the new “Apple” of Abel’s eye has quickly become Berkshire’s No. 4 position.
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For the first time in well over half a century, Berkshire Hathaway (NYSE:BRKA)(NYSE:BRKB) entered the year in uncharted territory. Longtime CEO Warren Buffett retired at the end of last year, paving the way for his protégé, Greg Abel, to oversee the company's day-to-day operations and its closely watched $365 billion investment portfolio.
Abel wasted little time making his mark. During the first quarter, he sent 16 stocks packing! But amid this change, one investment trait remains the same: portfolio concentration. Between the Oracle of Omaha's legacy investments and the new apple of Abel's eye, four proven winners -- Apple (NASDAQ:AAPL), American Express (NYSE:AXP), Coca-Cola (NYSE:KO), and Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG) -- now account for 54% ($196.7 billion) of Berkshire's invested assets.
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Warren Buffett and Greg Abel both favor highly concentrated portfolios. Image source: Getty Images.
Apple: $78.38 billion (21.5% of invested assets)
Even though Warren Buffett sold 75% of Berkshire's Apple stake in the nine quarters leading up to his retirement, it remains the undisputed No. 1 holding. While Buffett has always appreciated customers' loyalty to the brand and Apple's otherworldly share repurchase program, totaling $879 billion since the start of 2013, it's the company's innovations that likely have Berkshire's new boss intrigued.
In addition to emphasizing its higher-margin subscription services, which can enhance customer loyalty, Apple has leaned into the evolution of artificial intelligence (AI) by rolling out its generative AI platform, Apple Intelligence, for its physical devices.
Abel sees Apple as a multidecade compounder.
American Express: $47.76 billion (13.1% of invested assets)
Credit-services titan American Express is another Buffett legacy investment, and the second-longest-tenured stock in Berkshire's portfolio (held continuously since 1991).
Amex's not-so-subtle secret to success is its ability to double-dip at the transaction counter. Not only is it a well-recognized payment processor that collects merchant fees, but it's also a lender generating annual fees and interest income from its cardholders.
Furthermore, Amex has historically attracted well-to-do clientele. High-income individuals are less likely to alter their spending habits or fail to pay their bills during minor economic disruptions.
Image source: Getty Images.
Coca-Cola: $37.08 billion (10.2% of invested assets)
While Amex is Berkshire's second-longest holding, beverage giant Coca-Cola is No. 1 (held since 1988). Coca-Cola's 64-year streak of raising its dividend, coupled with Berkshire's ultra-low cost basis of $3.2475 per share, works out to a tidy 65% annual yield on cost!
In a world fueled by AI ambitions, Coca-Cola reminds investors that a well-known consumer brand can still deliver. With the exception of North Korea, Cuba, and Russia, it has operations in every country. This allows Coca-Cola to generate predictable cash flow in developed countries while moving the organic growth needle in faster-growing emerging markets.
Coca-Cola and Amex were labeled as "indefinite" holdings by Buffett in his 2023 letter to shareholders, so neither is going anywhere.
Alphabet: $33.5 billion (9.1% of invested assets)
Lastly, we have the stock Buffett's successor has piled into since the beginning of the year, Alphabet.
Google maintains its virtual monopoly in global internet search traffic, providing Alphabet with a boatload of operating cash flow and meaningful ad-pricing power. But it's Alphabet's AI ambitions that have Abel excited.
Since Alphabet integrated generative AI and large language model capabilities into Google Cloud, the world's No. 3 cloud infrastructure services platform, sales growth has gone parabolic. Sales for this considerably higher-margin segment soared 82% in the June-ended quarter from the previous year. There's no question about it: Alphabet is the new "Apple" of Abel's eye.
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American Express is an advertising partner of Motley Fool Money. Sean Williams has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, American Express, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.
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