Warren Buffett's Successor, Greg Abel, Has 55% of Berkshire Hathaway's $360 Billion Portfolio Invested in 4 Standout Stocks

Source The Motley Fool

Key Points

  • Although Greg Abel overhauled Berkshire’s portfolio following Warren Buffett’s Dec. 31 retirement, he’s remained concentrated in a handful of stocks.

  • Berkshire Hathaway’s No. 3 holding shows there’s a new “Apple” of Abel’s eye.

  • Warren Buffett’s “indefinite” holdings have transformed into dividend goldmines over several decades.

  • These 10 stocks could mint the next wave of millionaires ›

For the first time in over half a century, Berkshire Hathaway (NYSE:BRKA)(NYSE:BRKB) entered the year without Warren Buffett as its CEO. The Oracle of Omaha retired on Dec. 31, giving his understudy, Greg Abel, the responsibility to oversee Berkshire's day-to-day operations and its revered $360 billion investment portfolio.

Abel hasn't been shy about shaking things up. He completely overhauled Berkshire's portfolio in the first quarter, while building up a few core positions. But the one trait that continues even after Buffett's retirement is portfolio concentration. Warren Buffett's successor currently has 55% ($196 billion) of Berkshire's invested assets in only four standout stocks:

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  • Apple (NASDAQ:AAPL): $76.61 billion (21.3% of invested assets)
  • American Express (NYSE:AXP): $47.24 billion (13.1%)
  • Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG): $36.91 billion (10.3%)
  • Coca-Cola (NYSE:KO): $35.3 billion (9.8%)
A close-up of Berkshire Hathaway's now-former CEO, Warren Buffett.

Berkshire Hathaway's portfolio remains highly concentrated after Warren Buffett's Dec. 31 retirement. Image source: Getty Images.

Alphabet is the new "Apple" of Abel's eye

For much of the last decade, iPhone maker Apple has been Berkshire's largest holding. While Apple's success correlates directly to its ongoing innovation and its shift toward higher-margin services, Buffett, who initiated his company's whopper stake in Apple, appreciated consumers' willingness to remain loyal to the brand and pay premium prices.

Though Buffett also initiated Berkshire's stake in Alphabet, it's Abel who has grown it to nearly $37 billion. Unlike Buffett, who favored Apple's consumer appeal, Abel's optimism about Alphabet centers on the company's artificial intelligence (AI) ties.

Google remains foundational to Alphabet's ongoing success. In August, Google accounted for more than 91% of global internet search traffic, affording the company exceptional ad pricing power.

But it's the integration of generative AI and large language model solutions into cloud infrastructure services platform Google Cloud that can supercharge Alphabet's long-term growth. Since incorporating AI into Google Cloud, sales growth for this substantially higher-margin segment has gone parabolic.

It would appear that it only took Greg Abel a few quarters to find his "Apple."

A person holding a fanned and folded assortment of cash bills by their fingertips.

Image source: Getty Images.

Berkshire's "indefinite" holdings are dividend goldmines

In addition to a strong tech presence -- AI stocks make up almost 32% of Berkshire's invested assets -- Abel is overseeing a portfolio that's packed with legacy holdings that deliver outsize dividends.

Beverage behemoth Coca-Cola and credit-services provider American Express (commonly known as Amex) have been continuously held by Berkshire Hathaway since 1988 and 1991, respectively. Each company possesses competitive advantages that have boosted its operating results over time.

For example, Coca-Cola has operations in all but three countries (North Korea, Cuba, and Russia), enabling it to generate consistent operating cash flow in developed markets, while leaning on emerging markets to move the organic growth needle.

Meanwhile, Amex enjoys the luxury of double-dipping. It benefits from both sides of the transaction counter, generating fees from merchants when processing transactions, and fees/interest from cardholders as a lender.

But it's the dividend income Berkshire receives from these two stocks, both of which were labeled as "indefinite" holdings in Warren Buffett's 2023 letter to shareholders, which makes them so valuable.

Berkshire's cost bases in Coca-Cola and Amex are roughly $3.25 and $8.49 per share, respectively. After 64 consecutive years with a dividend increase, Coca-Cola pays out $2.12/year, while Amex doles out $3.80/year. Based on yield-to-cost, Abel's company is netting annual yields of 65% and 45% on Coca-Cola and American Express, respectively.

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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.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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