Does Warren Buffett Have a Favorite Stock?

Warren Buffett has expressed a positive view toward dozens of stocks during his 60-year tenure as CEO of the Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) holding company. It's hard to say with certainty whether he has a favorite, but if we simply follow the money, he has plowed twice as much into Berkshire Hathaway stock itself through buybacks than he has invested in any other company.

When you look at Berkshire's performance, it's no surprise Buffett likes it so much. Its stock has delivered a compound annual return of 19.9% since he became CEO in 1965, crushing the S&P 500 (SNPINDEX: ^GSPC) which grew by just 10.4% annually over the same period.

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In dollar terms, $1,000 invested in Berkshire stock in 1965 would have been worth a whopping $44.7 million at the end of 2024, whereas the same investment in the S&P 500 would have grown to just $342,906 over the same period.

You won't believe how much money Buffett has authorized in share buybacks since 2018, and when you see the number, you might come to the same conclusion I did: Berkshire really is his favorite stock.

Image source: The Motley Fool.

Buffett turned Berkshire into a trillion-dollar conglomerate

Berkshire Hathaway was a struggling textiles company when Buffett swooped in and acquired a majority stake in 1965. After realizing its primary operations weren't viable, he turned it into a holding company for his various investments. Today, Berkshire operates a number of wholly owned subsidiaries like GEICO Insurance and Dairy Queen, and manages a $283 billion portfolio of publicly traded stocks and securities.

That portfolio includes many of the world's highest-quality stocks. Between 2016 and 2023, Berkshire spent approximately $38 billion acquiring shares of Apple (NASDAQ: AAPL), which is the most money the conglomerate has ever invested in a single company. Going into 2024, the position was worth over $170 billion. That accounted for half the value of Berkshire's portfolio, so Buffett and his team sold over 50% of the stake throughout the year to lock in some gains and manage risk. Apple still accounts for 21.2% of Berkshire's portfolio today.

Coca-Cola (NYSE: KO) is another prominent Berkshire holding. Buffett spent $1.3 billion buying 400 million shares in the beverage giant between 1988 and 1994, and to this day he has never sold a single one. The position is now worth $28.1 billion, and it will pay Berkshire $816 million in dividends during 2025 alone. In other words, the conglomerate recoups more than half of its original investment every single year in dividend payments alone.

Buffett likes investing in companies that return money to shareholders through dividends and buybacks, because he always takes a long-term view and they compound his returns significantly faster than those that don't. This strategy is one of the key reasons Berkshire's market capitalization has grown to over $1 trillion.

American Express, Bank of America, Visa, Moody's Corp, and Kraft Heinz are just a few of Berkshire's other long-term holdings that pay regular dividends.

Buffett has plowed twice as much into Berkshire as he invested in Apple

It's completely reasonable to think that Apple is Buffett's favorite stock, given Berkshire's unprecedented $38 billion investment in the iPhone maker, and because he consistently heaps praise on the brand. But since 2018, Buffett has plowed more than twice that amount into his own company, Berkshire Hathaway, through stock buybacks.

Buybacks are Buffett's preferred way of returning money to shareholders. They shrink the number of Berkshire shares in circulation, which typically results in a proportionate increase in the price per share. He usually authorizes them when Berkshire can't find enough suitable investment opportunities, because sitting on large piles of idle cash can affect the conglomerate's performance.

Buffett has authorized a whopping $77.8 billion worth of buybacks since 2018, but their pace has gradually slowed over the past couple of years, and there haven't been any repurchases at all over the last three quarters.

BRK.A Stock Buybacks (Quarterly) data by YCharts.

Berkshire can execute buybacks at management's discretion as long as the total value of its cash and Treasury bonds sits above $30 billion. Since the conglomerate has over $347 billion in dry powder right now, that certainly isn't an issue. Berkshire's upcoming leadership change is the most plausible reason for the halt. Buffett plans to step down from his role as CEO at the end of 2025, and he probably wants to leave key decisions like buybacks to his successor, Greg Abel.

Buffett will continue serving as Berkshire's chairman, so his brand of long-term value investing will likely endure at the conglomerate. As for which stock might be his favorite, I think most people would have a soft spot for the place where they've worked tirelessly for the last six decades. The fact that he has poured $77.8 billion into Berkshire over the last seven years, instead of finding alternative investments, simply cements the idea that he favors his own company above any other.

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American Express is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Moody's, and Visa. The Motley Fool recommends Kraft Heinz. The Motley Fool has a disclosure policy.