Key Points:
- Warren Buffett has nearly doubled the annualized total return of the benchmark S&P 500 since the mid-1960s.
- Concentrating investments in his best ideas is one of Buffett’s key strategies for success.
- Approximately $199 billion of Berkshire Hathaway’s $301 billion portfolio is invested in five leading businesses with robust capital-return programs.
Buffett’s Unparalleled Investment Record
For nearly six decades, Warren Buffett, the CEO of Berkshire Hathaway (BRK.A, BRK.B), has been a beacon of investment excellence. His Class A shares have delivered a staggering cumulative return of 5,561,176% as of December 12, 2024, vastly outperforming the S&P 500’s annualized total return, including dividends.
Buffett’s success lies in his disciplined approach: identifying businesses with sustainable competitive advantages and outstanding management, then making outsized investments in these top-tier ideas. Heading into 2025, Buffett’s Berkshire Hathaway has allocated 66% of its $301 billion portfolio to five standout stocks.
The Top 5 Investments Driving Berkshire’s Portfolio
1. Apple: $74.4 Billion (24.7% of Invested Assets)
Tech titan Apple (NASDAQ: AAPL) remains Berkshire’s largest holding by a significant margin, even as Buffett has sold over 615 million shares across the past year. During Berkshire’s 2024 annual meeting, Buffett explained that these sales were partly driven by tax considerations, anticipating an increase in corporate income tax rates. However, with Donald Trump’s re-election, corporate tax rates are expected to stay at historic lows, or possibly drop further.
Buffett’s admiration for Apple stems from its iconic brand and CEO Tim Cook’s leadership in steering the company toward high-margin subscription services. Apple’s capital-return program is another draw. The company pays $1 per share annually in dividends, generating $300 million in dividend income for Berkshire in 2025. Additionally, Apple boasts the world’s largest share buyback program, having repurchased $700.6 billion worth of shares since 2013.
2. American Express: $45.5 Billion (15.1% of Invested Assets)
American Express (NYSE: AXP), a credit-services provider, is Berkshire’s second-largest holding and has been part of its portfolio since 1991. Buffett’s preference for financial stocks stems from their cyclical nature and resilience during economic recoveries.
AmEx benefits from its dual revenue streams:
- Merchant Fees: As the No. 3 payment processor by U.S. purchase volume, it collects fees from merchants.
- Interest Income: It earns from annual fees and interest charged to cardholders.
AmEx’s clientele, primarily high earners, ensures stable revenues even during economic slowdowns. Notably, Berkshire’s cost basis in AmEx is approximately $8.49 per share, resulting in a dividend yield of 33% on cost.
3. Bank of America: $35.3 Billion (11.7% of Invested Assets)
Bank of America (NYSE: BAC) ranks as Berkshire’s third-largest holding, despite recent stock sales totaling over 266 million shares since mid-2024. Like with Apple, these sales may reflect Buffett’s strategy to lock in gains at favorable tax rates.
BofA’s interest-rate sensitivity has made it a standout performer during the Federal Reserve’s aggressive rate-hiking cycle. Even as the Fed shifts to rate easing, the gradual nature of this process ensures continued benefits for BofA.
Berkshire’s 2025 dividend income from BofA is expected to reach $797 million. The bank’s board is also committed to share buybacks, enhancing shareholder value during periods of economic growth.
4. Coca-Cola: $25.5 Billion (8.5% of Invested Assets)
Consumer goods giant Coca-Cola (NYSE: KO) is Berkshire’s longest-tenured holding, dating back to 1988. Buffett’s investment philosophy prioritizes simplicity, and Coca-Cola exemplifies this with its strong brand recognition and resilient demand for its beverages.
Coca-Cola’s unmatched geographic reach—operating in every country except North Korea, Cuba, and Russia—provides steady cash flow from developed markets and growth opportunities in emerging regions. Its marketing efforts, leveraging digital channels and AI, bridge generational gaps and maintain consumer engagement.
Coca-Cola’s capital-return program is another highlight. With 62 consecutive years of dividend increases, Berkshire’s cost basis of $3.25 per share yields a remarkable 60% annual return on cost.
5. Chevron: $18.4 Billion (6.1% of Invested Assets)
Rounding out the top five is Chevron (NYSE: CVX), an energy giant benefiting from sustained high oil prices. Buffett’s sizable investment in Chevron and Occidental Petroleum underscores his confidence in a constrained global energy supply.
Chevron’s diversified operations—from upstream drilling to downstream refining—provide a buffer against oil price volatility. The company’s capital-return program includes 37 consecutive years of dividend increases and a $75 billion share repurchase authorization, ensuring shareholder rewards.
Buffett’s Formula for Success
Warren Buffett’s concentrated investment strategy has propelled Berkshire Hathaway to extraordinary heights. By focusing on businesses with strong fundamentals and robust capital-return programs, he’s crafted a portfolio that’s both resilient and poised for growth. As investors look ahead to 2025, Buffett’s top five holdings exemplify his timeless approach to wealth creation.
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