Warren Buffett’s 4 favorite stocks right now

What are Buffett’s favorite stocks right now? Only 4 stocks represent almost 70% of the portfolio of the world’s richest investor, arousing curiosity among traders looking for solid profits.

67.3% of Berkshire Hathaway’s $361 billion portfolio is invested in just 4 companies. The Oracle of Omaha thus demonstrates that diversification does not always translate into the most profitable choice. “Diversification is a protection against ignorance”, the billionaire would have confessed in one of his many and followed revelations. According to Buffett, if you know how to analyze a company, its industry, and its stocks, you don’t need to own more than a few extraordinary companies. These are the 4 favorite stocks of the elderly and wealthy investors.

1. Apple

Apple is by far the largest holding in Berkshire Hathaway’s stock portfolio. Buffett accumulated shares almost every quarter from the beginning of 2016 through the third quarter of 2018, resulting in a position equivalent to over 1 billion shares today. It has reduced the position a few times since then, including each of the last two quarters, but Berkshire still holds nearly 800 million shares.

There’s a lot to like about Apple beyond its massive capital return program supported by steady cash flows. Buffett praised CEO Tim Cook and called Apple “one of the best companies we own” at Berkshire’s 2023 shareholder meeting.

The iPhone may be the most successful consumer product in history. Cook’s ability to leverage the device’s popularity into a growing services business has been a key driver of the company’s profit margin growth. Despite Berkshire’s recent sell-off, Buffett told investors that Apple will most likely remain Berkshire’s largest holding.

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2. Bank of America

Buffett bought most of Berkshire’s stake in Bank of America in 2011. At the time he pledged $5 billion to the bank in exchange for preferred shares that paid a 6% dividend. But the agreement also included a mandate to purchase 700 million shares for $7.14 each. Buffett decided to exercise this mandate in 2017, acquiring a 6.8% stake in the company. It subsequently added shares in 2018, 2019, 2020, and 2023, resulting in a 13.1% stake in the company.

Bank of America has struggled recently amid the high-interest rate environment. A larger portion of its balance sheet contains long-dated bonds than the rest of the sector. Fortunes, however, are expected to change direction, as interest rates will eventually fall.

Despite major setbacks from the 2008-2009 financial crisis, the bank recovered to become one of the largest retail banks in the country. Buffett realized this early enough to make a substantial investment. But his continued buying, especially noteworthy in 2023 amid rising interest rates, indicates that he still sees opportunity in Bank of America.

3. American Express

Buffett began buying American Express shares in the early 1990s. And, similar to Apple, American Express has repurchased a significant number of shares almost every year.

Today, Berkshire’s stake in the credit card issuer stands at 21.1%. Buffett said in his latest letter to shareholders that he intends to keep Berkshire’s position in Amex indefinitely.

American Express is a unique business. Unlike other credit card issuers, the company owns the payment network used by its payment cards. Therefore, while banks rely heavily on the interest that their credit card users pay on their balance, American Express relies on the amount that customers spend on their cards.

The fact that the vast majority of spending comes from consumer cards provides strong protection against economic slowdowns and rising inflation rates, as in such situations individuals with higher incomes are less likely to change their spending habits compared to low-income families.

Because of its business model, American Express is more susceptible to large changes in consumer spending than other credit card issuers. But the types of card users it attracts make it better protected against loan defaults.

4. Coca Cola

Coca-Cola is one of Berkshire Hathaway’s longest-held companies. Buffett’s first purchases date back to 1988 and 1989. Today Berkshire’s share is 9.3%.

Coca-Cola is a classic Buffett investment. its strong brand and the significant cost advantages provided by its size give it a wide “economic moat,” as Buffett would call it. That is, it has a sustainable competitive advantage that gives it a much larger gross margin than other companies in the industry.

The strength of the brand has been instrumental to its success in recent years in the context of high inflation. Net revenue grew 3% year-over-year in the quarter. Meanwhile, the company is leveraging its global scale to improve operational efficiency and max out its supply chain.

Buffett has said he wishes he had advised his grandfather to buy Coca-Cola stock in 1936. Nearly 90 years later, he still thinks it’s a great stock to own.

|DISCLAIMER
The information and considerations in this article should not be used as the sole or primary basis for making investment decisions. The reader maintains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk propensity and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation to the public for savings.|

Original article published on Money.it Italy 2024-05-11 11:26:12. Original title: Le 4 azioni preferite da Warren Buffett in questo momento