Billionaire Warren Buffett’s Top Oldest Investments

If one starts stacking up all that has ever been written on the ‘Oracle of Omaha’, it would probably fill up a whole library. Perhaps no words can ever do full justice to the man, who has managed to beat the markets and that too by a wide margin for 50 years. Actually, no one needs words or adjectives to describe Warren Buffett because the performance of his investment company Berkshire Hathaway speaks for itself. In the period between 1965 and 2015, while the S&P 500 generated annualized returns of 9.7%, Berkshire Hathaway Inc. (NYSE:BRK.A)’s stock delivered annualized returns of 20.8%. Since a lot has already been said and written about Mr. Buffett, in this post we are not going to waste the time of our readers in enumerating his brilliance. Rather, we will go through the five stocks that Berkshire has held for a long time and try to understand why they still account for a major chunk of its portfolio.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

#5 USG Corporation (NYSE:USG)

– Shares Owned by Berkshire Hathaway (as of December 31): 39 million

– Value of Holding (as of December 31): $1.04 billion

Berkshire Hathaway initiated its stake in USG Corporation (NYSE:USG) in the fourth quarter of 2000 by purchasing 6.5 million shares of the company. Over the years, it has kept increasing that stake and now owns over 26% of all outstanding shares of USG Corporation (NYSE:USG). Since the company generates consistent income and Berkshire Hathaway owns a large stake in it, there always have been rumors on the Street that the firm will eventually acquire the company. Another notable investor with a substantial stake in the company is billionaire David E. Shaw‘s D.E. Shaw, which owned 575,850 shares of USG Corporation at the end of December. Though USG Corporation’s stock has fallen considerably since the second half of 2015, it is trading in the green this year with marginal gains of 1.31%. The company is expected to report its fiscal 2016 first quarter results next month and analysts currently project it to report EPS of $0.25 on revenue of $932.79 million. For the same quarter of the previous financial year, it had reported EPS of $0.29 on revenue of $909 million.

#4 Moody’s Corporation (NYSE:MCO)

– Shares Owned by Berkshire Hathaway (as of December 31): 24.67 million

– Value of Holding (as of December 31): $2.56 billion

Moody’s Corporation (NYSE:MCO) has been a part of Berkshire’s portfolio since 2000. Though the fund has almost halved its stake in the company from the 48 million shares it held in June 2009, it booked considerably profit in doing so because Moody’s Corporation (NYSE:MCO)’s stock has appreciated over 300% since that time. John Armitage‘s Egerton Capital Limited was among the funds which initiated a stake in the company during the fourth quarter, it purchased 2.49 million shares of Moody’s Corporation  during that period. Though the stock of rating agency started 2016 on a dismal note, depreciating by 20% in the first weeks, it has made a swift recovery and now trades down by 5% year-to-date. On March 10, the company announced that it would withdraw from the Russian domestic market, citing new Russian regulations which require foreign rating agencies to issue ratings in the country only through a local subsidiary that agrees to certain conditions. On February 22, analysts at Argus reiterated their ‘Buy’ rating on Moody’s stock, but lowered their price target to $110 from $120.

#3 American Express Company (NYSE:AXP)

– Shares Owned by Berkshire Hathaway (as of December 31): 151.61 million

– Value of Holding (as of December 31): $10.54 billion

Mr. Buffett has had a long relationship with American Express Company (NYSE:AXP), moving in and out the stock several times in his investing career. However, he has continued to own a stake in the company permanently since 1993. In January this year, when American Express Company (NYSE:AXP) reported its fourth quarter earnings and issued a disappointing guidance, Berkshire Hathaway saw the value of its 15% stake in the company drop by over $1.2 billion overnight due to the slump in American Express Company’s stock. Though the stock has regained some lost grounds since then, it still trades down almost 14% year-to-date. Due to the slump in its stock price and its subpar financial performance in the past few quarters, the company recently cut the total compensation of its CEO, Kenneth Chenault, by 26% to the lowest level since 2008. While analysts generally appreciated this move, some also noted that Mr. Chenault’s pay is still relatively high considering the performance of the company under his leadership. At the 2015 Berkshire annual meeting, vice-chairman Charlie Munger highlighted that American Express’ moat has been eroded over time and the company’s path to ‘prosperity’ isn’t easy anymore.

#2 The Coca-Cola Co (NYSE:KO)

– Shares Owned by Berkshire Hathaway (as of December 31): 400 million

– Value of Holding (as of December 31): $17.18 billion

The Coca-Cola Co (NYSE:KO) has been one of the legendary investments made by Mr. Buffet in his career, something which is still admired by a lot of investors and discussed quite often. The company has generated enormous profits for Berkshire Hathaway since it first initiated a stake in it in 1988. However, there are  also a few people like activist investor Bill Ackman, who not only dislike The Coca-Cola Co (NYSE:KO), but also Berkshire’s investment in it. Last year, a few days after Charlie Munger criticized the strategy of Valeant Pharmaceuticals Intl Inc (NYSE:VRX), in which Mr. Ackman owns a substantial stake, Mr. Ackman retaliated by saying that The Coca-Cola Co has ’caused enormous damage to society’ and ‘has probably done more to create obesity and diabetes on a global basis than any other company in the world’. Shares of the beverage giant have rallied since September 2015 and are currently trading up by 7% year-to-date. However, in spite of this rally, the stock still sports an attractive annual dividend yield of 3%. On March 16, analysts at Goldman Sachs reiterated their ‘Neutral’ rating and $46 price target on the stock.

#1 Wells Fargo & Co (NYSE:WFC)

– Shares Owned by Berkshire Hathaway (as of December 31): 479.70 million

– Value of Holding (as of December 31): $26.07 billion

Though Berkshire initiated a stake in Wells Fargo & Co (NYSE:WFC) in 1989 itself, the company became a major part of the firm’s portfolio in the following year when Berkshire increased its stake in it by 600%. Wells Fargo & Co (NYSE:WFC) has been Berkshire’s largest equity holding for the past 15 quarters and accounted for almost 20% of the value of the firm’s equity portfolio at the end of 2015. In a recent filing with the US Securities and Exchange Commission, Berkshire reported holding 506.31 million shares of Wells Fargo & Co (NYSE:WFC), representing 10% of the company’s outstanding stock. With ownership of nearly 19 million shares, Ken Fisher‘s Fisher Asset Management trailed Berkshire Hathaway as the largest shareholder of the company  among funds tracked by us at the end of the fourth quarter. Amid a decline in major banking stocks this year, shares of Wells Fargo & Co have also declined this year and are currently trading down 11%  year-to-date. However, they performed relatively well when compared to other banking stocks. For its first fiscal quarter, analysts are expecting Wells Fargo & Co (NYSE:WFC) to report EPS of $0.99 on revenue of $21.68 billion, compared to EPS of $1.04  on revenue of $21.30 billion that it delivered in the same quarter of the previous fiscal year. Wells Fargo & Co’s stock sports an average rating of ‘Overweight’ and an average price target of $56.06.

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