Below we take a look at the legendary Warren Buffett Stock Portfolio: Top 5 Stock Picks. For our methodology and a more comprehensive list of the Oracle of Omaha’s stock picks, please see Warren Buffett Stock Portfolio: Top 10 Stock Picks.
5. American Express Company (NYSE:AXP)
Value of Berkshire Hathaway‘s 13F Position: $20.4 Billion
Number of Hedge Fund Shareholders: 71
Warren Buffett’s stake in American Express Company (NYSE:AXP) was left unchanged during Q3 at nearly 152 million shares. Buffett also owns stakes in Visa Inc. (NYSE:V) and Mastercard Incorporated (NYSE:MA), though they’re much smaller by comparison. Those holdings were also left untouched during Q3. Ken Fisher’s Fisher Asset Management and Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital also own noteworthy stakes in AXP.
As noted in the first half of this article, Buffett loves companies like American Express Company (NYSE:AXP) that have strong competitive advantages. His interest in the company dates all the way back to 1964, which is when he first took a stake in it. He sold out of that position a few years later, but went long AXP again in 1993 and now owns more than 20% of the company.
Buffett might prefer American Express Company (NYSE:AXP) over its rivals due to the company’s focus on affluent customers and its resulting strong credit quality. Nonetheless, American Express’s $778 million in provisions during Q3, was much higher than the market anticipated and suggests even its customer base isn’t immune from the broader economic fallout. The company’s overall performance has remained strong however, with net income rising by 3% during the quarter to $1.88 billion while revenue surged by 24% to $13.6 billion.
4. The Coca-Cola Company (NYSE:KO)
Value of Berkshire Hathaway‘s 13F Position: $22.4 Billion
Number of Hedge Fund Shareholders: 59
The Coca-Cola Company (NYSE:KO) is one of Warren Buffett’s oldest holdings and the Oracle of Omaha has left it unchanged for more than a decade (his share count doubled in Q3 2012 due to the company’s stock split). Buffett is not only a major investor of the company (it ranked as his top stock pick for several quarters), but also one of the biggest fans of its iconic sodas, consuming multiple cans daily.
Other money managers appear to be concerned by Coca-Cola’s slowing growth and the decline in global soda consumption, as their ownership of the stock has dropped for three straight quarters, falling by 20% during that time. The Coca-Cola Company (NYSE:KO) did have a strong Q3 however, growing net revenue by 10% and EPS by 14% on year-over-year bases, which highlights the success the company has had in expanding out from its soda offerings, which includes launching two alcoholic beverages this year.
Carillon Tower likes the direction of The Coca-Cola Company (NYSE:KO)’s pricing, as revealed in its Q3 2022 investor letter:
“Shares of The Coca-Cola Company (NYSE:KO) sold off with consumer staples even as the company reported strong pricing for the second quarter. On average, product prices rose with management hinting at further momentum.”
3. Chevron Corporation (NYSE:CVX)
Value of Berkshire Hathaway‘s 13F Position: $23.8 Billion
Number of Hedge Fund Shareholders: 68
Berkshire Hathaway’s position in Chevron Corporation (NYSE:CVX) was increased by 3% during Q3, with Buffett’s holding company ending the quarter with over 165 million shares. Hedge fund ownership of CVX has risen during five of the past six quarters to hit an all-time high, jumping by over 50% during that period.
Chevron Corporation (NYSE:CVX) is Buffett’s top energy stock pick. The company provides a strong mix of both upstream and downstream assets that allow it to profit heavily when oil and gas prices are high, while insulating it somewhat when they’re not. Chevron’s upstream operations more than doubled its earnings year-over-year during the first nine months of 2022, hitting $24.8 billion. The company has a fortress-like balance sheet and a solid dividend that it’s raised for 35 consecutive years.
The Diamond Hill Long-Short Fund discussed why Chevron Corporation (NYSE:CVX) was one of its top Q1 contributors in the fund’s Q1 2022 investor letter:
“Other top contributors in Q1 included multinational energy company Chevron Corp. (NYSE:CVX). The company benefited from increased energy demand as COVID-related economic restrictions eased in tandem with concerns regarding supply interruptions related to Russia’s invasion of Ukraine.”
2. Bank of America Corporation (NYSE:BAC)
Value of Berkshire Hathaway‘s 13F Position: $30.5 Billion
Number of Hedge Fund Shareholders: 101
Warren Buffett still owns just over 1.01 billion shares of Bank of America Corporation (NYSE:BAC) as of September 30, the same amount he’s owned for the last two years. The value of his position has risen by over $6 billion during that time. Bank of America fell to an all-time low in hedge fund ownership a year ago, but has rebounded by 31% since then. Louis Bacon’s Moore Global Investments added BAC to its 13F portfolio during Q3.
Bank stocks were a favorite investment of Buffett’s for a long time, but no longer have the same honored place in his portfolio. One of the exceptions is Bank of America Corporation (NYSE:BAC), which ranks as Berkshire’s second-largest 13F holding. He held BAC shares for several years in the 2000’s before selling off his stake in late 2010, but bought back into the company in the third quarter of 2017 and has gradually added more shares to his holding in the years since.
Bank of America will benefit more from rising rates than many other banks given its relatively high sensitivity to them, with the company’s net interest income expected to grow at a CAGR of 16% between 2022 and 2023. In the September quarter, BoA’s net interest income soared by $2.7 billion year-over-year to $13.9 billion. That figure is expected to approach or top $18 billion in a year.
Diamond Hill Capital Management shared its thoughts on Bank of America Corporation (NYSE:BAC)’s recent share price weakness in the fund’s Q2 2022 investor letter:
“Bank of America Corporation (NYSE:BAC) shares were weak in Q2 as the market became increasingly focused on the possibility of a near-term recession and the potential for credit losses along with current fee revenue pressures.”
1. Apple Inc. (NASDAQ:AAPL)
Value of Berkshire Hathaway‘s 13F Position: $124 Billion
Number of Hedge Fund Shareholders: 141
Apple Inc. (NASDAQ:AAPL) has been Warren Buffett’s top stock pick for five years and has commanded a gigantic percentage of his 13F portfolio over the past two years after he nearly quadrupled the size of his Apple position during Q3 2020. Berkshire’s 13F exposure to Apple hasn’t fallen below 40% in the two years since. The position was left unchanged during Q3 at nearly 895 million shares. To put Buffett’s gargantuan $124 billion stake in Apple into context, there are only a handful of hedge funds in the world that even have $124 billion in assets under management, let alone that much money invested into a single stock.
The iPhone still accounts for more than half of Apple Inc. (NASDAQ:AAPL)’s revenue and there are some concerns about the company’s reliance on a small number of manufacturers, namely those in China, where Covid lockdowns and protests threaten to upend Apple’s supply chain. The company is working to bring more of its production in-house in the future, but there’s no escaping its current predicament.
Apple is also looking to diversify its offerings so it’s not as reliant on the iPhone in general, and does have some intriguing growth opportunities in the fintech and healthcare spaces. The company has significantly ramped up its R&D initiatives over the past two years, growing spending from $18.8 billion in 2020 to over $26 billion this year, though that still pales in comparison to some of its largest tech rivals in terms of R&D budget as a percentage of revenue.
Wedgewood Partners remains bullish on Apple Inc. (NASDAQ:AAPL)’s dynamic and valuable combination of hardware and software, as noted in its Q3 2022 investor letter:
“Apple Inc. (NASDAQ:AAPL) grew revenues +5% (foreign exchange adjusted and excluding Russia) driven by record iPhone revenues that were up about +3% on an exceptional year ago comparison of +50%. Apple’s installed base is over 1.8 billion devices which helps drive a software and services business that has generated almost $80 billion of revenue over the past 4 quarters. As we have highlighted in the past, Apple’s relentless focus on the development and integration between hardware (especially ICs) as well as software, continues to add significant value for customers of its products and services. We expect this favorable competitive dynamic to continue for the foreseeable future.”
For more of the latest stock picks worth considering for your portfolio, check out the 12 Best Nancy Pelosi Stocks To Buy and the 15 Best Self-Driving Car Stocks To Buy.
Disclosure: None.
