Warren Edward Buffett, who has been tagged as the legendary value investor, turned ailing textile mill into financial engine which powered what would be the world’s most renowned and successful holding company. He is also known as “Oracle of Omaha” because of his investment prowess, and Mr. Buffett amassed personal fortune of more than $100 billion, as per data released by Forbes. There are several investors who have made a fortune just by following and investing in Warren Buffett’s stock picks.
Mr. Warren Buffett started making investments at a young age as he bought his first stock at the age of 11. He made his first real estate investment when he was just 14 years of age. Mr. Buffett studied under legendary value investor Benjamin Graham at the time of pursuing his business degree at Columbia University. Portfolio and investment ideas of Mr. Buffett continues to be tracked closely by the retail investors. Warren Buffett’s stock picks have generated multi-bagger returns over the long-term because of his principles related to value investing.
If you are planning to track Mr. Buffett’s portfolio, this article has come to your rescue. By the end of this article, you will know that more than 60% of his portfolio is invested in just 3 stocks. Yes, you read that right! Just 3 stocks. Now you know that Warren Buffett’s stock picks are actually long-term conviction buys and his followers should focus on only long-term value stocks.
Since he became CEO in 1965, Mr. Warren Buffett saw greater-than ~4,450,000% return in Berkshire Hathaway’s Class A shares. It goes without saying that portfolio concentration of Mr. Buffett played critical role in his success as an investor. At the time of writing, ~$216 billion of Berkshire Hathaway’s investment portfolio is composed of 3 renowned stocks.
1. Apple, Inc.
Apple, Inc. has been categorised as one of the world’s leading consumer electronics and personal computer companies. It has released its financial results for 3Q23 ended July 1, 2023. Apple saw quarterly revenue of $81.8 billion, which exhibits a decline of 1% year-over-year, and quarterly earnings per diluted share of $1.26, exhibiting a rise of 5% year-over-year.
Mr. Tim Cook announced that the company saw all-time revenue record in Services during quarter ended June, stemming from more than 1 billion paid subscriptions. Apart from this, the company saw continued strength in emerging markets as a result of strong sales of iPhone. During 1Q23, the company recorded very strong operating cash flow of $26 billion, and returned more than $24 billion to its shareholders. The company continues to invest in its long-term growth plans. Board of directors of the company announced a cash dividend of $0.24 per share of common stock. This dividend was payable on 17th August 2023.
Another thing which smart investors should know about Apple, Inc. is that the company continues to upgrade its products with the help of AI (artificial intelligence). Experts have revealed that Apple, Inc. built custom framework for developing AI models. As the result, the company produced own version of OpenAI’s ChatGPT, and the company named it Apple GPT.
When the company released its 3Q23 earnings report, it showed that its R&D spending touched ~$23 billion, exhibiting a rise of ~$3 billion in comparison to the year before. When asked, CEO Tim Cook informed that this increase was mainly because of higher research on generative AI technologies.
2. Bank of America Corporation
Bank of America Corp has been categorised as the largest financial institutions in the US, having over $2.5 trillion in assets. The company carries out operations in 4 major segments: 1) Consumer banking, 2) Global wealth and investment management, 3) Global banking, and 4) Global markets.
The company has released its 2Q23 results, and it saw its net income rising 19% to $7.4 billion, or $0.88 per diluted share, in comparison to $6.2 billion, or $0.73 per diluted share for 2Q22. Revenue of the company, net of interest expense, saw an increase of 11% to $25.2 billion. Non-interest expense went up by ~$765 million, or 5%, to $16.0 billion because of investments in franchise throughout people and technology and increased FDIC expense. Operating leverage of the company came in at 6% and efficiency ratio was 64%.
Average loan and lease balances grew by $32 billion, or 3%, to $1.0 trillion as the result of strong commercial loan growth and higher credit card balances. Its book value per common share went up by ~7% to $32.05 and its tangible book value per common share was up by ~10% to $23.237.
In 2Q23, the company saw continued organic client growth and client activity throughout its businesses which complemented beneficial impacts of increased interest rates and produced 11% rise in revenue. The company sees healthy U.S. economy which is growing at the slower pace, with resilient job market.
Although the stock is behind Apple, Inc., Bank of America Corp is one of the favourite Warren Buffett’s stock picks, with Berkshire holding over 1 billion shares of the company’s stock. This equates to market value of ~$29.3 billion as on 8th September.
3. American Express Company
This is the 3rd stock which makes up more than ~60% of Warren Buffett’s investment portfolio worth $353 billion, when aggregated with Apple, Inc. and Bank of America.
American Express Company saw 2Q23 net income of $2.2 billion, or $2.89 per share in comparison to net income of $2.0 billion, or $2.57 per share, a year ago. The company delivered its 5th straight quarter of record revenues and record EPS this quarter, each increasing by ~12% over the previous year. This demonstrates continued strength of the company’s differentiated business model.
Conclusion
If you have been a long-term follower of Mr. Buffett, you’d probably know that Warren Buffett’s stock picks involve no fancy charts or algorithms. Instead he focuses on well-run, profitable businesses and then he holds onto these stocks for years, if not decade. All of the Warren Buffett’s stock picks have sustainable moats/competitive advantages and these businesses have a strong and healthy track record of generating stable cash flows.
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