When Berkshire Hathaway (BRK.A -0.30%) (BRK.B -0.15%) CEO Warren Buffett speaks, investors wisely pay attention. That’s because the appropriately-dubbed “Oracle of Omaha” has overseen a cumulative return in his company’s Class A shares (BRK.A) of more than 5,570,000% spanning six decades.
Buffett’s keys to success are no secret. Whether it’s in his annual letter to shareholders or during the question-and-answer session at Berkshire’s annual meeting, he lays out his game plan to for building wealth on Wall Street and keeping emotions in check. Berkshire’s chief is a value-oriented, long-term investor who primarily focuses on businesses with sustainable competitive advantages and strong management teams.
But when overseeing a 44-stock, $296 billion investment portfolio, it can be tough to tell which, if any, stocks the Oracle of Omaha has the most confidence in.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Apple, AmEx, and Bank of America are large holdings -- but none are Buffett’s favorite stock
Logic would dictate that the three largest holdings by market value in Berkshire Hathaway’s investment portfolio are the company’s Warren Buffett has the utmost confidence in… but this isn’t necessarily the case.
Tech giant Apple (AAPL -0.08%) has consistently been Berkshire’s top holding for years, and remains a company Buffett speaks highly about. Aside from the iPhone being the market share-leading smartphone in the U.S., Apple’s capital-return program is world-leading. More than $725 billion worth of the company’s stock has been repurchased since the start of 2013, which has demonstrably improved its earnings per share (EPS).
However, Buffett and his top advisors, Todd Combs and Ted Weschler, have also overseen the sale of more than 615 million shares of Apple stock between Oct. 1, 2023 and Sept. 30, 2024. Even if this selling is purely for tax purposes, it likely rules out Apple as the stock Buffett has the most confidence in.
Credit-services provider American Express (AXP 1.12%) has worked its way up to No. 2 spot in Berkshire Hathaway’s portfolio. “AmEx,” as American Express is more commonly known, was labeled an “indefinite” holding in Buffett’s letter to shareholders last year. Berkshire’s investment team likely appreciate AmEx’s ability to play both sides of the transaction counter, with the company generating payment processing fees from merchants, as well as annual fees and interest income from cardholders.
Yet it’s been a long time since Buffett purchased shares of American Express. If this were truly Buffett’s favorite company, he would likely add to the position.
Berkshire Hathaway’s third-largest holding, Bank of America (BAC 1.31%), is a similar story to Apple. It’s a company whose management team has received praise in the past from Buffett. BofA is the most interest-sensitive of America’s money-center banks and it benefited immensely from the Federal Reserve’s aggressive rate-hiking cycle from March 2022 through July 2023.
But since July 17, 2024, required Form 4 filings with the Securities and Exchange Commission (SEC) show that Berkshire’s top investment minds (led by Buffett) have sold 26% (about 266.5 million shares) of their Bank of America stake.
Image source: Getty Images.
The Oracle of Omaha has purchased this stock in 24 out of the last 25 quarters
Interestingly enough, the stock Warren Buffett appears to have the utmost confidence in is a company that doesn’t show up in Berkshire’s quarterly-filed Form 13Fs with the SEC. This is the form investors use to track the purchase and selling activity at Buffett’s company.
Rather, detailed purchasing activity of this “favorite stock” can be found in Berkshire Hathaway’s quarterly operating results. On the page prior to the beginning of the executive certifications, investors will find a breakdown of how many shares of Berkshire Hathaway Class A and B (BRK.B) stock the Oracle of Omaha purchased during the quarter. Perhaps it’s fitting that the stock Buffett buys most and has the utmost confidence in is shares of his own company.
However, buying shares of Berkshire Hathaway stock hasn’t always been easy for Warren Buffett. Prior to July 2018, shares could only be repurchased if Berkshire’s stock fell to or below 120% of book value. Unfortunately (for Buffett), this is a threshold Berkshire Hathaway’s stock never dipped to or below, which led to no buyback activity.
On July 17, 2018, Berkshire’s board reworked the rules governing buybacks to give its CEO more freedom to buy shares of the company he’s clearly the most confident in. Under the new criteria, share repurchases have no end date or cap as long as Berkshire has at least $30 billion in combined cash, cash equivalents, and U.S. Treasuries, and Buffett views his company’s stock as intrinsically cheap. This last part is intentionally vague and allows Buffett to deploy his company’s capital toward buybacks as he sees fit.
Even though Buffett didn’t repurchase shares of his company’s stock in the September-ended quarter, he had done so in each of the previous 24 quarters, with a cumulative $78 billion spent on buybacks.
Aside from these repurchases reinforcing Buffett’s belief that Berkshire Hathaway is ideally positioned to take advantage of lengthy periods of economic expansion, these buybacks serve two additional purposes.
For one, steadily reducing the company’s outstanding share count is incrementally increasing the ownership stakes of Berkshire’s investors. This goes a long way to incentivizing the long-term ethos that Buffett’s late right-hand man, Charlie Munger, helped to instill.
The other purpose behind these buybacks is to make Berkshire’s stock more fundamentally attractive. Companies with steady or growing net income and a declining outstanding share count can expect their EPS to increase over time.
With Berkshire Hathaway closing out the third quarter with a record $325.2 billion in (combined) cash, cash equivalents, and U.S. Treasuries on its balance sheet, it seems only logical to expect Buffett to buy shares of the stock nearest and dearest to his heart in 2025.
