Business · News 61
For the first time in more than half a century, Berkshire Hathaway (BRKA +0.60%, BRKB +0.57%) entered the year without Warren Buffett as its CEO. His Dec. 31 retirement paved the way for longtime understudy Greg Abel to take the helm and oversee the company's $360 billion investment portfolio. Although Abel has wasted little time reshaping Berkshire's portfolio, several aspects remain the same. Both Buffett and Abel believe in concentrating their company's invested assets in their best ideas. As of the closing bell on Aug. 28, Greg Abel had 63% ($226 billion) of Berkshire's portfolio concentrated in five superstar stocks: Apple ($72.87 billion, 20.2% of invested assets), American Express ($50.52 billion, 14%), Alphabet ($36.63 billion, 10.2%, combined classes), Coca-Cola ($35.86 billion, 9.9%), and Bank of America ($30.13 billion, 8.4%).
Warren Buffett retired as Berkshire Hathaway's CEO on Dec. 31. Berkshire is now a tech-driven conglomerate, with the tech sector comprising more than 30% of invested assets, primarily driven by Apple and Alphabet. Google parent Alphabet has been a significant addition since Abel took over in January, with Abel more than tripling Berkshire's stake in the first quarter and adding another $17 billion in the second quarter. Abel appears particularly attracted to Google Cloud’s growth, which has seen parabolic sales since incorporating AI solutions.
Meanwhile, Apple's iPhone sales have picked up after a multiyear lull, potentially signaling that the late 2024 launch of Apple Intelligence is making waves. American Express and Coca-Cola, Buffett’s so-called "indefinite" holdings, remain foundational. Berkshire holds Coca-Cola at a cost basis of roughly $3.25 per share with a 65% yield on cost, and American Express at $8.49 per share with a 45% yield. Both companies benefit from long periods of economic growth. Coca-Cola operates in all but three countries (North Korea, Cuba, and Russia), while American Express benefits from both sides of the transaction counter as a payment facilitator and lender.
On the other hand, Bank of America has seen a reduction in Berkshire’s stake for an eighth straight quarter, with sales of over 30 million shares in the second quarter. Berkshire’s stake in Bank of America has shrunk by approximately 53% over the trailing two years. While Bank of America benefits from lengthy economic expansions, its cyclical nature and valuation may pose challenges. Berkshire’s focus on value remains paramount, with Bank of America’s stock having moved from a 62% discount to book value to a 58% premium.
Source: The Motley Fool
