Top 10 Berkshire Stock Holdings for 2017
Berkshire Hathaway Holdings 2017
Of all the legendary investors of our time, Warren Buffett probably has the biggest following among income investors. Buffett is known for his buy-and-hold strategy, and has also collected billions of dollars in dividends. Thanks to his wisdom, investors of Buffett’s company Berkshire Hathaway Inc. (NYSE:BRK.B) have been handsomely rewarded. In this article, we are going to take a look at the top 10 Berkshire stock holdings in 2017.
For income investors, patience can be a valuable virtue. However, in today’s market, not everyone has patience. When you can make double-digit gains trading the hottest tech stocks in a single day, who cares about a few percentage points of dividend yield?
The thing is, though, if an investor holds solid companies long enough, the return could be substantial. Warren Buffett’s success story is probably the best example of this. From 1964 to 2016, Berkshire Hathaway generated a total return of 1,972,595%. And yes, that number is accurate.
Berkshire Stock History
If you have been to Berkshire Hathaway’s annual shareholder meeting, you would know that some people consider it a financial pilgrimage. However, Berkshire didn’t really start out as an investment company. Its roots can be traced to a textile manufacturing company in Valley Falls, Rhode Island.
Buffett began buying stock in Berkshire Hathaway in 1962, but he quickly noticed that the textile business was going downhill. Still, he maintained the company’s core textile business after the acquisition, while also expanding into the insurance industry and other investments. It wasn’t until 1985 that Berkshire’s last textile operations were shut down.
While Berkshire has gained legendary status in the investing world, Buffett considers buying Berkshire one of his biggest mistakes. He once called the purchase of Berkshire a “monumentally stupid decision.” (Source: “Warren Buffett: My $100 billion blunder,” Fortune, February 28, 2015.)
Still, by generating a compound annual gain of 20.8% from 1965 to 2016, Berkshire stock managed to outperform the S&P 500 by more than 11% every year.
Warren Buffett Berkshire Hathaway Companies
Warren Buffett is a value investor. He once said that he is “85% Benjamin Graham,” who is known as the “father of value investing.” Value investors look for securities that trade at prices lower than their intrinsic worth. There is no golden formula that determines a company’s intrinsic value, but it is most often estimated by analyzing the fundamentals.
According to Warren Buffett’s right-hand man, Charlie Munger, companies owned by Berkshire Hathaway often have the following characteristics at the time of purchase. First, the company has an intrinsic competitive advantage that is durable; second, it has a management team with integrity and talent; and third, the company was available at a fair price.
One thing that has helped Berkshire generate those astronomical returns is dividends. While Berkshire does not pay a dividend, it has no problem collecting dividend payments from the companies it owns. As a matter of fact, nine of the top 10 stocks in Berkshire Hathaway portfolio are dividend-paying stocks.
Below is a list of current Berkshire Hathaway stock holdings ranked by market value. The holdings come from Berkshire’s 13F filing to the U.S. Securities and Exchange Commission on February 14, 2017. (Source: “Form 13F Information Table,” U.S. Securities and Exchange Commission, February 14, 2017.)
Note that the holding amount for Apple Inc. (NASDAQ:AAPL) is an approximation which comes from Buffett’s interview with CNBC on February 27. (Source: “Billionaire Warren Buffett more than doubled his holdings in Apple in 2017,” CNBC, February 27, 2017.)
List of Companies Owned by Berkshire Hathaway
|Company Name||Stock Symbol||Shares||Market Value||Dividend Yield|
|Kraft Heinz Co||KHC||325,634,818||$29.9 Billion||2.61%|
|Wells Fargo & Co||WFC||479,704,270||$26.8 Billion||2.72%|
|Apple Inc.||AAPL||133,000,000||$18.6 Billion||1.63%|
|The Coca-Cola Co||KO||400,000,000||$17.0 Billion||3.48%|
|International Business Machines Corp.||IBM||81,232,303||$14.1 Billion||3.22%|
|American Express Company||AXP||151,610,700||$11.8 Billion||1.65%|
|Phillips 66||PSX||80,689,892||$6.3 Billion||3.21%|
|U.S. Bancorp||USB||85,063,167||$4.4 Billion||2.13%|
|Charter Communications Inc.||CHTR||9,443,491||$3.0 Billion||N/A|
|Moody’s Corporation||MCO||24,669,778||$2.7 Billion||1.37%|
Warren Buffett Portfolio 2017
1. Kraft Heinz Co
Warren Buffett once said that he eats like a six-year-old. And he’s willing to put money where his mouth is; Buffett’s Berkshire Hathaway owns more than 325 million shares of Kraft Heinz Co (NASDAQ:KHC), a multinational food and beverage company, valued at a whopping $29.9 billion at today’s price.
Kraft Heinz was formed by the merger of Kraft Foods Group and Heinz in 2015. The deal, which was backed by 3G Capital and Berkshire, helped create the fifth-largest food and beverage company in the world. The business owns some of the most iconic brands in the industry, eight of which generate more than $1.0 billion in annual sales each. Last year, Kraft Heinz earned total revenue of $26.5 billion. (Source: “The Kraft Heinz Company,” Kraft Heinz Co, last accessed March 22, 2017.)
The company’s entrenched position in a slow-changing industry makes it a great choice for long-term investors. Kraft Heinz also pays quarterly dividends, with an annual yield of 2.61%.
2. Wells Fargo & Co
Just like Kraft Heinz, Wells Fargo & Co (NYSE:WFC) is a well-known name to American consumers. Its services include banking, insurance, investments, mortgage, and consumer and commercial finance. With $1.9 trillion in assets, it is the third-largest bank in the U.S.
Wells Fargo is well established in an industry with high barriers to entry. The company has more than 8,600 locations, 13,000 ATMs, and offices in 42 countries and territories. It serves one in three households in the U.S. If someone wants to challenge Wells Fargo’s position, it would have to build an equally impressive branch network and convince millions of consumers to switch—a very difficult job, indeed. That’s why Wells Fargo has been around for over 160 years and remains dominant today.
WFC stock has a quarterly dividend rate of $0.38 per share, translating to an annual yield of 2.72%.
3. Apple Inc.
Warren Buffett hasn’t really been known as a tech investor, which is why some people find his company’s giant stake in Apple a bit surprising. Berkshire first revealed a $1.0-billion stake in Apple in May 2016. But that was just the start; according to Buffett’s latest interview with CNBC, Berkshire now owns 133 million shares of the Cupertino, California-based tech giant. The stake is currently worth $18.6 billion.
Apple has been around for quite a while, but AAPL stock really started picking up momentum after the launch of the first “iPhone” around 10 years ago. The iPhone is still the company’s biggest source of revenue; in the December quarter, Apple’s iPhone sales totaled a staggering $54.4 billion. (Source: “Apple Reports Record First Quarter Results,” Apple Inc., January 31, 2017.)
Buffett said that he does not have an iPhone. However, he has noticed how the product could be indispensable to its users: “Apple strikes me as having quite a sticky product, and an enormously useful product to people that use it.” (Source: CNBC, February 27, 2017, op cit.)
Apple is also a dividend-paying company and currently yields 1.63%.
4. The Coca-Cola Co
It’s no secret that Warren Buffett loves the products of The Coca-Cola Co (NYSE:KO). He once told CNBC that he consumes about 700 calories of Coke a day, saying, “I’m about one-quarter Coca-Cola.” (Source: “Buffett defends Berkshire’s big Coke stake,” CNBC, May 2, 2016.)
Unsurprisingly, Coca-Cola also happens to be one of the top Berkshire Hathaway companies. Buffett owns 400 million shares of the beverage giant, with a current market value of $17.0 billion.
Note that Coca Cola has been in Warren Buffett’s portfolio for quite some time Buffett bought more than $1.0 billion of Coca-Cola stock in 1988. Even though the soda industry is facing headwinds, Buffett’s giant stake shows that he still believes in the long-term earnings power of the iconic beverage company.
5. International Business Machines Corp.
International Business Machines Corp. (NYSE:IBM) is a multinational technology company that has been operating for over 100 years. Today, its products include hardware, midware, and software. The company also offers hosting and consulting services in areas ranging from mainframe computers to nanotechnology.
IBM stock has had quite choppy ride over the past several years. When asked about his position in “Big Blue,” here’s Buffett’s response: “What you pay for a stock doesn’t mean anything. What means something is where the company’s going to be in five to 10 years.” (Source: “Warren Buffett: Buying IBM a mistake? Don’t think so, but …,” CNBC, February 29, 2017.)
Compared to other companies in the tech sector, IBM’s dividends stand out. Paying $1.40 per share on a quarterly basis, the company has an annual dividend yield of 3.22%.
6. American Express Company
By now, you will likely have noticed that the current Berkshire Hathaway stock holdings reflect Buffett’s preference of companies with wide economic moats. American Express Company (NYSE:AXP) is another great example of this investing philosophy.
American Express is a multinational financial services company that is best known for its credit card. Due to high barriers to entry, the credit card industry is essentially an oligopoly, with the market being shared by only four players: American Express, Visa Inc (NYSE:V), Mastercard Inc (NYSE:MA), and Discover Financial Services (NYSE:DFS). Being a major player in this oligopoly could allow American Express to continue generating sizable returns for its shareholders.
Note that Warren Buffett invested in American Express Company in the 1960s, making AXP one of his oldest stock picks.
7. Phillips 66
Phillips 66 (NYSE:PSX) is a diversified energy company that processes, transports, stores, and markets fuels and products globally. The company operates through four main segments: Midstream, Chemicals, Refining, and Marketing and Specialties.
Many energy companies have been hit hard in the downturn in commodity prices, and investors have suffered sizable losses as a result. Phillips 66 stock, however, recovered very quickly; in the past five years, PSX stock has more than doubled.
Last year, Warren Buffett increased his stake in the energy company. By the end of 2016, Berkshire owned 80.7-million shares of Phillips 66, which is now valued at approximately $6.3 billion.
8. U.S. Bancorp
U.S. Bancorp (NYSE:USB) is a bank holding company based in Minneapolis, Minnesota. It is the parent company of U.S. Bank National Association. With $446.0 billion in assets, U.S. Bank is the fifth-largest commercial bank in the U.S. The bank operates 3,106 banking offices in 25 states and has more than 4,800 ATMs.
By the end of 2016, Berkshire owned 85 million shares of the U.S. Bancorp. With interest rates moving higher, the best could be yet to come for investors of this bank holding company.
9. Charter Communications, Inc.
Charter Communications, Inc. (NASDAQ:CHTR) is a broadband communications company and the second-largest cable operator in the U.S. The company offers a wide range of broadband services under the branding of Charter Spectrum.
Compared to other companies in this top 10 list, Charter Communications is a more recent addition to Warren Buffett’s portfolio. Berkshire first disclosed the stake in 2014. Today, Buffett’s company owns more than nine-million shares of Charter Communications, with market value of over $3.0 billion.
Note that Charter is the only company in Berkshire’s top 10 holdings list that does not pay a dividend.
10. Moody’s Corporation
Moody’s Corporation (NYSE:MCO) is a financial services company headquartered in New York City. Consumers may not have interacted with Moody’s directly, but the company plays a critical role in global financial markets. It provides ratings, research, tools and analysis through Moody’s Investors Service and Moody’s Analytics.
Moody’s essentially operates in a duopoly, since it has just one main competitor: Standard & Poor’s. Limited competition gives Moody’s the ability to earn a higher profit, and share some of that profit with MCO stock investors. Since 2009, the company has raised its quarterly dividend rate every year. Moody’s currently has an annual dividend yield of 1.37%.