Berkshire Hathaway has given shareholders very solid returns for decades. From 1965 through 2016, the company outperformed the S&P500 Index by 11.1% per year. Now, Warren Buffett has been on a shopping spree, increasing his position in his number one top stock.
The Largest holding – Apple Inc
Berkshire Hathaway’s largest holding is Apple Inc (NYSE:AAPL) which weights as much as 14.63%. Warren Buffett owns 165,333,962 Apple shares so it’s fair to say that he strongly believes in the company. During Q4, Buffett increased his position by 23%, and keep in mind that this is a after a 25% bull run.
When looking at the valuation metrics, it’s not that difficult to understand why Buffett loves this company so much. The P/E ratio is 16.73 and the Forward P/E ratio is 12.9. That’s quite remarkable, given that most technology companies trade at P/E close to 22 or even above. Further, the P/S is 3.64 which isn’t bad at all. Apple is a strange mix of both value and growth, so one could make the argument that both P/E and P/S are good measurements. The company yields 1.47% which is lower than inflation. Dividend income investors shouldn’t say no too fast, because Apple’s dividend grows at insane speed. The CAGR is close to 10%, meaning that patient investors will see their dividend grow a lot. Further, the payout ratio is less than 30%, so Apple will have no problem paying its shareholders for decades.
In total, Apple seems like a great mix of both value and growth, providing shareholders with a somewhat consumer-based security while getting access to cutting edge technology,
The second largest holding – Wells Fargo & Co
Wells Fargo & Co (NYSE:WFC) has been a long-term holding for Buffett. The company weights as much as 14.53%. The financial bank has been a solid performer for decades. Yielding 2.61% and having a P/B at 1.61 is not bad at all. The company trades at around $60 and the sum of target prices is 64.27 according to finviz.com.
The third largest holding – Kraft Heinz Co
Kraft Heinz Co (NYSE:KHC) is another long-term holding for Buffett. The company weights as much as 13.24% in Berkshire Hathaway’s portfolio. The company has been on a downwards spiral since the summer of 2017 when the price was close to $95. Now, the price is $67, but the average target price is 88.30 according to finviz.com. If you combine the price gain and the sweet dividend yield at 3.71%, maybe it’s time for investors to take a second look at this well-managed company.
The author holds none of the stocks above.