Warren Buffett's most valuable investments
Berkshire Hathaway's top holdings illustrate the Oracle of Omaha's steadfast investing strategy.
By Karen Riccio
Warren Buffett, who often uses the Berkshire Hathaway (BRK.A) annual shareholders' meeting to reiterate why he buys the stocks he buys, mesmerized his loyal fans once again last weekend in Omaha.
While the portfolio changes from time to time, his philosophy for buying stocks is cast in stone.
Buffett stresses to focus on what you know about a company today, and do not take "unknowns" into account. Zero in on size, market share, profit margins, return on equity, earnings, free cash flow, debt and price relative to earnings and book value.
Ignore wars, government rhetoric, climate change, upgrades, downgrades and any other noise surrounding the stock market. Fundamentals eventually pay off, and can actually protect against uncertainty in the market.
Here are the three Berkshire Hathaway stakes worth the most, and how each is a cornerstone to the Buffett empire.
Wells Fargo (WFC)
Berkshire Hathaway stake: $24 billion
Buffett purchased shares of Wells Fargo in 1989-1990 and currently owns 483.4 million, one of the largest and most valuable holdings of Berkshire.
Even when the real estate-driven recession in 1990 hammered the stock, his reaction was to purchase even more shares. Why? He believes in the bank management’s ability to do what’s right in the face of adversity. Unlike many of its peers in the era of foreclosures, Wells Fargo had fewer cases and lower loan delinquencies. While the company is working on reducing expenses by $1.5 billion per quarter, it delivers above-average return on assets, and thus, profits.
Buffett's original investment cost $11.8 billion and its value has doubled to $24 billion. It's still a good buy today. In the past year, the company's stock is up 30 percent and is beating the S&P 500, which has gained 16.52 percent in the same time frame. WFC also delivers a 2.8 percent dividend.
Berkshire Hathaway stake: $16.5 billion
Buffett loves a company with a marketable and competitive brand, and Coca-Cola has long reigned as an icon.
Buffett originally bought shares back in 1988-1989, but as pointed out in "The Warren Buffett Way" by Robert Hagstrom Jr., at age 6 Buffett used to buy six-packs of Coke for 25 cents and resell individual bottles for a nickel each . . . for a 12 percent profit. Today, he owns 342.6 million shares of KO worth $13.8 billion.
By 1992, the U.S. had the highest per capita Coke consumption in the world. Two decades (and billions in profits for Buffett) later, Mexico, Chile and Panama zoomed past the United States as people around the world that most embraced Coke. Other countries in the top 10 include Spain, Bolivia, and South Africa. The top 10 Coke-consuming countries drink 386 servings of Coca-Cola beverages per person per year.
It isn't good news to consumers, but a plan to raise prices by 3 percent to 4 percent in the second half of 2014 is good news for Coca-Cola shareholders. So is a return on equity (ROE) that has averaged 30.8 percent over the past decade, according to Validea. Coca-Cola also has enough in annual earnings to pay off its debt in less than two years. Shares of KO are up 7 percent over the past three months and deliver a healthy 3 percent dividend.
American Express (AXP)
Berkshire Hathaway stake: $13.8 billion
Finally, American Express truly is a stock to hold forever, as Buffett puts it.
Buffett originally purchased shares in the mid-1960s after a scandal, in which AXP was held liable for $60 million in damages, drove down its value. While other investors sold en masse, Buffett stayed focused on what he liked most about the company: great fundamentals and its reputations as one of the world's most valuable brands. He now owns 151.6 million shares worth about $12 billion.
American Express has been ranked as one of the 20 most admired and recognized companies in the world by Fortune. Its credit card is honored in more than 180 countries.
Buffett is also fond of the company's focus on generating revenues by taking a small piece of every transaction made by consumer and corporate account holders. Finance charges and fees, unlike other credit cards, provide only a secondary source of income. As American Express notes in its annual report, "average spending on our cards is significantly higher on a per-card basis for us versus our competitors." This means that American Express is more valuable to merchants who, as loyal customers, drive higher sales.
Today, American Express is as profitable as ever. In the first three months of 2014, its cardholders spent 6 percent more than last year over the same period, boosting year-over-year revenue 4 percent to $8.2 billion. Net income also rose 12 percent in the first quarter. AXP is up 24 percent over a year.
More from Traders Reserve
- 3 bank stock plays that could double your money
- Why these huge American cities are headed for bankruptcy
- 4 keeper stocks to save your sanity
"The U.S. Federal Reserve is in no rush to decide the appropriate size of its balance sheet, but if it ultimately shrinks it to a pre-crisis size, the process could take the better part of a decade, Fed Chair Janet Yellen said on Thursday. Yellen, in testimony to a Senate panel, said no decision had yet been made on the central bank's portfolio of assets, which has swollen to $4.5 trillion from about $800 billion in 2007."
The BETTER move would be to give her 30 days to liquidate all of it. The flush would collapse the hoarded holdings of every crooked wealth-monger on Earth and their central bank dogs too. The move would mandate diligence for once, proving undoubtedly the most "assets" are bull-crap. We could easily round up the originators and fry them for crimes against the world.
Democrats in DC are running scared since Trey Gowdy has been put on the Benghazi case! They are trying to act all indignant saying the republicans are raising funds off of those murdered....like they ever cared about anything but barrak hussein getting re-elected so their ghetto voters could keep getting SNAP, welfare and medicaid....This is hilarious... They know the truth will come out that obama and hillary tried to make out like it was the video instead of a full blown terrorist attack on the US personnel just so obama wouldn't look like the weakling president that he is election time came. You scumbag liberals deny it but it's true. It might not mean anything to you but it means plenty to the rest of us.........The truth is going to come out with regards to the IRS scandal too.....I hope Gowdy is given a hand in investigating that too.
Trey Gowdy is what you theiving liberal bastards fear most......a good man who is armed with the truth.
Robin the Merry man, thought your rhyme was cute....
Sure glad that some seem to know a lot about the Keystone Extension Pipeline..
Ahhhhh, a learning experience is had by all....??
Don't forget to check on lawsuits in Nebraska, and "future rulings" in Sept. or October.
From the State Supreme Court..
"Voice of reason", Lmao....No, I just don't deal much with dumb fks or trolls...
Well ABS, how can they hi-jack your moniker, if it's already in use...??
I just thought you were going to support Obungles for a Third term...
And it seems you have a new "camp follower"...Flameboy..
You probably shouldn't have used all those sexual innuendos, you pulled him in, from out under the bridge...
Good luck dealing with all these "mouth breathers" or maybe "breeders"...
Must of had a computer clinic, at the library or asylum today...??
Well I just finished a decent brunch of Bacon and Cheese on toast, maybe I should say toast points..
Some here may like that better, high class you know..?
It's nap time...
I can check in on CGT's report later..
Yup, when you have "big bucks" invest it in Great Companies....
AND "GIVE IT ALL" AWAY to CHARITIES when YOU DIE.....yup good luck Warren.
Little Mr. Buffet sat on his duffet
counting his corporate welfare.
Along came the G-men
who slung more QE in his P-pen (pig-pen),
and fattened Mr. Buffet some more.
Copyright © 2014 Microsoft. All rights reserved.
4 analysts downgrade the stock the day after a disappointing quarterly report.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.