It is early in the year so it’s a great time to revisit the stock portfolios of the world’s largest investors, like Warren Buffett’s top 5 stocks for 2023, and check out what they are holding for the year ahead. This will also include the analysis and a breakdown of why he holds each one. Of course, stock buying differs from going shopping, which is why you are not expected to buy blindly as an investor. However, new investors are itching to get into the stock market in 2023 after a 20% drop last year; no doubt, looking into these super investors’ portfolios can help you with great ideas for starting your research. With this, we are looking into Warren’s suggestions for the top 5 of his largest holdings. This portfolio is 49 stocks long, but the five we are considering are not the be-all and end-all for Berkshire. However, they account for 75 % of the portfolio of Berkshire and are the best for its position.
Here Are the Top 5 Stocks for 2023
American Express
American Express is on the list, at 7.93% of Berkshire’s portfolio. So Warren first bought a stake in American Express in 1988 and has not touched the position since 1998. That sounds funny, right? You should have known Warren to be addicted to strategic investment and focus on great businesses, and holding them for as long as he can, so far he has not found a reason to sell his steak. Warren paid 8.43 billion dollars to form the position, and it’s a stake that today is worth about 20 billion dollars. So what does the American Express team do? They are one of the world’s big three card providers, alongside Visa and Mastercard, and they make money in a few different ways. In Q3 2022, their biggest revenue chunk was their US consumer credit card business, fees, and interests collected on consumer cards in the US, followed by the commercial credit card business. Again fees and interest but for business cards. Then coming inferred were all the fees from international credit cards, followed by Merchant fees, which are the fees merchants have to pay American Express to accept American Express cards. However, if you factor in, then the expenses are related to each revenue segment. Instead, look at their pre-tax segment income; you see a slightly different story. The different story is how they make their money. Wall Street currently attests that American Express trades at a much lower price than its peers.
Coca-Cola
The second one is the Coca-Cola portfolio which has 7.57 of his portfolios. He bought Coca-Cola stock in 1988 after the sudden stock market crash of 1987 plunged Coca-Cola stock price by almost 25 positions in 1989 and another in 1994. As of 1995, Berkshire had invested 1.3 billion dollars total and, like his position in American Express, still holds his shares now worth 22 billion dollars, which does not even include dividends. Warren has refused to sell it because of how vital Coca-Cola moats are, which is why the shares are worth so much today. According to Wall Street, Coca-Cola is sitting at an industry-standard P of around 28 and seems more valued based on the discounted cash flow analysis. Nonetheless, Coca-Cola is an interesting buff at the stock worthy of some time and research.
Chevron
Chevron is the third on the list of the top 5 stocks for 2023. Chevron is the seventh largest oil company in the world by revenue, and unlike American Express and Coca-Cola, it is more of an addition to Berkshire’s portfolio. Warren started buying Chevron in Q3 of 2020 but notably in Q1 of 2022. He bought an additional 121 million shares, which at the time catapulted the company to Berkshire”s fourth largest holding now. Right now, the oil market is doing pretty well, but that was different from what enticed Warren to buy stock in Chevron.
As you know, Warren buys stocks with high hopes of a strong economy at the underlying business, regardless of what happens at the moment. Chevron is seen as the least like Warren-like stock, and this is because it is not a strong moat company, unlike American Express and Coca-Cola. However, it has worked out well for Warren even though it’s business and stock performance depend on the oil price.
Bank Of America
Another investment of Warren in stock buying is in the Bank Of America. Bank Of America is one of only two double-digit positions in the Berkshire portfolio, occupying 10.3 per cent. Warren first bought the stock in 2011 with 5 billion dollars of preferred stock plus warrants to buy 700 million common shares when many investors were worried about the Bank’s capital need. But it became a regular top 10 holding after Q3 of 2017 when he exercised his stock warrant in 2011, allowing him to buy 700 million shares of common stock at 7.14 cents per share. Today, that equity position is now bigger to over a billion shares, which is now worth 30 billion dollars. When turning to simply Wall Street, we can see that their price-to-earnings ratio is marginally lower than their peers, but admittedly that is for lower earnings growth. So if we turn to their DCF, Wall Street’s model suggests that the business is worthy of us doing a little research.
Apple
Finally, Apple is the largest holding of Warren and takes 41 of Berkshire Hathaway’s stock portfolio, literally four times bigger than the Bank Of America holding. It is seen as one of the biggest of Warren’s investments ever, not by a percentage but certainly by the sheer dollar size of the return. Warren bought Apple shares in q1 2016 with 39 million shares at first, but it was Q4 of 2016, then all of 2017, and the beginning of 2018 when he invested a lot of money into the company across that time. He bought around 950 million Apple shares at approximately 36 billion dollars which is a classic example of Warren buying a great business at a reasonable price because, during that time, Apple’s per ratio hovered between 13 and 16 as investors were concerned revenue growth had stalled. In addition, there’s iPhone had saturated the market. However, Warren could see many positivities amidst the noises of negativities because Apple had a moat that gave them pricing power and with the stock trading at a reasonably low PE. Right now, Warren has a value of 120 billion dollars.
Interestingly, investors are again getting a bit nervous about Apple because, over the last 12 months, the stock has fallen about 30. So it will be interesting to see what Warren does with the position this year. Although turning too simply, Wall Street looks like Apple has been pegged back from being overvalued. So, we could see nothing at all.
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Recommended books for further reading:
- Rich Dad’s Guide to Investing: What the Rich Invest in, That the Poor and the Middle Class Do Not!
- Smarter Investing: Simpler Decisions for Better Results
- A Beginner’s Guide to the Stock Market: Everything You Need to Start Making Money Today
- The Barefoot Investor: The Only Money Guide You’ll Ever Need
- The Five Rules Successful Stock Investing: Morningstar’s Guide to Building Wealth and Winning in the Market
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