Over the span of six decades, Warren Buffett has consistently outperformed Wall Street’s benchmark index. With an annualized return that nearly doubles the S&P 500 since the mid-1960s, Buffett has overseen a cumulative increase in Berkshire Hathaway Class A shares exceeding 6,310,000%. Despite his impressive track record, investors keenly follow Berkshire’s trades to identify potential stock picks. While Buffett doesn’t provide specific recommendations, his actions speak volumes. Among Berkshire’s top holdings, one particular investment stands out as Buffett’s true favorite—his own company.
Buffett’s largest investment is not among the five major stocks accounting for nearly 64% of Berkshire’s $268 billion invested assets but rather in his own company. Since mid-2018, he has allocated nearly $78 billion towards repurchasing Berkshire Hathaway shares. This significant move reflects Buffett’s confidence in the company he built with Charlie Munger over decades. However, with Berkshire stock trading at its highest price-to-book multiple since 2008, Buffett paused buybacks in late 2024, indicating his commitment to value investing principles.
Berkshire's Top Holdings and Their Strategic Importance
Berkshire Hathaway’s portfolio showcases a mix of long-term investments in well-established companies. These include Apple, American Express, Coca-Cola, Bank of America, and Chevron, collectively representing a substantial portion of Berkshire’s invested assets. Although these brands contribute significantly to Berkshire’s portfolio value, they do not reflect the magnitude of Buffett’s investment in his own company.
Berkshire Hathaway’s top holdings are strategically chosen based on their enduring qualities and consistent performance. For instance, Coca-Cola and American Express have been held since the late 1980s and early 1990s, respectively, with minimal initial investment compared to their current market value. Similarly, the acquisition of stakes in Apple and Chevron was executed at favorable prices, highlighting Buffett’s knack for identifying undervalued opportunities. Despite these successful investments, Buffett’s most substantial commitment remains his own company, where nearly $78 billion has been allocated since mid-2018.
The Significance of Repurchasing Berkshire Shares
Buffett’s decision to repurchase Berkshire Hathaway shares underscores his belief in the intrinsic value of the company. By reducing the number of outstanding shares, Buffett aims to enhance shareholder value through increased ownership stakes and improved earnings per share (EPS). This approach aligns with his long-term investment philosophy, encouraging a buy-and-hold strategy that benefits both the company and its shareholders.
Prior to July 2018, repurchasing Berkshire shares was constrained by strict valuation criteria. However, after revising the rules, Buffett gained more flexibility to execute buybacks when he deemed shares intrinsically cheap. Over six years, approximately $78 billion was spent on repurchasing shares, resulting in a nearly 12.5% reduction in the outstanding share count. This aggressive buying spree signals Buffett’s unwavering confidence in Berkshire’s future prospects. Nevertheless, with the stock trading at elevated levels, Buffett halted buybacks in late 2024, adhering to his value-oriented investment principles. As a result, future repurchases will likely depend on a discernible price dislocation, ensuring that investments remain aligned with Buffett’s core philosophy.