How the Berkshire Hathaway portfolio moved in Q4 2022

27 Feb 2023 , 10:12 AM

Here we are not talking about the business investments of Berkshire Hathaway like in railways or insurance or in reinsurance. We only refer to the portfolio investments of Berkshire Hathaway as of 31st December 2022. As of the close of 2022, Berkshire Hathaway has an investment portfolio of $300 billion and an additional $105 billion in hard cash and cash equivalents; ready to enter the market if opportunities come by. But, first a look at the equity portfolio.

How does Berkshire portfolio look like?

For simplicity, we have only presented stocks where the holdings are more than $1 billion and that accounts for nearly 96.7% of the overall portfolio. All the other smaller stocks and positions of Berkshire Hathaway, together, account for just about 3.3%.

Company	Ticker	Market value ($ million)	No. of shares	% of total portfolio
APPLE INC	AAPL	1,16,305	89,51,36,175	38.90%
BANK OF AMERICA	BAC	33,455	1,01,01,00,606	11.19%
CHEVRON CORP	CVX	29,253	16,29,75,771	9.78%
COCA COLA	KO	25,444	40,00,00,000	8.51%
AMERICAN EXPRESS	AXP	22,400	15,16,10,700	7.49%
KRAFT HEINZ	KHC	13,257	32,56,34,818	4.43%
OCCIDENTAL PETROLEUM	OXY	12,242	19,43,51,650	4.09%
MOODYS CORP	MCO	6,873	2,46,69,778	2.30%
ACTIVISION BLIZZARD INC	ATVI	4,035	5,27,17,075	1.35%
HP INC.    (COM)	HPQ	2,807	10,44,76,035	0.94%
DAVITA HEALTHCARE	DVA	2,695	3,60,95,570	0.90%
VERISIGN INC	VRSN	2,633	1,28,15,613	0.88%
CITIGROUP INC	C	2,495	5,51,55,797	0.83%
KROGER CO	KR	2,229	5,00,00,000	0.75%
VISA INC	V	1,724	82,97,460	0.58%
LIBERTY MEDIA	LSXMK	1,691	4,32,08,291	0.57%
GENERAL MOTORS	GM	1,682	5,00,00,000	0.56%
PARAMOUNT GLOBAL	PARA	1,581	9,36,37,189	0.53%
MASTERCARD INC	MA	1,386	39,86,648	0.46%
AON PLC	AON	1,319	43,96,000	0.44%
CHARTER COMMUNICATIONS	CHTR	1,298	38,28,941	0.43%
BANK OF NEW YORK MELLON	BK	1,141	2,50,69,867	0.38%
MCKESSON CORP	MCK	1,071	28,55,514	0.36%
ALL OTHERS		9,991		3.34%
Total Portfolio Value		2,99,008		100.00%

Data Source: Berkshire Hathaway Filings

It has often been said that Apple has been the biggest driver of profit growth at Berkshire Hathaway since 2016. Back in 2016, when Apple first came into the Berkshire Hathaway portfolio, it accounted for just 6% of the total portfolio. Today, it accounts for nearly 39% of the overall Berkshire Hathaway portfolio. For a man who was never a great believer in the technology sector as an investment opportunity, it is ironic that his portfolio value in the last 6 years has been virtually driven by Apple. 

It is not just the holdings in Apple, but each quarter, Berkshire Hathaway has been acquiring Apple stock on each dip to enhance its holdings. With a holding value of $116 billion, Berkshire is the largest institutional shareholder in Apple. Warren Buffett has never been a great believer in portfolio diversification. If you look at the top 5 holdings of Berkshire Hathaway; Apple, Bank of America, Chevron, Coca Cola and American Express account for 75.87% of the total portfolio value of Berkshire Hathaway. At times, portfolio concentration surely does work.

Major changes to the Berkshire Hathaway portfolio

Here we focus largely on the key changes made by Berkshire Hathaway to its portfolio in the fourth quarter in particular and overall in year 2022 in general. In addition, we also look at some interesting changes over the last few years to get a perspective of how the Berkshire Hathaway story is evolving in terms of its portfolio strategy. Here are some snippets.

1. In the fourth quarter ended December 2022, Berkshire Hathaway picked up 3.34 lakh shares of Apple during its big dip from higher levels. Apple continues to rank number 1 by value and number 2 by number of shares held in the Berkshire portfolio.

    

2. During the fourth quarter of 2022, Berkshire also added shares of building products manufacturer, Louisiana Pacific, and Paramount Global which offers streaming services in competition to Amazon and Netflix. Berkshire has been accumulating Paramount global since the first quarter of 2022.

    

3. In the December 2022 quarter, Berkshire sharply cut its exposure to Taiwan Semiconductor Manufacturing Company (TSMC), which is the largest chip fab maker in the world. Berkshire also cut its stake in Chevron, one of its top holdings, but more than offset that by increasing its holdings in Occidental Petroleum, another oil company.

    

4. In the December quarter, Buffett cut many of his smaller positions in banking stocks. However, two of their largest holdings in Bank of America and American Express were kept intact during the quarter. The fund also did not tamper with its holdings in Coca Cola, which still remains one of its prime holdings in the portfolio.

    

5. In the last two years, Berkshire has been quite aggressively selling out of pharma stocks. For instance, in 2022, Berkshire sold Bristol Myers Squibb and Royalty Pharma. In 2021, Berkshire Hathaway had fully exited its holdings in some of the leading pharma stocks like Biogen, Teva Pharmaceuticals and Merck Ltd; apart from Merck spinoff Organon.

    

6. In the last five years, Berkshire Hathaway did make some big investment bets and backed out with equal alacrity. For instance, in 2018, Berkshire Hathaway had made a big bet on a slew of airline companies, something they had not done. However, with the COVID pandemic hitting in 2020, they opted to exit airlines in totality. They also made some badly timed entries into General Electric and IBM, but exited both these one-time giants of American industry in 2017 and 2018 respectively.

    

7. Not much is known publicly, but Berkshire Hathaway has been a big investor in Japanese conglomerates in the last 3 years. For instance, in 2020, Berkshire invested $6 billion in 5 Japanese conglomerates viz. Mitsubishi, Mitsui, Sumitomo, Itochu and Marubeni. As of December 2022, Berkshire Hathaway holds 6.59% in Mitsubishi, 6.62% in Mitsui, 6.21% in Itochu, 6.75% each in Sumitomo and Marubeni. That is a rather big bet on Japan.

Will this strategy continue to work? The proof of the pudding lies in the eating. Over the last 57 years since the inception of Berkshire Hathaway, the S&P 500 index has given CAGR returns of 10.1% over 57 years. During the same period, Berkshire Hathaway gave CAGR of 20.1%. That probably, sets the argument to rest.

Real story of Berkshire is Coca Cola and Amex

One may be inclined to believe that the real story of Berkshire is Apple, but the two stocks that really capture the DNA of Berkshire Hathaway and Warren Buffett are Amex and Coca Cola. Let us look at Coca Cola first.

In 1994, Berkshire completed its 7 year purchase of Coca Cola. Then it had invested $1.3 billion and it had paid an annual dividend of $75 million to Berkshire. In 2022, Coca Cola paid out $704 million as dividends. The value of Coca Cola holdings is $25 billion in 2022.

In 1995 the purchase of American Express worth $1.3 billion. In 1995, Berkshire received a dividend of $41 million from Amex. In 2022, the dividends have grown to $302 million, while the value of the holdings stands at $22 billion.

Coca Cola and Amex are what the real DNA of Berkshire has been. They look for real long term earnings and wealth compounders and just stay invested. Typically, the Buffettian philosophy has been to look for a moat and stay on as long as the moat remains. That strategy, as Buffett says, is getting harder to implement with the choice reducing. However, that has surely stood the test of time for Berkshire Hathaway.