Warren Buffett is watched closely by members of the investing community across the globe. The billionaire investor has managed to almost double the performance of the stock market for the last 60 years by buying high-quality companies at reasonable prices.
Other investors are constantly wondering what his next purchase is going to be. But these stocks aren’t necessarily his best picks in the stock market. Instead, Buffett’s top stocks to own are more likely the ones he’s already heavily invested in. And as of the latest Berkshire Hathaway filings, 73% of his entire portfolio is concentrated into just five companies.
Buffett’s biggest holdings
Investors are often told to remain diversified. It’s a sound piece of advice, given it helps reduce risk as well as the impact of any single position tanking a portfolio. Yet, Buffett has a reputation for taking a more concentrated approach to investing on the basis that he knows what he’s doing. Given his stellar track record, it’s hard to argue.
So where has he concentrated the bulk of his investment portfolio?
| Company | Industry | Number of Shares Owned | Proportion of Portfolio |
| Apple (NASDAQ:AAPL) | Technology | 400,000,000 | 31.4% |
| American Express | Financial Services | 151,610,700 | 13.1% |
| Bank of America Corp | Banks | 802,668,860 | 11.8% |
| Coca Cola Co. | Beverages | 25,460,000,000 | 9.5% |
| Chevron Corp. | Oil & Gas | 18,553,059,728 | 6.9% |
It’s a fairly diverse set of companies, each operating in a different industry with alternative drivers and weaknesses. So while concentrated, Buffett’s seemingly keeping his top holdings well-balanced rather than putting all his eggs into a single sector.
So given these are seemingly Buffett’s top stocks to own, should investors simply follow in his footsteps and copy his holdings?
Even the best companies have risks
Let’s zoom in on Buffett’s largest investment – Apple. There’s a lot to like about this technology giant. Since the release of the iPhone back in 2007, the firm has been on an upward trajectory. It’s been releasing new products and services almost every year, building a powerful brand in the process. And the financial impact of the group’s success is clear when looking at the stock price.
Over the last 10 years, the shares of Apple are up almost 800%! And given the group is set to benefit from the sudden rise of artificial intelligence (AI) technology, this trend may continue for years or even decades to come. With that in mind, it’s not hard to understand why Buffett has become so bullish on this enterprise.
Having said that, Apple’s future success isn’t guaranteed. In fact, there are numerous threats the company’s currently facing, the most concerning of which is a lawsuit by the Department of Justice relating to anti-competitive practices.
Depending on the outcome of these allegations, the firm could find itself in quite a lot of hot water. But even if the firm emerges unscathed, today’s price-to-earnings ratio of 34 indicates high-performance expectations from shareholders. And failing to meet these lofty targets could spark significant share price volatility.
Apple may well be a winning investment in the long run. As could Buffett’s other top holdings. But investors need to carefully scrutinise the potential and risk of each company before blindly walking into an investment. After all, even Buffett doesn’t always get it right.
