Legendary investor Warren Buffett likely needs no introduction. The ‘Oracle of Omaha’ is one of the most successful investors alive today, more than doubling the long-term average stock market return since the 1960s. So it’s no surprise that the portfolio of his investment firm, Berkshire Hathaway, is closely followed by the investing community including professionals.
Today, Buffett and his team are invested in 37 different stocks, each operating in a vast number of industries. Yet, almost 90% of his entire portfolio is concentrated in just 10 businesses. So what are his highest conviction ideas? And should investors consider buying these stocks today?
Warren Buffett’s top 10 holdings
| Company | Industry | % Of Portfolio |
| Apple | Technology Hardware & Equipment | 27.3% |
| American Express | Financial Services | 16.7% |
| Bank of America | Banks | 12.8% |
| Coca-Cola | Beverages | 9.1% |
| Chevron | Oil & Gas | 6.4% |
| Moody’s Corp | Finance & Credit Services | 4.4% |
| Occidental Petroleum | Oil & Gas | 4.3% |
| Kraft Heinz (NASDAQ:KHC) | Food Producers | 3.7% |
| Chubb Limited | Non-Life Insurance | 2.7% |
| DaVita | Healthcare Providers | 2.0% |
The Berkshire Hathaway portfolio seems to have quite a diverse range of industry exposure. So given these firms have Buffett’s stamp of approval, why don’t investors just copy his portfolio and reap the same returns?
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This is actually quite a popular strategy. And since Berkshire has to publish updates to portfolio positions each quarter, it’s not that difficult to execute either. However, mindlessly following in another investor’s footsteps may not actually be a sensible idea, even if that investor is Buffett.
Mistakes happen
As impressive as his track record is, he’s made plenty of mistakes over the years. And Kraft Heinz has been one of them.
Like Buffett, the famous ketchup manufacturer is a well-known name even among non-investors. At the time, he was impressed with the firm’s ability to generate excessive pre-tax profits that almost matched its operating assets. That’s a pretty exceptional feat for a food-producing business.
So what went wrong? Despite having a solid track record of picking winning consumer brands (like Coca-Cola and See’s Candy), he failed to properly assess the threat of competition from Amazon and Costco. With these rival brands delivering higher sales versus Heinz, the firm was secretly losing market share. As a consequence, Buffett ended up overpaying quite a bit.
That story largely hasn’t changed since his initial investment. And even today, his position in Kraft Heinz is still sitting in the red by around 60%. Yet he’s held on because the poor performance was driven by paying too much rather than the underlying company being fundamentally flawed. And in the meantime, the group’s consistent cash flows are funding a dividend that’s slowly offsetting the negative returns.
The bottom line
All of this is to say that no investor‘s immune to making mistakes. So while it’s likely a sensible idea to keep tabs on world-class investors like Buffett, it’s also prudent to assess each decision they make. Otherwise, copycat investors can potentially end up buying companies like Kraft Heinz at a terrible price, destroying wealth rather than creating it.
