It’s hard to believe that this will be Warren Buffett’s last quarter at the helm of Berkshire Hathaway. Over more than six decades, he transformed a struggling textile mill into a massive conglomerate with businesses spanning insurance, railroads, energy, and more. Simultaneously, he built a massive investment portfolio for Berkshire worth over $300 billion. The long-term holding strategy he championed delivered a compound annual growth rate of 19.9% for Berkshire, significantly outperforming the S&P 500 index over the same period. Although this 95-year-old investment maestro is about to retire, the investment principles he practiced – seeking companies with exceptional management teams, strong industry positions, stable revenues, and solid earnings records – will continue to guide countless investors.
For investors looking to build portfolios in the post-Buffett era, drawing lessons from his investment approach is undoubtedly a solid starting point. Among Berkshire’s heavily weighted stocks, five companies are particularly noteworthy, each representing Buffett’s discovery of value in different sectors.
Berkshire holds a substantial 22% stake in American Express, far exceeding its ownership in other payment network companies, which fully demonstrates Buffett’s high regard. American Express’s uniqueness lies in its precisely targeted high-end customer base, offering unparalleled travel and entertainment rewards experiences through products like corporate cards, as well as personal Gold and Platinum cards. This strong brand premium even allows it to raise the annual fee for the Platinum card to $895, with customers still willing to pay. Furthermore, American Express also operates a personal loan business, which is relatively rare among its peers, generating nearly $6 billion in interest income in the third quarter alone, constituting a considerable and stable additional profit source.
Although Buffett invested in Amazon relatively late, its business model perfectly aligns with his preference for industry leaders. Amazon has built two powerful growth engines: the first is its vast e-commerce network, which, although not high-margin, provides a massive revenue base; the second is its industry-leading cloud computing division, Amazon Web Services (AWS). This business not only has a huge revenue scale but also boasts a remarkable operating margin of over 34%, having become the core, robust, and sustained profit pillar for the company. Analysis suggests that AWS’s early positioning in future technologies like artificial intelligence is expected to further accelerate its growth momentum.
Apple has long held the position of the largest single holding in Berkshire’s investment portfolio. The iPhone remains its most important product, contributing to nearly half of its sales. However, the value of its Services division – which includes the App Store, Apple Music, etc. – might be undervalued by the market. This division not only generates nearly $30 billion in annual revenue but also maintains double-digit year-on-year growth, forming a high-margin and highly sticky ecosystem. Although the company’s revenue experienced a plateau previously, it has recently returned to growth and successfully surpassed the $400 billion annual revenue milestone.
Kroger might not be as flashy as tech companies, but it embodies Buffett’s deep understanding of defensive investing. As a leading grocery retailer in the U.S., it operates over 2,700 stores and numerous well-known brands. Regardless of economic cycles, groceries are essential consumer goods, providing Kroger with a solid business foundation. The company’s strong push in recent years into private-label products, which are more price-competitive, not only attracts budget-conscious consumers but also offers Kroger higher profit margins compared to selling branded goods.
Buffett’s bullish view on the energy sector is reflected in his substantial stake in Chevron. Despite challenges like oil price volatility, Chevron’s stock price has recently shown resilience. The company’s core strength lies in its record production levels, particularly achieving significant growth in production within its home U.S. market. While short-term earnings fluctuate with commodity prices, Chevron remains a solid investment in the energy sector from a long-term perspective. Additionally, its substantial dividend yield of 4.5% provides valuable cash flow returns to the portfolio.
