Warren Buffett Personal Portfolio: By any measure, Warren Buffett is one of the best investors of all time, due in large part to his passion for studying the nuances of market behavior.
As a child, he was fascinated by stocks and made his first trade before he was old enough for high school. While his peers spent their leisure time on traditional hobbies like sports, Buffett’s hobby was entrepreneurship.
By the time Buffett entered college, he knew how to build a business that produced in-demand products and services. He had also mastered the art of creating deep, long-term customer relationships.
After college, that same business acumen made Buffett particularly adept at identifying companies with solid foundations. When those companies were undervalued, Buffett knew just how to rebuild them so they could reach their full potential, generating profits for Buffett and his investors along the way.
When Warren Buffett took over Berkshire Hathaway, it was a textile company that was rapidly approaching obsolescence. Buffett transformed it into a powerful holding company by acquiring a collection of businesses with solid growth potential and putting together a portfolio of high-quality stocks and other assets.
From the time Buffett became the leader of Berkshire Hathaway in 1965 to the end of 2021, the company grew by an astonishing 3,641,613 percent. That amounts to a total of $610 billion for Berkshire Hathaway investors. Buffett’s annual letter to shareholders has become must-read material for investors at all experience levels. His perspective is widely regarded as the last word in smart trading strategy.
What Are Warren Buffett’s Four Rules Of Investing?
Warren Buffett’s strategy isn’t complicated, yet few can duplicate his returns. That’s because Buffett has two traits that most traders lack: patience and discipline. He plays the long game and sticks to his four rules of investing no matter what.
Warren Buffett’s four rules of investing are simple:
Stocks must be undervalued.
Stocks must have clear long-term potential.
Stocks must be managed by a proficient leadership team.
Stocks must demonstrate stability and be easy to understand.
Berkshire Hathaway’s portfolio is a matter of public record as the company must file Form 13F with the SEC every quarter. However, Buffett’s personal portfolio is a mystery, leading to speculation.
Does Warren Buffett follow his four rules of investing when no one is watching? A peek at one of Warren Buffett’s hidden portfolios suggests that the answer is yes.
What Does Warren Buffett Have In His Secret Portfolio?
If the rumors are true, Warren Buffett’s personal portfolio is primarily invested in Berkshire Hathaway stock – a strong indication that Buffett, as he once put it, “eats his own cooking.”
While the details of Buffett’s personal portfolio can’t be independently verified, there is a company deep inside the Berkshire Hathaway conglomerate that has its own stock portfolio. Its holdings show how Buffett invests when he is offstage.
The company in question is General Re, an insurance firm that Berkshire Hathaway acquired in 1998. General Re, in turn, owns New England Asset Management (NEAM) – a specialized investment services operation with $6.31 billion in assets under management (AUM).
A full 86 percent of those assets are invested in just three companies – Apple, US Bancorp, and Bank of America – all of which are well-represented in the Berkshire Hathaway portfolio.
At the end of first quarter 2022, more than 40 percent of Berkshire Hathaway’s portfolio was invested in Apple stock. NEAM takes its faith in Apple stock to the next level, putting more than 56 percent of its assets into Apple shares.
That faith is well-placed, as Apple continues to deliver technology that meets existing consumer demand.
More importantly, Apple’s commitment to constant, unrelenting innovation creates new demand as Apple introduces the products and services of the future.
Apple is one of the world’s most recognized brands, and its customers are passionate about the products. In the United States, Apple controls at least half of the smartphone market, and it is rapidly growing market share around the globe.
Once users have committed to an Apple device, they are easily persuaded to deepen their relationship with the company. There are Apple wearables, Apple smart home connections, and a growing menu of subscription services that range from entertainment to fitness.
Apple’s stock split made share prices more affordable for retail investors, and as a bonus, Apple is one of the few tech stocks that pays a dividend. In short, Warren Buffett knows what he is doing when he puts a large chunk of investor money into Apple stock. The company’s future is bright, and Apple stock can be relied upon for long-term growth.
Berkshire Hathaway has a significant portion of its portfolio in financial services, including more than $6.7 billion in US Bancorp stock. That represents roughly two percent of total stock assets.
NEAM is also heavily invested in financial services. Its second-largest holding is US Bancorp stock, which makes up nearly 15 percent of NEAM’s total portfolio.
US Bancorp is a market favorite because it has a leadership team that doesn’t like risk. Instead of experimenting with derivative investments – the sort that have created enormous losses throughout the financial services industry – US Bancorp sticks with the basics: deposits and loans. As a result, US Bancorp’s return on assets tends to be higher than its peers.
Though US Bancorp sticks with traditional banking functions, it doesn’t insist that customers use traditional banking methods like teller windows and paper loan applications. US Bancorp has embraced technology to the point that more than 80 percent of all transactions are now completed online or through the company’s mobile app.
The beauty of this transition to digital banking is that US Bancorp saves a substantial amount in overhead. Tellers and call center representatives are expensive – and so are the facilities and equipment they need to function.
By moving into digital banking, US Bancorp has become more profitable, ensuring US Bancorp stock meets Warren Buffett’s requirements for inclusion in any of his portfolios.
Bank of America
At ten percent, Bank of America stock is Berkshire Hathaway’s second-largest holding. Bank of America stock is tied for second place in NEAM’s portfolio, as it makes up just under 15 percent of total holdings. The choice has served both portfolios well because Bank of America stock has increased reliably over time.
As interest rates begin to rise, Bank of America’s bottom line will benefit because the company holds a large number of variable-rate loans. So too does Bank of America’s interest income also rise.
In one estimate published by the company earlier this year, Bank of America said it expects a net-interest income increase of approximately $5.4 billion per year for every 100-basis-point increase in the interest rate yield curve.
Given the Federal Reserve’s plans to continue increasing interest rates, that factor alone makes Bank of America stock a buy.
Warren Buffett’s Strategy: The Bottom Line
New England Asset Management’s hidden portfolio operates independently from Berkshire Hathaway’s. It stays under the radar and away from the scrutiny of Buffett’s followers. However, it is still under Buffett’s control as part of the Berkshire Hathaway family. The stocks in that secret portfolio are clearly aligned with Berkshire Hathaway’s holdings, proving that Warren Buffett follows his four rules of investing consistently, whether his trades are public or private.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.