What Is Warren Buffett’s Favorite Stock?

What Is Warren Buffett’s Favorite Stock? Many of us could be forgiven for assuming that Buffett’s favorite ticker symbol is KO, representing the Coca-Cola Company.

After all, Buffett put $1 billion into Coca-Cola in 1988, and that was 6% of the company’s value at the time. It’s grown a lot since then, too.

Buffett currently holds a staggering amount of Coca-cola stock: 400 million shares worth over $19 billion.

However, as Buffett’s investment portfolio has changed over time, an even bigger winner has emerged.

Buffett’s Favorite Stock Is ….

Buffett’s favorite stock is now Apple (AAPL). The Oracle of Omaha bought up hundreds of thousands of shares as Apple gained 32% over the year 2020.

To take a look at the philosophy behind this, let’s go back to the previous Coca-Cola (KO) strategy.

At the time that Buffett got heavily invested in Coke, he pointed out that the company’s value, in his estimation, exceeded the market price of the shares.

One way that analysts explain buying a big, established consumer company is that you can get good company shares at a bargain when external events have driven market prices down.

In other words, where get-rich-quick traders want to buy bad companies for pennies, Buffett leaned toward buying good companies after a stock hit, and waiting for the price to recover. The gains can be less extravagant short-term, but with greater risk, greater rewards can manifest.

Apple Is Buffett’s “3rd Business”

A lot of this market philosophy was in play when Buffett started getting excited about Apple, which had already started making iPhones. And it had good earnings and minimal debt load to service.

But that doesn’t fully explain Buffett’s enthusiasm.

In the last couple of years, Buffett has started to call Apple, affectionately, his “third business” – not just a regular stock holding, but something that he feels strongly about as an investor.

This goes to one of Buffett’s core investing values – evaluating how well a company can handle competition.

Since his initial buy-in, Buffett has explained that it’s partly Apple’s ecosystem that intrigues him about this corporate holding.

In the days when lots of companies pursue open-source tech projects, Apple is perhaps one of the most tightly defensive tech companies around.

It doesn’t make products that are compatible with a lot of open market standards, and so it benefits from being unique on the market. Obviously, it’s hard to do this unless the company really has a winning design, and Apple really does.

One of the biggest signs of this is Apple’s runaway dominance on the personal computer market; yes, the market is awash with low-priced PCs, but an Apple computer is the desktop or laptop of choice for customers focused on quality.

That attraction is what allows Apple to cultivate its “walled garden,” which in turn helps it to defend its value on a market where devices are becoming ubiquitous.

The Proof Is In The Pudding: Apple Valuation

At the end of 2020, Buffett’s Apple investment was worth $125 billion, with nearly a billion actual shares bought.

Part of that is related to Apple’s meteoric growth, but more of it represents Buffett doubling down on his Apple investment with those very unique trading principles in mind.

What the seasoned investor would probably say, if pressed, is that his bet on Apple’s innovation and design philosophy paid off, because without the core products, the company’s strategy wouldn’t have succeeded.

Top Buffett Stocks: What Else Does Buffett Own?

Buffett doesn’t just own Apple, but it towers – in dollar terms – above a lot of the investments that he’s made in other companies.

Bank of America (BAC) is a runner-up of sorts with $34 billion invested in just over one billion shares, and Buffett also holds 325 million shares of Kraft, cashing in on the outsized appetite of the common grocery shopper.

Apple also represents Buffett’s biggest tech holding. For contrast, the investor holds 500,000 shares in Amazon (AMZN), but it’s really a small part of the overall portfolio.

To the extent that you could call companies like Bristol-Meyers Squibb or Biogen “tech companies,” the stakes are similarly small: Buffett holds almost 30 million shares of BMY for an investment of around $1.9 billion, and $170 million in BIIB with roughly 643,000 shares invested.

These stakes in other companies aren’t “small” unless you stack them up to the Apple chips this experienced trader holds, a giant stack, a skyscraper of money.

Buffett also has 12 million shares in Barrick Gold (GOLD), but as technology starts to pick up and rival precious metals, it seems that Buffett has chosen Apple as his way forward.

What Is Warren Buffett’s Favorite Stock?

It makes sense that in dipping into the waters of technology stocks, Buffett would choose Apple over many of the stock offerings that rely on blockchain technology or new digital asset systems.

Even though Berkshire Hathaway recently made headlines with stake in a potential IPO for Snowflake, a blockchain-relevant enterprise, the “thawing” toward digital assets has not been particularly swift or decisive.

Apple, on the other hand, represents everything that Buffett has been known to like about well-governed consumer product companies. That helps to explain his astronomical investment in a company that’s already a blue-chip holding.

No company can continue to skyrocket forever, but Buffett is betting there’s more in Apple’s arsenal to keep it moving up in the years to come.

Indeed investors need to look no further than the removal of the Parler app for evidence of the power of Apple and rival Google. When they decided to remove the app, there was nowhere for it to turn and operations ceased. Could Apple delete Facebook if it violated terms and conditions? If so, how much power does Apple have? Is that built into its current valuation?

---

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.