Berkshire Hathaway’s Core Holdings: Insights from Greg Abel
Warren Buffett famously stated, “When a great management team owns a piece of a great company, our preferred holding period is forever.” He consistently aimed to acquire only outstanding companies, but very few made the cut for investment. Berkshire Hathaway will stand the test of time.
In his inaugural letter to shareholders, Greg Abel, Buffett’s successor, highlighted nine companies that Warren had identified as core to Berkshire’s investment portfolio. Together, these stocks comprise over 60% of the company’s holdings. Abel mentioned that investors should anticipate “limited activity from these holdings.” While many align with Buffett’s past remarks, some do not. Here are the nine stocks Abel aims to keep indefinitely:
1. Apple (19% marketable stock)
Apple is Berkshire Hathaway’s largest stock position, even after Buffett sold off a significant portion of his shares over the past two years. Abel’s remarks indicate that the selling trend may be coming to an end.
This year is noteworthy for Apple due to its lower capital demands in comparison to other tech giants. While competitors are pouring over $700 billion into expanding AI infrastructure, Apple is expected to generate over $100 billion in free cash flow.
Despite setbacks in the rollout of a revamped Siri aimed at enhancing its AI capabilities, Apple recorded solid growth in revenue from devices and services last quarter. Notably, iPhone sales surged by 23% year-over-year, partly thanks to strong demand from Greater China. If the Siri updates succeed, they could trigger a significant upgrade cycle, making another robust year for iPhone sales likely.
Though the stock’s forward P/E ratio is at 30, which might seem high, its share buyback scheme, steady revenue growth, and rising profit margins suggest the valuation is reasonable.
2. American Express (15%)
American Express has been a fundamental part of Berkshire’s portfolio for over three decades, and Abel plans to keep it as a permanent holding.
The company is effectively introducing new initiatives designed to attract affluent consumers and small businesses. Last year, American Express revamped its Platinum Card offerings, receiving positive feedback despite higher annual fees. These fees have risen quickly but still represent a minor aspect of the overall business. Furthermore, net interest income has climbed as the company moves towards providing more lines of credit instead of strictly charge cards. Nevertheless, the bulk of its revenue comes from interchange fees collected through transactions.
American Express is well-positioned to capitalize on the growing trend of digital payments. It targets young, affluent customers with its flagship cards, ensuring retention and driving profit growth at a faster rate than sales. Thus, a forward P/E ratio of only 17 appears quite appealing right now.
3. Coca-Cola (10%)
Coca-Cola is yet another long-standing holding for Buffett. The company’s global brand clout allows it to implement price increases in mature markets and extend its product lines effectively, leading to steady revenue increases and improved profit margins.
Management aims for mid-single-digit growth, a target they achieved in the previous year, with a 5% organic increase largely credited to price hikes. Investors can expect comparable growth for 2026 with a slight uptick in earnings per share due to enhanced margins and share repurchases.
The stock trades at a forward P/E ratio of 24, which may seem a bit overvalued considering the business’s steady pace. Still, it’s likely Abel will retain these shares for the long haul, given the substantial capital gains in its original investment.
4. Moody’s (4%)
Moody’s is considered a timeless stock, and Abel emphasized its importance in his letter. Berkshire originally purchased shares in 2000 but divested about half in subsequent years, yet Buffett has held onto it since 2013.
As a globally trusted credit rating service, Moody’s plays a critical role for both investors and those issuing bonds. It provides essential evaluations of whether a bond from one issuer is more or less secure than one from another. This offers a competitive edge, as Moody’s investor services generate about two-thirds of its revenue—complemented by a growing analytics segment. The firm pursues growth through acquisitions to broaden its service offerings.
With the pricing power of its ratings services and growth in analytics, earnings per share are projected to rise significantly next year. Management targets a 9% revenue increase, and the stock’s current valuation at 28 times future earnings estimates seems reasonable.
5-9. Japanese Trading Companies (14%)
Back in 2019, Buffett and Charlie Munger made investments in five Japanese trading firms: Mitsubishi, Mitsui & Co., ITOCHU Corporation, Sumitomo, and Marubeni. Over time, they’ve incrementally increased their stakes, with some positions showing gains exceeding 10% last year.
All five companies operate similarly to Berkshire Hathaway. Abel considers them not just investments but also potential partners for future international ventures. They provide a strong platform for collaboration across various sectors.
Many of these stocks still offer appealing valuations. Berkshire optimizes its investment through low-cost borrowing in yen, mitigating some currency risks. The dividends received from these firms adequately cover any interest obligations associated with such debts.
Abel mentioned that other companies might one day join the ranks of core holdings, but for now, he plans to streamline non-core positions and concentrate on the best opportunities within Berkshire’s portfolio.
