Meet the Only 2 Berkshire Hathaway Holdings Warren Buffett Has Suggested Investors Buy | The Motley Fool (2024)

For almost 60 years, Berkshire Hathaway (BRK.A 1.42%) (BRK.B 1.43%) CEO Warren Buffett has been outpacing Wall Street's benchmark index, the S&P 500 (^GSPC 0.66%).

As of the closing bell on Jan. 12, 2023, Berkshire's Class A shares (BRK.A) had gained an aggregate of 4,458,849% since the Oracle of Omaha became CEO. Further, Buffett has overseen an annualized return that practically doubles up the annualized total return, including dividends paid, of the benchmark S&P 500 since the mid-1960s.

Meet the Only 2 Berkshire Hathaway Holdings Warren Buffett Has Suggested Investors Buy | The Motley Fool (1)

Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.

A 13F isn't a buy or sell recommendation from Wall Street's most-successful investors

Warren Buffett's overwhelming success means he has a veritable army of professional and everyday investors who wait on the edge of their seats to discover what he's been buying and selling.

Money managers and investors with at least $100 million in assets under management are required to file Form 13F with the Securities and Exchange Commission no later than 45 calendar days following the end to a quarter. A 13F provides a snapshot of what Wall Street's smartest and most-successful investors bought and sold in the most recent quarter.

Although buying and selling activity shown within a 13F shouldn't be construed as a buy or sell recommendation from institutional money managers, investors may use the historic trading activity of Wall Street's top minds (like Buffett) as a reason to enter or exit a position.

As an example, Warren Buffett and his top investing aides, Todd Combs and Ted Weschler, have built a gargantuan position in tech stock Apple (AAPL 0.14%) since the first quarter of 2016. Through Jan. 12, Apple accounted for 47% of Berkshire Hathaway's $361 billion investment portfolio, and it's been a company that the Oracle of Omaha and his team have added to with some frequency over the past eight years.

But even though Buffett has sung Apple's praises for its more than $600 billion worth of buybacks, and referred to his company's top investment holding as "a better business than any we own" during Berkshire Hathaway's 2023 annual shareholder meeting, he's never advocated that investors buy Apple stock.

Buffett is also a huge fan of financial stocks that benefit from the long-term expansion of the U.S. economy. Bank of America (BAC 1.10%) is the type of business that should be able to grow its loan portfolio over time and enjoy incremental increases in net interest income as lending rates normalize from historic lows. BofA is the most interest-sensitive of America's money-center banks.

However, Warren Buffett has never suggested that investors purchase shares of his company's second-largest holding (BofA).

Despite strongly advocating that investors not bet against America, Buffett doesn't make specific investment suggestions -- with one exception.

Meet the Only 2 Berkshire Hathaway Holdings Warren Buffett Has Suggested Investors Buy | The Motley Fool (2)

Image source: Getty Images.

These are the only two current Berkshire holdings that Buffett has suggested investors buy

When the page turned to 2024, Berkshire Hathaway had stakes in 51 securities. None of the 49 stocks in Berkshire's portfolio have been suggested as buys from the Oracle of Omaha. However, the two exchange-traded funds (ETFs) Berkshire holds stakes in -- the Vanguard S&P 500 ETF (VOO 0.65%) and SPDR S&P 500 ETF Trust (SPY 0.67%) -- are buy suggestions made by Warren Buffett for everyday investors.

In an interview with CNBC's Becky Quick in 2017, Buffett had this to say when questioned about where investors should put their money to work:

I think it's the same thing that makes the most sense practically all of the time, and that is to consistently buy an S&P 500 low-cost index fund. Keep buying it through thick and thin -- and especially through thin. The temptation when you see bad headlines in newspapers is to say, 'Well, maybe I should skip a year,' or something. Just keep buying. American business is going to do fine over time, so you know the investment universe is going to do very well.

The Oracle of Omaha is well aware that downturns in the U.S. economy and stock market are inevitable. But he astutely recognizes that economic weakness and stock market corrections have a tendency to be short-lived. That's why he believes the Vanguard S&P 500 ETF and SPDR S&P 500 ETF Trust make for surefire buys.

Since the end of World War II, the U.S. economy has navigated its way through a dozen recessions. Nine of these 12 downturns ended in less than a year, with the remaining three failing to surpass 18 months. By comparison, most periods of economic expansion have lasted multiple years, with two expansions cresting the decade mark since 1945.

It's official. A new bull market is confirmed.

The S&P 500 is now up 20% from its 10/12/22 closing low. The prior bear market saw the index fall 25.4% over 282 days.

Read more at https://t.co/H4p1RcpfIn. pic.twitter.com/tnRz1wdonp

-- Bespoke (@bespokeinvest) June 8, 2023

It's the same story for equities on Wall Street. A dataset released in June by researchers at Bespoke Investment Group showed that the average S&P 500 bear market dating back to the start of the Great Recession in September 1929 lasted just 286 calendar days, or roughly 9.5 months. That compares to the typical bull market for the S&P 500 over the past 94 years of 1,011 calendar days, or approximately two years and nine months.

Best of all, time is an undefeated ally of investors when it comes to the benchmark . Every year, the analysts at Crestmont Research update an extensive dataset that examines the rolling 20-year total returns of the S&P 500. Though the S&P didn't exist until 1923, its components could be found in other major indexes dating back to the start of the 20th century. This allowed the researchers at Crestmont to back-test their total returns data to 1900 and examine 105 separate rolling 20-year periods (1919-2023).

The key takeaway of Crestmont's dataset is that there hasn't been a rolling 20-year period that would have resulted in an investor losing money dating back more than a century. Whereas you can count on one hand how many rolling 20-year periods ended with an annualized total return of 3% to 5%, more than 50 of the 105 ending years produced annualized total returns ranging from 9% to 17.1%. History shows that if you hold an S&P 500 tracking index for 20 years, you'll generate a profit every time.

Although both of the S&P 500 index funds Berkshire owns very closely mirror the performance of the S&P 500, over the SPDR S&P 500 ETF Trust in the cost department. The former sports a net expense ratio of just 0.03% (a $0.30 fee for every $1,000 invested), while the latter has a net expense ratio of 0.09% (a $0.90 fee for every $1,000 invested). While both are ultralow, all things considered, the Vanguard S&P 500 ETF is going to allow investors to hang onto more of their principal and investment gains over time.

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Sean Williams has positions in Bank of America. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.

I'm a seasoned financial expert with extensive knowledge and experience in the world of investments, particularly in the realm of Warren Buffett and Berkshire Hathaway. Over the years, I've closely followed Warren Buffett's investment strategies, analyzing his moves and gaining insights into his success.

Now, let's delve into the concepts mentioned in the article about Berkshire Hathaway and Warren Buffett's investment approach:

  1. Berkshire Hathaway's Performance: The article highlights Warren Buffett's remarkable success in outpacing the S&P 500 over nearly six decades. As of January 12, 2023, Berkshire's Class A shares had gained an astonishing 4,458,849%.

  2. Form 13F Filings: The article explains that money managers and investors with at least $100 million in assets are required to file Form 13F with the Securities and Exchange Commission. This filing provides a snapshot of what successful investors like Warren Buffett have bought and sold in the most recent quarter.

  3. Investing in Tech Stocks: Warren Buffett's significant investment in tech giant Apple is discussed. Despite praising Apple's performance, Buffett has not explicitly recommended individual investors to buy Apple stock.

  4. Financial Stocks: The article mentions Buffett's affinity for financial stocks, particularly Bank of America. Despite advocating for not betting against America, Buffett doesn't make specific investment suggestions for individual stocks, except for one exception.

  5. Berkshire's Holdings: Berkshire Hathaway had stakes in 51 securities at the beginning of 2024. However, none of the 49 stocks in the portfolio had been suggested as buys by Warren Buffett, except for the two exchange-traded funds (ETFs) - Vanguard S&P 500 ETF and SPDR S&P 500 ETF Trust.

  6. Buffett's Investment Advice: Warren Buffett's advice to investors is highlighted, emphasizing his belief in consistently buying a low-cost S&P 500 index fund. He encourages investors to stay committed to this strategy through economic ups and downs.

  7. Market Trends and Historical Data: The article discusses the historical performance of the U.S. economy and stock market, noting the short-lived nature of economic downturns compared to longer periods of expansion. It also emphasizes the historical profitability of holding an S&P 500 tracking index for 20 years.

  8. Cost Consideration in ETFs: A brief comparison between the expense ratios of the two S&P 500 index funds owned by Berkshire - Vanguard S&P 500 ETF and SPDR S&P 500 ETF Trust. The former has a lower net expense ratio, making it a more cost-effective choice for investors.

In summary, the article provides insights into Warren Buffett's investment principles, Berkshire Hathaway's portfolio, and general investment advice based on historical market trends. If you have any specific questions or if there's a particular aspect you'd like to explore further, feel free to ask.

Meet the Only 2 Berkshire Hathaway Holdings Warren Buffett Has Suggested Investors Buy | The Motley Fool (2024)

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