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Berkshire Hathaway Discloses Concentrated Portfolio and Energy Sector Investments Under New Leadership

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Berkshire Hathaway Under Greg Abel: A Focused Portfolio and Enduring Energy Bet

Greg Abel has assumed leadership of Berkshire Hathaway's substantial $318 billion investment portfolio following Warren Buffett's retirement as CEO on December 31. Recent fourth-quarter 13F filings reveal a highly concentrated portfolio, with approximately 61% of invested assets held in five key companies. Concurrently, Berkshire Hathaway has made significant, multi-billion-dollar investments in the oil and gas sector under previous leadership, a strategy reflecting a long-term perspective on energy assets.

Leadership Transition and Portfolio Overview

Following Warren Buffett's transition from CEO to chairman at the end of last year, Greg Abel has taken over the management of Berkshire Hathaway's investment portfolio. The company's fourth-quarter 13F filings, submitted to the Securities and Exchange Commission, provided details on stock transactions for the period. These filings indicated that a significant portion of the $318 billion portfolio is concentrated in a limited number of holdings.

Berkshire Hathaway's $318 billion portfolio is notably concentrated, as detailed in recent 13F filings.

In his inaugural annual letter to shareholders, Abel outlined operational plans for the company and discussed the equities portfolio. He also identified specific stocks that Berkshire Hathaway intends to hold for the long term, anticipating limited activity in these positions.

Key Holdings and Long-Term Investments

Approximately 61% of Berkshire Hathaway's invested assets are concentrated in five primary stocks: Apple, American Express, Coca-Cola, Bank of America, and Chevron.

Warren Buffett had previously identified Coca-Cola and American Express among eight companies considered indefinite holdings in his 2023 letter to shareholders. Coca-Cola has been a continuous holding in Berkshire's portfolio since 1988, and American Express since 1991. Both provide substantial annual yields relative to their cost basis:

  • Coca-Cola (KO): With an approximate cost basis of $3.25, it provides an annual yield of 63%. It constitutes 10.2% of the portfolio, has been owned for decades, and is noted for increasing its annual dividend for 63 consecutive years, offering a 2.6% dividend yield.
  • American Express (AXP): With an approximate cost basis of $8.49, it provides an annual yield of 39%. It accounts for 14.7% of the portfolio. Berkshire initially invested in 1964 and significantly increased its stake in the 1990s. The company's brand and closed-loop payment network are cited for recurring fee revenue.

Abel's letter also highlighted four specific long-term holdings, noting them as "businesses we understand well, have a high regard for their leaders, and expect will compound over decades." These include Apple, American Express, Coca-Cola, and Moody's.

  • Apple (AAPL): Represents 18.9% of Berkshire's portfolio. Berkshire first acquired shares in 2016. The stake was reduced by approximately 75% in recent years before settling into its current position. Apple is noted for its conservative approach to artificial intelligence development and consistent share buyback program, which has seen over $841 billion in stock repurchased since 2013.
  • Moody's (MCO): Constitutes 3.7% of the portfolio and is the eighth-largest holding, acquired by Berkshire in 2000. Its primary business segment involves providing ratings on corporate debt, and it operates a growing unit supplying data and analytical tools.

Valuation Changes and Potential Portfolio Adjustments

Under Greg Abel, Berkshire Hathaway is expected to maintain its focus on value-driven investments. However, the valuation of some significant holdings has evolved.

  • Apple: The trailing 12-month price-to-earnings (P/E) ratio for Apple has nearly tripled since Berkshire's initial purchase in the first quarter of 2016, currently standing at 34. The company has experienced periods of weakness in physical device sales.
  • Bank of America (BAC): Berkshire established a position in Bank of America's preferred stock in August 2011, when its common stock traded at a 62% discount to its book value. Currently, Bank of America trades at a 31% premium to book value.

Given these valuation shifts, adjustments to Berkshire's exposure to both Apple and Bank of America are possible.

Significant Investments in the Energy Sector

Under Warren Buffett's previous leadership, Berkshire Hathaway made substantial investments in the oil and gas sector, totaling at least $58 billion.

These investments occurred during a period when the company had not been a major buyer of stocks and had built significant cash reserves.

Key acquisitions and stake developments in the energy sector include:

  • Building significant positions in Chevron and Occidental Petroleum.
  • Acquisition of Dominion Energy's natural gas and storage assets in 2020, valued at nearly $10 billion, including debt assumption.
  • Purchase of a 50% stake in the Cove Point liquefied natural gas facility from Dominion Energy for $3.3 billion in July 2023.
  • A planned acquisition of the remaining 8% of Berkshire Hathaway Energy for approximately $2.4 billion in October 2024.
  • A planned acquisition of Occidental Petroleum's petrochemical division, OxyChem, for about $9.7 billion in cash in 2025. This unit produces chemicals for water treatment, healthcare, and other commercial applications.

Outlook on Energy Assets

Berkshire Hathaway's commitment to oil and energy assets reflects a perspective on their ongoing importance. Increases in crude futures have been influenced by geopolitical factors and supply shortages. Global demand for energy, potentially intensified by sectors such as artificial intelligence, suggests a continued need for diverse energy sources, including fossil fuels.

The U.S. Energy Information Administration's (EIA) 2023 International Energy Outlook projected that crude oil, liquid hydrocarbons, and biofuels would meet global liquid fuel demand through 2050. The report also noted uncertainties in future demand and supply, alongside the potential for global reserves to increase through new technologies.

Chevron's position within the portfolio may become foundational. Greg Abel's background as CEO of MidAmerican Energy (now Berkshire Hathaway Energy) provides him with an understanding of energy sector dynamics. Chevron's integrated operating model, encompassing pipelines, chemical plants, and refineries, is noted for its ability to offset volatility in crude oil spot prices.