Everyone wants to know what Warren Buffett is buying. As one of the world’s most-followed investors, he has a track record that would make anyone jealous. Shares of his Berkshire Hathaway (BRK-A) have climbed from $7 per share when he started buying the stock in 1962 to more than $150,000 recently, making buy-and-hold investors rich over that half-century.
To get some insight into Buffett’s latest thing, let’s take a look at Berkshire’s portfolio of stocks to find out which ones Buffett likes best — and expects to buy more of in the near future.
1. Wells Fargo (WFC), $15.8 billion invested
One of the nation’s largest banks, Wells Fargo held up remarkably well during the financial crisis in 2008, which helped its shareholders avoid the heavy losses that other bank stocks suffered. Although its acquisition of Wachovia exposed it to substantial amounts of bad mortgage loans, Wells Fargo’s conservative approach toward its own core banking business helped minimize its losses. With its long-term focus on meeting customer needs, Wells Fargo’s philosophy matches well with Buffett’s, helping explain why Berkshire added another 17 million shares of Wells Fargo to its portfolio during the fourth quarter of 2012.
2. Coca-Cola (KO), $15.5 billion invested
Coca-Cola boasts the most valuable brand in the world and a straightforward business model that has kept it in good standing in Berkshire’s portfolio for decades. Despite the ever-rising controversy over the role of sugary beverages in the obesity epidemic, Coke has the growth potential of billions of emerging-market consumers to boost its — and shareholders’ — fortunes in the years to come.
3. IBM (IBM), $14.1 billion invested
IBM is a relatively recent acquisition for Buffett: Berkshire only announced its position in the tech giant in 2011. Some investors questioned the move. It not only ran counter to Buffett’s long-standing aversion to tech stocks — a distaste that dates back to the 1990s tech boom — but also uncharacteristically came when IBM had already more than doubled from its 2008 lows. Yet IBM has demonstrated both its commitment to earnings growth and its flexibility, adapting well in advance to changing conditions that have crushed other players in the hardware industry. Those attractive characteristics represent what Buffett often looks for in a stock, and that explains why he added another $120 million in IBM shares during the last quarter.
4. American Express (AXP), $9.7 billion invested
Buffett started buying shares of American Express 20 years ago, and even now, he doesn’t leave home without the company. His initial move came during tough times for AmEx, when it was losing market share to rival card networks, but AmEx refocused on its core, affluent customers and built up a cachet of exclusivity that has served it well ever since. It has faced a lot of pressure from mobile-payment companies trying to get into the payment-processing business. But AmEx has recently made a move to greatly expand its client base by launching its Bluebird prepaid debit card — a low-cost card aimed at potential cardholders with far lower income levels than its traditional customers. Success in that demographic could lead to a new period of explosive growth for AmEx.
5. Procter & Gamble (PG), $4.1 billion invested
Consumer giant Procter & Gamble wraps up the top five, even though Buffett sold off almost 24 million shares throughout 2012. In an interview in October, Buffett cited high valuations as his reason behind the sale. Yet other investors have had trouble with P&G’s tepid growth, especially in emerging markets, and have noted problems with new-product rollouts. Even though he doesn’t seem have the same confidence in Procter & Gamble that he has in his other top positions, the stock still represents a big chunk of Buffett’s overall holdings.
Should You Follow Buffett?
Most of these stocks have been part of Buffett’s overall investing strategy for quite a while, so with the possible exception of Procter & Gamble, Buffett would almost certainly say that they’re appropriate investments for the long haul. They may not rise this month or this year, but with favorable long-term prospects, these stocks are worth a closer look if you have a long-enough time horizon to weather any short-term bumps in the road.
Motley Fool contributor Dan Caplinger owns shares of Berkshire Hathaway and warrants on Wells Fargo. The Motley Fool recommends American Express, Berkshire Hathaway, Coca-Cola, Procter & Gamble, and Wells Fargo. The Motley Fool owns shares of Berkshire Hathaway, IBM, and Wells Fargo. Try any of our newsletter services free for 30 days.
Photo: Nicholas Kamm, AFP, GettyImages