Berkshire Hathaway’s Fourth Quarter 2024 Portfolio Moves

Overview of Berkshire Hathaway’s Q4 13F Filing

Berkshire Hathaway’s fourth-quarter 13F filing, released on February 14, 2024, after the market close, provides a glimpse into the investment strategies of Warren Buffett and his team, including Todd Combs and Ted Weschler. This regulatory filing, required quarterly by the Securities and Exchange Commission (SEC), details Berkshire’s publicly traded equity portfolio, excluding its wholly-owned subsidiaries and international holdings. The filing showed that Berkshire’s investment portfolio stood at $267 billion, comprising 38 companies, down from 40 in the previous quarter. This suggests that Berkshire was likely a net seller of publicly traded stocks during the quarter.

Additionally, Berkshire’s fourth-quarter earnings report, which includes Warren Buffett’s highly anticipated annual letter, is expected to be released on February 22. This report will provide further insights into Berkshire’s wholly-owned operating companies, offering a more comprehensive view of the conglomerate’s performance and strategy. The 13F filing, however, focuses solely on the U.S. publicly traded portion of Berkshire’s portfolio, giving investors a snapshot of where Buffett and his team are allocating capital in the stock market.

Berkshire Hathaway’s Top Ten Holdings

Berkshire’s top ten holdings dominate its investment portfolio, accounting for nearly 90% of the total assets. The top five holdings—Apple (AAPL), American Express (AXP), Bank of America (BAC), Coca-Cola (KO), and Chevron (CVX)—together make up approximately 71% of the portfolio, down from 76% in the first quarter. This level of concentration underscores Buffett’s preference for investing in a smaller number of high-quality companies with strong fundamentals and competitive advantages.

Apple, in particular, remains Berkshire’s largest holding, though its weighting has decreased from over 50% of the portfolio in early 2024 to around 28%. This reduction reflects Berkshire’s strategy of trimming its Apple stake, potentially to lock in gains or rebalance the portfolio. Despite this, Apple still accounts for a significant portion of Berkshire’s investments, highlighting the company’s enduring appeal to Buffett and his team.

Berkshire Hathaway’s Portfolio by Sector

Berkshire’s portfolio has seen notable shifts in sector exposure during the fourth quarter. The technology sector, driven primarily by Apple, has moved to a slight underweight compared to the S&P 500, as Berkshire paused its trimming of Apple shares during the quarter. While technology remains a meaningful part of the portfolio, the reduction in Apple’s weighting has reduced the sector’s overall influence.

The financial sector continues to be the largest overweight in Berkshire’s portfolio, accounting for nearly 40% of assets. This is despite the trimming of positions in several banking stocks, including Bank of America, Citigroup, Capital One Financial, and NU Holdings. Buffett’s stature as one of the greatest bank stock investors of all time makes this continued reduction in financials notable, though the sector remains a key area of focus.

Berkshire’s portfolio is also overweight in energy and consumer staples, driven by significant stakes in Chevron and Occidental Petroleum (OXY) in the energy sector, and Coca-Cola and Kraft Heinz (KHC) in consumer staples. Occidental Petroleum, in particular, has been a major focus for Berkshire, with the company owning 28% of the outstanding shares. This significant exposure to energy and consumer staples reflects Berkshire’s long-term perspective on these industries.

Notably absent from Berkshire’s portfolio are any significant holdings in the real estate or utilities sectors. While some of Berkshire’s wholly-owned subsidiaries, such as Burlington Northern Santa Fe (a large railroad), do operate in these areas, the publicly traded portion of the portfolio does not include exposures to these sectors.

Portfolio Changes: Additions and Reductions

The fourth quarter saw Berkshire make several notable changes to its portfolio, including the addition of one new holding, Constellation Brands (STZ). Valued at over $1.2 billion, Constellation Brands represents Berkshire’s nineteenth largest holding and accounts for nearly half a percent of the portfolio. Constellation Brands is best known for its ownership of Corona and Modelo beers in the U.S., as well as a portfolio of wine and spirits brands.

Despite Constellation’s addition, the timing of this investment is intriguing. The company reported weaker-than-expected quarterly earnings in January and reduced its outlook for the year. Additionally, potential tariffs on Mexican imports could negatively impact Constellation’s Mexican beer business, while growing consumer interest in GLP-1 diet drugs and cannabis may pose long-term challenges to its alcohol brands. However, the stock is currently trading at multi-year lows across several valuation metrics, which may have presented an attractive entry point for Berkshire.

In addition to Constellation Brands, Berkshire increased its stakes in several existing holdings, including Domino’s Pizza (DPZ), Pool Corporation (POOL), Occidental Petroleum (OXY), Verisign (VRSN), and Sirius XM Holdings (SIRI). These additions suggest that Buffett and his team see value in these companies’ long-term prospects, even as they maintain a cautious overall stance on the market.

On the other hand, Berkshire also trimmed or eliminated several positions during the quarter. Ulta Beauty (ULTA) was entirely removed from the portfolio after being reduced in the previous quarter. This exit is notable, as Ulta was only added to the portfolio in the second quarter of 2024. Similarly, Berkshire sold its minor holdings in the Vanguard S&P 500 ETF (VOO) and the SPDR S&P 500 ETF (SPY), suggesting a preference for direct stock picks over passive index exposure.

Within the financial sector, Berkshire reduced its stakes in several banks, including Citigroup (C), Capital One Financial (COF), Bank of America (BAC), and NU Holdings (NU). While nearly 40% of Berkshire’s portfolio remains invested in financial companies, the continued trimming of banking stocks is worth noting, given Buffett’s historical success in the sector.

Other notable reductions include T-Mobile (TMUS), Charter Communications (CHTR), Liberty Media—Formula One (FWONK), and Louisiana-Pacific (LPX). These adjustments reflect Berkshire’s ongoing effort to optimize its portfolio and align it with its investment thesis, even as the broader market presents fewer attractive opportunities.

Portfolio Valuation Metrics

A closer examination of Berkshire’s portfolio reveals its valuation characteristics relative to the S&P 500. Across key metrics such as price-to-earnings (P/E), price-to-sales (P/S), return on equity (ROE), and enterprise value-to-EBITDA (EV/EBITDA), Berkshire’s portfolio appears cheaper than the broader market. This suggests that Buffett and his team are prioritizing undervalued companies with strong fundamentals.

The portfolio also demonstrates superior profitability compared to the S&P 500, as measured by return on equity and operating margin. These metrics align with Buffett’s well-known preference for high-quality businesses that generate significant cash flows. Additionally, the portfolio’s free cash flow yield is higher than that of the S&P 500, further reinforcing the attractiveness of Berkshire’s holdings from a value investing perspective.

However, the long-term consensus earnings-per-share growth rate for Berkshire’s portfolio is expected to be lower than that of the S&P 500. This reflects the mature, stable nature of many of Berkshire’s holdings, which are often established companies with strong competitive advantages but slower growth prospects. Despite this, Buffett’s focus on cash flow and profitability over growth aligns with his long-term investment philosophy, which emphasizes compounding returns over time.

Summary and Implications

Berkshire Hathaway’s fourth-quarter 13F filing suggests that Warren Buffett and his team remain cautious about the broader market, as evidenced by the company’s ninth consecutive quarter of net stock sales. With an estimated $5 billion in net sales during the quarter, Berkshire continues to hold a massive cash reserve, which stood at over $100 billion at the end of 2023. This cash hoard underscores Buffett’s disciplined approach to investing, as he waits for opportunities to deploy capital at attractive valuations.

The concentration of Berkshire’s portfolio in a few key sectors, particularly financials, energy, and consumer staples, reflects the team’s confidence in these areas. However, the reduction of banking stocks and the addition of Constellation Brands highlight the ongoing evolution of the portfolio in response to market conditions. While the exact reasons behind these moves will become clearer with the release of Berkshire’s earnings report and Buffett’s annual letter, one thing is clear: Berkshire remains committed to its value investing principles, even in a challenging market environment.

Buffett’s inability to find sufficient attractive acquisition targets in his “circle of competence” has left Berkshire with significant cash reserves. This underscores the difficulty of finding high-quality businesses at reasonable valuations in the current market. Nevertheless, Berkshire’s disciplined approach and long-term perspective position it well to capitalize on future opportunities, whether through additional stock purchases or strategic acquisitions.

In summary, Berkshire Hathaway’s fourth-quarter 13F filing offers valuable insights into the investment strategy of one of the world’s most revered investors. While the portfolio reflects a cautious stance on the market, it also demonstrates a continued commitment to value and quality, principles that have guided Berkshire to long-term success. As investors await Buffett’s annual letter and the release of Berkshire’s earnings report, one thing is certain: Berkshire’s approach to investing remains as compelling as ever.