Warren Buffett, a man who once famously compared stock picking to picking lottery numbers (but with slightly better odds, naturally), always maintained that the ideal holding period was “forever.” A rather optimistic stance, one might think, given the inherent instability of, well, everything. But it was a sentiment Greg Abel, his successor at Berkshire Hathaway, has clearly taken to heart. Abel, in his first letter to shareholders, highlighted nine companies that form the core of Berkshire’s equity portfolio – representing over 60% of the entire thing. A significant concentration, even for a company built on significant concentrations (it’s a bit like building a house entirely out of very expensive bricks). Investors, he suggests, shouldn’t expect much shuffling of these particular decks.
1. Apple (19% of marketable equities)
Apple. The company that convinced an entire generation they needed to periodically replace perfectly functional rectangles. It remains Berkshire’s largest holding, despite Buffett’s recent (and rather uncharacteristic) selling spree. One suspects even Buffett felt a slight pang of existential dread staring into the abyss of endless product cycles. Abel’s comments suggest that particular phase may be over. And why wouldn’t it be? Apple’s lower capital intensity compared to its hyperscaler peers is, frankly, a relief. While others are busy building data centers the size of small countries (and consuming enough electricity to dim the eastern seaboard), Apple is still churning out free cash flow exceeding $100 billion. A truly remarkable feat of engineering, or possibly just clever marketing.)
Despite the somewhat delayed revamp of Siri (a digital assistant whose primary function appears to be misunderstanding basic requests), Apple’s sales have remained robust. iPhone sales, in particular, were up 23% year-over-year, boosted by strength in Greater China. (One wonders if the Chinese market is simply ahead of the rest of us in realizing the futility of resisting the allure of shiny rectangles). If Siri ever learns to actually understand what people want, well, then we’re all in trouble. At 30 times forward earnings, the stock might seem a tad expensive, but the share repurchase program, solid revenue growth, and expanding margins suggest a fair price. (Fair, in the grand scheme of things, is a relative term. Like saying a black hole is “slightly inconvenient.”)
2. American Express (15%)
American Express. A company that has, for over 30 years, successfully convinced people that a piece of plastic is a viable substitute for actual money. Abel intends to continue holding the stock indefinitely, which, given the current state of global finance, seems like a perfectly sensible plan. Amex is adept at attracting high-end consumers and small businesses with its card portfolio, having recently refreshed its Platinum card. (The new fees are, admittedly, rather astronomical, but apparently, some people are willing to pay a premium for the privilege of being slightly more exclusive.) Net interest income is climbing, and interchange fees remain the primary revenue driver.
Amex is well-positioned to capitalize on the shift to digital payments, attracting young, high-income customers and keeping them for the long haul. This enables strong operating leverage and faster earnings growth. At 17 times forward P/E, it looks like a bargain. (A bargain, of course, is subjective. It depends entirely on how much you value the ability to purchase things with a small rectangle.)
3. Coca-Cola (10%)
Coca-Cola. A company that has managed to convince a significant portion of the world that brown, fizzy sugar water is a legitimate beverage. It’s a moat built on global brand recognition, allowing them to raise prices and introduce new products. The result is steady revenue growth and margin expansion. Management targets mid-single-digit revenue growth, and achieved just that last year. Investors can expect similar growth, with slightly better earnings-per-share from margin improvements and share repurchases.
At 24 times forward earnings, it might be a bit overpriced, given the slow-and-steady nature of the business. But considering Berkshire’s sitting on $29.5 billion worth of capital gains on its original investment of $1.3 billion, it’s unlikely Abel wants to sell those shares anytime soon. (It’s a bit like being unwilling to dismantle a particularly elaborate sandcastle, even though the tide is coming in.)
4. Moody’s (4%)
Moody’s. The company that tells everyone how risky everyone else is. Buffett never highlighted it as a forever stock, but Abel made it clear it’s a core position. Berkshire acquired the stock in 2000, sold half in 2009/2010, but hasn’t touched it since 2013. A curious history, suggesting a period of mild skepticism followed by a resolute commitment. Moody’s is a trusted credit rating agency, essential for investors and bond issuers. (The fact that these ratings aren’t always accurate is, of course, a minor detail.) The company benefits from a network effect, giving it a wide moat. Its Investors Service business accounts for two-thirds of its income, with the Analytics business growing faster.
Pricing power and operating leverage should push earnings per share up double digits next year. At 28 times forward earnings, it looks like a fair price. (Fair, in this context, meaning “not entirely outrageous.”)
5-9. Japanese Trading Houses (14%)
In 2019, Buffett and Munger established positions in Mitsubishi, Mitsui, Itochu, Sumitomo, and Marubeni. He added to them over the years, exceeding 10% stakes in several last year. These five companies operate similarly to Berkshire Hathaway, acting as both investors and partners. Abel sees them as potential collaborators for international investments. (It’s a bit like forming a particularly well-funded and globally-minded book club.)
Many of the stocks continue to trade at attractive valuations. Berkshire has borrowed yen equal to the cost basis, hedging currency risk and taking advantage of low interest rates. Dividends cover the interest paid on the loan. (A clever maneuver, assuming the yen doesn’t suddenly become worthless, which, given the current state of global finance, is always a possibility.)
Abel said other companies could eventually become core holdings, but for now, he may be focused on trimming non-core positions and on the biggest and best investments in Berkshire’s portfolio. (A sensible strategy, given the sheer improbability of everything.)
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2026-03-12 02:13