Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) CEO Warren Buffett is arguably the greatest investor of our time. Rather than relying on fancy charting software or throwing his weight around as an activist investor, Buffett’s approach has always been to buy companies that have clear-cut and sustainable competitive advantages, and to hang onto those businesses for very long periods of time.
As Berkshire Hathaway’s most recent annual shareholder letter shows, patience pays off. Between 1965 and 2020, Berkshire Hathaway’s average annual gain was 20%, which was nearly double the 10.2% average annual total return (i.e., including dividends) of the benchmark S&P 500 over the same period. Over this time span, Berkshire Hathaway’s stock has nearly outperformed the S&P 500 by an aggregate of 2,800,000%.
With a focus on the long-term, Warren Buffett’s cost basis on many of his company’s largest holdings are surprisingly low. Here’s a brief look at the per-share cost basis for each of Berkshire Hathaway’s 10-largest holdings (Note: Kraft Heinz is excluded because Berkshire Hathaway uses a different accounting method to establish its cost basis).
1. Apple: $34.26 per share cost basis
Tech kingpin Apple (NASDAQ:AAPL), which makes up just over 38% of Berkshire Hathaway’s portfolio, has been nothing short of a slam-dunk investment. Shares are up 253% above the Oracle of Omaha’s cost basis, serving as a reminder that great companies can continue to be great, even if they happen to have trillion-dollar market caps. Apple’s 5G push should light a fire under iPhone sales for years to come, with the company’s ongoing push into services providing more stable cash flow and even higher operating margins.
2. Bank of America: $14.17 per share cost basis
It’s no secret that Warren Buffett loves bank stocks — and he’s absolutely cleaned up with Bank of America (NYSE:BAC). Berkshire Hathaway currently owns 12% of the company’s outstanding shares at a cost basis just above $14. This means Buffett and his team are sitting on unrealized gains of 168%, not including dividends, through this past weekend. As the nation’s most interest-sensitive money-center bank, Bank of America stands to benefit in a big way once yields and interest rates start rising.
3. American Express: $8.49 per share cost basis
This marks the 28th consecutive year that payment services company American Express (NYSE:AXP) has been a Berkshire Hathaway holding. Over that time, AmEx has catapulted from Buffett’s cost basis of $8.49 to close this past weekend at $148.54. That’s a not-too-shabby return of 1,650%, not including dividends received. Although American Express is a cyclical company, its ability to lure affluent clients has helped it navigate and emerge from recessions better than most financial services companies.
4. Coca-Cola: $3.25 per share cost basis
Speaking of long-tenured holdings, beverage giant Coca-Cola (NYSE:KO) is the longest-held stock by Buffett at 33 years. Having closed out this past week at $50.36, shares of Coca-Cola have delivered a bubbly unrealized return of 1,450% for the Oracle of Omaha, not counting dividends. The crazy thing is that, if you do include dividends, Coca-Cola is now providing an annual yield of 52%, based on Berkshire’s initial cost basis of $3.25. With over 20 brands bringing in $1 billion or more in annual sales, and a presence in all but two countries worldwide (North Korea and Cuba), Coca-Cola is a true moneymaker for Buffett.
5. Verizon Communications: $59.24 per share cost basis
Don’t let your jaw hit the floor, but the Oracle of Omaha and his investing team are actually losing money on their stake in Verizon (NYSE:VZ). Then again, Buffett and his investing lieutenants only added the telecom giant to Berkshire’s portfolio in the fourth quarter, so it hasn’t really had any time to shine. With Berkshire Hathaway sitting on a boatload of cash, Verizon’s low-volatility stock that’s currently paying out 4.5% annually might be Buffett’s modern-day version of a Treasury bond or bank CD.
6. U.S. Bancorp: $38.05 per share cost basis
Have I mentioned that Buffett likes bank stocks? Berkshire Hathaway owns more than 148 million shares of regional banking behemoth U.S. Bancorp (NYSE:USB) at just over an average price of $38. That’s good for a return of 44% (unrealized) through this past weekend. U.S. Bancorp’s management team has avoided the risky derivative investments that have previously sunk larger money-center banks, and it’s done an excellent job of encouraging its customers to bank online or with its app. With so many users banking digitally, the company has been able to close some of its physical branches to reduce its noninterest expenses.
7. Moody’s: $10.05 per share cost basis
Warren Buffett’s investment in credit rating and analytics company Moody’s (NYSE:MCO), which was spun off from Dun & Bradstreet in 2000, might be his most impressive of all. Berkshire Hathaway’s cost basis of $10.05 is absolutely dwarfed by the $291.64 closing price for Moody’s this past weekend. That’s an unrealized gain of 2,802%, not accounting for dividends. With lending rates remaining at or near historic lows, Moody’s credit rating agency has been busy grading new debt issuances. Meanwhile, as long as equities remain volatile, demand for market analytics should remain high.
8. BYD Co.: $1.03 per share cost basis
Your eyes are not deceiving you. Following an initial investment back in 2008, Berkshire Hathaway is holding 225 million shares of Chinese electric-vehicle (EV) manufacturer BYD (OTC:BYDDY) at roughly $1.03 per share. Based on BYD’s closing price of $24.98 this past weekend (Buffett owns the H-shares (BYDDF)), Buffett and company have notched an unrealized gain of 2,325%. China projects as the largest EV market in the world, with half of all auto sales in 2035 expected to be powered by alternative energy (i.e., non-fossil fuels). As a provider of EV components and a manufacturer of vehicles, BYD could play a big role in the growth of alternative energy solutions in China.
9. Chevron: $82.97 per share cost basis
Like Verizon, oil and gas giant Chevron (NYSE:CVX) is a new addition to the Berkshire Hathaway portfolio, as of the fourth quarter. But unlike Verizon, Chevron’s stock has been on fire, due mostly to surging prices for Brent and West Texas Intermediate crude oil. Even though this is a new position, Buffett and his team are already up by 34%. Chevron’s reasonably low debt-to-equity ratio, coupled with pared-back capital expenditures, should ensure continued profitability and the safety of its 4.6% annual yield.
10. General Motors: $30.50 per share cost basis
Finally, there’s Detroit automaker General Motors (NYSE:GM). With Berkshire Hathaway in at $30.50 per share, Buffett’s company has driven to an unrealized gain of 94%, through this past weekend. General Motors has been especially hot since it announced in November that it was upping its spending on electric vehicles and autonomous vehicles (AVs). The company had previously been planning to spend $20 billion on EVs and AVs through 2025, but increased its projected outlay to $27 billion. By 2025, General Motors anticipates launching 30 new EVs around the world.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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