Buffett spends a lot of money on his best conviction stock.
One of the things that makes Warren Buffett a widely praised investor is his willingness to share how he does it. Buffett was a market student since his first stock purchase over 80 years ago. He shares mistakes and shares lessons he learns every year in his letters Berkshire Hathaway (brk.a -0.55%)) (brk.B) -0.22%)) at shareholders and annual shareholder meetings.
Investors also gain insight into his and his team’s investments through Securities and Exchange Committee applications that disclose changes to Berkshire’s portfolio.
Buffett has been a net seller of stocks for the past few years, but at the time of this writing he still oversees a portfolio worth $281 billion. And almost half of it is invested in just three exceptional stocks.
Image source: The Motley Fool.
1. Apple (22% of portfolio value)
Buffett first bought the stock apple (AAPL) 0.41%)) In 2016, it was traded with a rating that was too low to ignore. Seeing the powerful moat created by the iPhone, Buffett locked hundreds of millions of consumers into the Apple ecosystem, while Berkshire Hathaway poured tens of thousands of dollars into stocks over the next few years. At one point, Apple accounted for more than half of Berkshire’s marketable equity portfolio. It accounts for 22% of its portfolio after selling key chunks in 2024.
As mentioned before, Apple has benefited from a wide range of competitive moat thanks to the success of the iPhone. Apple’s iPhone sales have exceeded $200 billion over the past three years, with sales steadily progressing in 2025. The iPhone is at the heart of the growth of Apple’s ecosystem of devices and services, helping the rest of the business grow.
The Services segment is a particularly bright spot for Apple, currently boasting an annual run rate of $100 billion. Apple’s services are a much higher revenue stream than devices. As one of the fastest growing segments of the business, Apple’s overall profit margins have been growing as a result. When combined with Apple’s huge stock repurchase program, Apple can deliver meaningful growth in earnings per share.
However, Apple faces some headwinds. First of all, it lies in the crosshairs of tariffs planned by the Trump administration. Its supply chain is heavily dependent on China and Taiwan. As a result, it may increase their costs and you may need to pass those costs to the consumer. It could potentially dent in the sale of that device.
Furthermore, Apple is slowing down the development of competitive artificial intelligence services. Losing customers looking for more AI integration capabilities from their mobile phones and services is at risk. Apple customers tend to be trapped in the ecosystem, which helps to minimize that risk.
Apple Stock has fallen from its all-time high in late 2024, falling more than 20% below its peak. At current prices, the stock is valuated by approximately 28 times forward profit. While Apple was not a fast grower in the past, the iPhone and services business remains solid today, there is a high possibility that it will lock value with AI services in the future. So it appears to be a fair price to pay the tech giant.
2. American Express (16%)
American Express (axp 0.45%)) This is Buffett’s long-standing holding. He put about $1.3 billion in his shares in the 1990s, but hasn’t mentioned it since. Today, these stocks are worth nearly $45 billion.
Amex separates itself from other credit card companies by operating as both a card issuer and a Payments network. Most issuing banks are affiliated with visa or Mastercard Transfer payments from your customer account to the vendor. By doing both, AMEX can exercise more control over your business and gain more economics for card payments. This is done very well by directing higher exchange rates from businesses by attracting wealthy households to expensive products.
Amex has successfully raised card fees over the past few years. The first quarter reported an increase in net card fees of 18% year-on-year, but customers spent just 6% compared to the first quarter of 2024.
Over the past few years, Amex has shifted its strategy to provide its customers with more credit products. The charging card historically required customers to pay their full balance each month, but Amex can now pay over time with interest. Its interest income rose rapidly from 2021 to 2024, but its growth rate fell by just 11% in the first quarter. This is mainly due to a large number of laws, with interest income accounting for almost a quarter of current revenues.
AMEX focuses on high-income households and not on interest income, which could potentially be a little more insulated from the slowdown in the economy compared to other banks and payment processors. Therefore, it is less likely to be affected by loan defaults. Amex trades with important premiums compared to their most comparable competitors. Capital One Financialhowever, it definitely deserves premium due to its customer base strength, size, and ability to increase revenue through increased rates and services that support more interest.
3. Coca-Cola (10%)
coca cola (KO) -0.19%)) Another stock Buffett was purchased over 30 years ago and is not scheduled to be sold anytime soon. His first $1.3 billion investment in the company (yes, the same amount he invested in AMEX) is currently worth around $29 billion. Needless to say, coke pays more and more with dividends each year. Berkshire shareholders will raise approximately $816 million in dividends from Coca-Cola this year.
There are two attractions about the company.
First of all, it is one of the most powerful global brands in history. The red Coca-Cola logo is known in a world where it is translated into virtually every language known to humans. However, the strength of the brand is far beyond flagship products, and includes the most sold carbonated drinks, water, juices and sports drinks. This gives us considerable pricing power and is used to offset inflation in recent years.
The second factor is large, creating a localized supply chain for product production and packaging has become more cost-effective. This has come to the fore in recent months as global trade policies put pressure on other global companies. Coca-Cola was able to avoid the impact of tariffs more than its competitors, reducing costs. During the first quarter revenue call, management warned that it was not immune to global trade dynamics, but is positioned more than most companies.
Both of these benefits helped Cola produce strong first quarter results while reaffirming its one-year forecast. Revenues increased by 6%, while earnings per share increased by 1%. These numbers may seem unimpressive, but they look better than Cola’s biggest rivals PepsiCosaw revenue per share shrink in the first quarter.
The relative strength of the coke is not noticed. The stock price has risen 15% per year at the time of this writing, with the stock trading at earnings of 24 times earlier. It’s higher than the historic average, but not ridiculous. Due to its strong position in the current economic environment, it may be worth paying a premium on Coca-Cola stocks. We also collect dividend yields of 2.8% at current prices.
