Few investors are more respected on Wall Street Berkshire Hathaway (BRK.A -0.92%) (BRK.B -1.00%) CEO Warren Buffett.He’s not foolproof, but he beat the benchmark S&P 500 Head to head including dividends paid since it took the reins of Berkshire Hathaway in 1965. That’s 120x the S&P 500’s 30,209% total return.
Suffice it to say that following Berkshire Hathaway’s 13F filing with the Securities and Exchange Commission (SEC), money-making propositions have been made for more than half a century thanks to the Oracle of Omaha.
But not all of Berkshire Hathaway’s holdings are found in the quarterly 13F filings with the SEC. Buffett’s firm also owns his New England Asset Management (NEAM), a specialist investment firm, thanks to his acquisition of reinsurance giant General Re 25 years ago. Buffett wasn’t involved in this investment decision for his $5.9 billion fund, but his NEAM is still owned by Berkshire Hathaway. This creates Warren of New England Asset Management’s Buffett’s secret portfolio.
What’s particularly interesting about Warren Buffett’s hidden portfolio is that it’s very similar to Berkshire Hathaway’s investment portfolio. Overall, Warren invested his 89% of his Buffett’s secret portfolio in just five stocks.
Apple: 48.13% of invested assets
If you thought Buffett’s investment portfolio at Berkshire Hathaway was concentrated in tech stocks apple (AAPL 0.04%), wait until you take a closer look at his hidden portfolio via NEAM. As of September 30, 2022, Apple represents more than 48% of New England Asset Management’s approximately $5.9 billion in assets under management.
The appeal of Apple is that it’s pure moneymaking. Over the past 12 months, he has generated over $122 billion in operating cash flow, with outstanding customer loyalty and top-notch innovation being the company’s primary drivers. Apple’s iPhone is the company’s biggest revenue driver, accounting for about half of all smartphones in the US.
Meanwhile, CEO Tim Cook oversees the successful transition to a subscription-driven operating model. This service his segment offers her double-digit annual growth potential sustained over a decade.
Plus, Apple’s Capital Return Program is second to none. Paying out about $14.6 billion in dividends each year, he’s repurchased a whopping $554 billion worth of common stock over the past decade. These share buybacks have had a distinct positive impact on Apple’s earnings per share.
Bank of America: 11.69% of invested assets
Like Berkshire Hathaway’s core investment portfolio, Buffett’s secret portfolio is bank of america (back -1.45%) as the second largest holding.
Warren Buffett and his team love bank stocks because they are well-positioned to take advantage of the long U.S. economic expansion. Recessions are a normal part of economic cycles, but they don’t last very long.
As the U.S. economy expands, money-center giants like Bank of America can benefit from what I call “banking mainstays”—loans and deposits. While it may not be attractive from a business perspective, the increase in loans and deposits will benefit banks and allow them to return capital to shareholders through share buybacks and dividends.
Bank of America is also well positioned for aggressive interest rate hikes by the Federal Reserve. Among the large banks, BofA is the most sensitive to changes in the yield curve. Bank of America is benefiting from a significant increase in net interest income as the country’s central bank has no choice but to fight historically high inflation.
US Bancorp: 11.37% of invested assets
local bank giant US Bancorp (USB -0.39%) It is the third largest holding in Oracle of Omaha’s hidden portfolio. The parent company of the well-known US Bank, the company accounts for more than 11% of his investment portfolio in NEAM.
If there is one thing that makes US Bancorp stand out from many publicly traded bank stocks, it’s the company’s propensity for digital engagement. At the end of August, 82% of US Bancorp’s active customers used digital banking, and 62% of total sales were completed online or via mobile apps.
Digital transactions cost banks very little compared to face-to-face or phone-based transactions. Not surprisingly, this digitization drive has enabled US Bancorp to consistently generate above-average returns on assets.
Another key to US Bancorp’s success is its financial discipline. Unlike most money center banks, US Bancorp has largely avoided the risky derivative investments that laid off large banks during the financial crisis. Again, our focus on the basics of banking has consistently delivered excellent performance.
Chevron: 10.85% of invested assets
energy stock chevron (CVX 1.00%) It was Warren Buffett’s secret portfolio’s biggest buy of 2022. As of the end of the third quarter, Chevron’s weight reached 10.85%.
Investors who are currently bullish on Chevron may be betting that oil and gas prices will continue to rise over the next few years. When Russia invaded Ukraine, Europe’s supply of these energy commodities came to a standstill. But a bigger issue may be that the COVID-19 pandemic has led to years of drastic reductions in capital spending on drilling, exploration and infrastructure. This should make it difficult to increase global oil and gas supplies anytime soon, providing a relatively safe floor below spot prices for energy commodities.
Another important point about Chevron is that it is an integrated operator. Chevron makes most of its money from drilling, but it also operates pipelines, chemical plants and refineries. Chemical plants and refineries are downstream assets that benefit when oil prices fall. In other words, Chevron’s integrated model helps us navigate any economic environment.
HP: 6.99% of invested assets
The fifth largest holding in Warren Buffett’s secret portfolio is a computing and printing solutions company. HP (HPQ -2.07%)At the end of September, HP represented approximately 7% of New England Asset Management’s invested assets.
There’s no denying that the heyday of HP’s growth is in the rearview mirror. Nonetheless, sales of personal computers and printing solutions tend to generate highly predictable quarterly earnings and operating cash flow. Additionally, HP can argue that there is a safe lower end to HP’s stock price, as he is valued at eight times his projected Wall Street earnings for fiscal 2023 and his fiscal 2024. .
Mature companies also tend to put rewarded shareholders at the top of the list. In his 2022 fiscal year (ending October 31, 2022), HP returned his $5.3 billion to shareholders in the form of dividends and share buybacks. The company, which recently announced a modest increase in its quarterly dividend, offers a market-leading yield of his 3.8%.
Bank of America is an advertising partner of The Ascent by The Motley Fool. Sean Williams holds a position at Bank of America. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway and HP. The Motley Fool recommends the following options: Berkshire Hathaway January 2023 $200 Long Call, Apple March 2023 $120 Long Call, Berkshire Hathaway 2023 January 200 short put, Berkshire Hathaway January 2023 $265 short call, March 2023 $130 short call apple. The Motley Fool’s U.S. headquarters has a disclosure policy.