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This has been a game-changing year for Berkshire Hathaway's (NYSE:BRKA)(NYSE:BRKB) long-term shareholders. Warren Buffett's retirement on Dec. 31 meant that this trillion-dollar conglomerate entered the year without its most familiar face running the show for the first time in well over half a century.
However, the Oracle of Omaha's successor, Greg Abel, hasn't missed a beat. He's grabbed the bull by the horns and revamped several aspects of Berkshire's $356 billion investment portfolio, while keeping one key trait the same: concentration. Abel, like Warren Buffett, has more than 45% of Berkshire Hathaway's invested assets ($160.6 billion) in just three undeniable winners: Apple (NASDAQ:AAPL), American Express (NYSE:AXP), and Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG).
Missed AI's "Act 1"? Act 2 Could Be 14x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we're only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »
Portfolio concentration has always been important to Warren Buffett and his successor, Greg Abel. Image source: Getty Images.
Apple was Warren Buffett's No. 1 holding by market value for close to a decade leading up to his retirement. Although innovation has always been the driving force behind Apple's success, Buffett tended to appreciate the company's exceptional pricing power and consumers' affinity for the brand.
But the Oracle of Omaha dumped 75% of Berkshire's stake in Apple in the nine quarters leading up to his departure. This left the door open for Abel to potentially continue selling shares after he took over as CEO.
However, Abel's first annual letter to shareholders in February referred to Apple as one of a few concentrated holdings that's expected to "compound over decades." Though this doesn't rule out further sales of Apple stock, it's pretty evident that Berkshire's new boss appreciates what Apple brings to the table: leading domestic smartphone sales (iPhone) and the world's largest share repurchase program.
Greg Abel is also overseeing a true legacy holding in American Express (commonly known as "Amex"). Amex has been a continuous holding for Berkshire Hathaway since 1991.
Financial stocks were always a favorite for Buffett because they're cyclical. Berkshire's now-former boss understood that while recessions are inevitable, they're historically short-lived. Buying bank stocks and financial services providers enabled Berkshire to take advantage of long-winded economic expansions.
American Express thrives as a double-dipper. It collects fees from merchants when processing transactions, as well as annual fees and interest income from cardholders as a lender.
Furthermore, Berkshire is netting a nearly 45% annual yield on cost from its Amex stake, giving Abel virtually no reason to ever sell this position.
However, Warren Buffett's successor really made his mark by piling into Google parent Alphabet. Abel more than tripled Berkshire's stake in the first quarter and added another $17 billion during the June-ended quarter.
There's little doubt that Abel, like Buffett, appreciates Alphabet's virtual monopoly in internet search. According to GlobalStats, Google accounted for roughly 90% of global internet search traffic in September, highlighting its impressive ad-pricing power.
But it's Alphabet's artificial intelligence (AI) ambitions that have piqued Greg Abel's interest. Since Alphabet integrated generative AI and large language model capabilities into Google Cloud, the world's No. 3 cloud infrastructure services platform by total spend, sales have skyrocketed.
We may be witnessing the birth of an AI applications powerhouse in Google Cloud.
Most investors think they missed the AI boat because they didn't buy Nvidia in 2005.
But according to our analysts, we're only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout, a massive technology build-out that Google's CEO says could be more profound than fire or electricity.
While everyone watches the chip designers, one "backbone" company provides the critical technology that Nvidia and AMD literally cannot function without. We've detailed this under-the-radar player in our new AI Playbook.
American Express is an advertising partner of Motley Fool Money. Sean Williams has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, American Express, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.
Warren Buffett's Successor, Greg Abel, Has Over 45% of Berkshire Hathaway's $356 Billion Portfolio Invested in 3 Undeniable Winners was originally published by The Motley Fool
