Berkshire Hathaway (BRK.A 0.15%) (BRK.B 0.30%) has one of the most closely followed stock portfolios in the world. The conglomerate owns about four dozen stocks, with a combined market value of more than $325 billion, and many of the positions were chosen by legendary investor Warren Buffett himself.
Of these stocks, there are a few that I have chosen to put my own money into. Here’s what they are, and why they’re my favorite “Buffett stocks” for the long term.
1. Markel
Markel (MKL 0.50%) is often referred to as “baby Berkshire” for the similarities in the business models of both companies. Both are insurance companies at heart but use their profits and float to invest in public and private companies. In fact, Markel has a stock portfolio, and its largest investment is Berkshire Hathaway. In short, Markel is an earlier-stage conglomerate that uses a lot of the same principles that made Berkshire such a success.
2. Bank of America
Berkshire’s second-largest stock investment is Bank of America (BAC 0.66%), of which it owns nearly 13%. It’s not hard to understand why. Bank of America has undergone an impressive transformation in the years since the financial crisis and is now one of the most solid big banks in the U.S., but trades for a cheaper valuation than most of its peers.
3. General Motors
It often surprises people when they ask for my favorite electric vehicle stock, and I say General Motors (GM 1.86%). But there are some good reasons. GM has outstanding brand loyalty that should translate into excellent sales of some of its upcoming electrified models, such as the Silverado. It has fantastic proprietary battery technology (Ultium) and has excellent relationships that could turn into billion-dollar revenue streams, such as with the Department of Defense. And finally, its majority stake in Cruise could make it a big winner as autonomous vehicle technology evolves.
4. Amazon
Of the stocks on this list, Amazon (AMZN 2.29%) is the most recent addition to my portfolio, as I see little reason for the stock shedding over half of its value in the market downturn. It’s rare to find a company that is dominant in not one, but two high-growth industries (e-commerce and cloud infrastructure). Amazon is currently a relatively small part of Berkshire’s portfolio, but I wouldn’t be surprised if Buffett and his team take advantage of the decline.
5. Ally Financial
Ally Financial (ALLY -0.10%) is a bank that was formerly the finance arm of General Motors, so not surprisingly, the main focus is auto lending. Ally’s auto lending business has fantastic margins and management has established an excellent track record of creating value for investors through both buybacks and dividends.
6. American Express
One of the longest-running stocks in Berkshire Hathaway’s portfolio, American Express (AXP 0.50%) is among the largest investments. In fact, Berkshire owns more than 20% of AmEx. I own it because its closed-loop payments network allows it to make money off multiple parts of each transaction, and because management has done a fantastic job of tailoring products to the important millennial generation.
7. Berkshire Hathaway
The seventh “Buffett stock” I own is Berkshire Hathaway itself, and it’s one of my largest stock positions. So, with this investment I indirectly have a position in all of the stocks in Berkshire’s portfolio. And because of this, it might seem odd that I also own so many of Berkshire’s stocks individually.
In a few cases, I don’t own certain stocks because Berkshire has a position and I feel I have enough exposure. As one example, I love Apple as a business, but because about 17% of Berkshire’s market cap is represented by its massive position in the tech giant, I don’t own it separately.
On the other hand, the seven individual “Buffett stocks” I own are either positions that are relatively small pieces of Berkshire’s overall business, companies that I have an extremely high level of conviction in, or both.
Ally is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Matthew Frankel, CFP® has positions in Ally Financial, Amazon.com, American Express, Bank of America, Berkshire Hathaway, General Motors, and Markel. The Motley Fool has positions in and recommends Amazon.com, Apple, Bank of America, Berkshire Hathaway, and Markel. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway, long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway, short January 2023 $265 calls on Berkshire Hathaway, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.