Any number of financial analysts, experts and asset managers would be eager to guide you about how to go about investing the Warren Buffett way. Yet, few have managed to match the success of this plain talking veteran who has consistently outperformed most other investors over an extended period. Buffett is always market-relevant, but there has been some additional focus on him over the last month following the release of the details of his annual portfolio holdings.
Additionally, his sage investor advice, in the form of his annual letter to shareholders of Berkshire Hathaway Inc. (BRK-B – Free Report) , grabbed headlines last week. But it’s not that his investing approach is without its fair share of detractors.
One common criticism of his technique is that he has to continue to buy into larger stocks. This limits the extent of price appreciation even if one holds the stock for an extended period. Even so, his approach has helped investors reap dividends over an extended period and picking up Buffett’s portfolio picks which carry a good Zacks Rank continues to make for a great investment option.
Concentrating on Large-Cap Holdings
Buffett’s $150 billion portfolio is heavily concentrated around his top 10 holdings. In fact, his top three holdings, namely, The Kraft Heinz Company KHC, Wells Fargo & Company (WFC – Free Report) and The Coca-Cola Company (KO – Free Report) account for 19.2%, 17.9% and 11.2% of his total portfolio, respectively. A cursory look at the others towards the top of the holdings charts also offers similar results.
And Buffett is expanding his position in several of these behemoths. Recently, Berkshire raised its ownership in Apple, Inc. (AAPL – Free Report) by a whopping 277%. This is only natural given the company’s fiscal first quarter performance and rising optimism around the release of the much awaited iPhone 8.
The veteran investor outlined his central tenet of investing once again in his annual letter to Berkshire shareholders. According to Buffett, investors who can avoid incurring substantial costs and hold a portfolio of large, domestic companies which rely on conservative methods of financing are setting themselves up for good returns.
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