2024 turned out to be a bit of an odd year for Warren Buffett and his company Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B). Berkshire's stock performed well, with class B shares generating a 27% return and beating the broader market's 23% return.
However, Buffett made many moves indicating that he views the market, or at least broad swaths of the market, as overvalued. Berkshire hoarded cash, was a net seller of stocks, and sold big parts of two of its largest positions -- Apple (NASDAQ: AAPL) and Bank of America (NYSE: BAC). Yet Berkshire didn't touch shares of one of its largest longtime holdings, which it's made a killing on.
Buffett has never preached diversification, believing it's a poor excuse for ignorance. When he sees something he likes he doesn't mess around; such was the case with the consumer tech giant Apple. Berkshire first bought the stock in 2016 and built the position to around 40% of its massive (roughly $296 billion) portfolio. Buffett did the bulk of his buying when Apple traded below $50 per share. Today, the stock trades at $240 per share.
Berkshire invested in Bank of America following the Great Recession in 2011. The Oracle of Omaha injected $5 billion of capital into the bank in exchange for preferred stock with a 6% annual dividend. Berkshire also got warrants giving it the right to buy 700 million shares of common stock with a strike price of $7.14 per share. Today, Bank of America stock trades at about $44 per share.
So Buffett has made great returns on both Apple and Bank of America. It's hard to know whether Berkshire plans to fully exit these positions, which collectively made up 39% of its portfolio at the end of 2024. We know it can take Berkshire a while to divest large positions, so the conglomerate could very well continue to sell these down.
We don't know exactly what it's concerned about in regards to Apple and Bank of America. But given Berkshire's moves in 2024, it may see a correction or economic downturn on the horizon, and could be looking to sell to cash in its profits.
Buffett and Berkshire have a long and storied history with the credit card and payments company American Express (NYSE: AXP). Berkshire first accumulated the stock in 1991 when it provided American Express with $300 million of capital when the company was struggling. In return, Berkshire received a special kind of derivative convertible into preferred stock and paying an 8.5% yield. In 1994, the preferred shares were exchanged for 14 million common shares and then Berkshire purchased 27.7 million more shares later that year, according to the New York Times.
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By 1998, Berkshire had acquired an additional roughly 8.8 million million shares, bringing its total position to slightly over 50.5 million shares. A three-for-one stock split in 2000 would increase the number of shares Berkshire held to roughly 151.6 million, the same share count it held at the end of the fourth quarter of 2024.
Although Berkshire has been shifty on bank stocks recently, American Express is unique in that it has a huge credit card franchise and runs one of the four major credit card networks in the world. While its network isn't nearly as big as those of Visa or Mastercard, Amex also issues credit cards to consumers.
Buffett is a big fan of companies with powerful brands that effectively build moats, and American Express has accomplished this in more ways than one. For instance, building a credit card network requires an incredible amount of scale -- so aside from Visa, Mastercard, and Discover Financial Services, which could soon merge with and into Capital One Financial), it's unlikely that it will have other competitors.
The company has also built an enviable brand among consumers. Many consumers believe having an Amex card presents a certain status. That's why they'll pay close to $700 per year for the company's Platinum Card. This not only creates a solid stream of annual recurring revenue, but also draws in higher-income customers who tend to be more resilient in a recession.
American Express stock currently makes up about 15% of Berkshire's portfolio, and hasn't been sold in roughly 27 years. That's impressive in a portfolio where almost every stock -- no matter its history with Buffett and his team -- seems to be vulnerable these days.
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American Express is an advertising partner of Motley Fool Money. Discover Financial Services is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money.
Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Mastercard, and Visa. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.
Warren Buffett Has Sold Over 950 Million Shares of Apple and Bank of America. But the Billionaire Has Made a Killing on 1 Stock He Hasn't Touched in 27 Years was originally published by The Motley Fool
