New CEO Greg Abel just delivered his first annual letter to Berkshire Hathaway’s shareholders, a tradition that former CEO Warren Buffett carried out for the past six decades. The letter was 18 pages and provided a ton of details on how Abel plans to run the company, a detailed overview of all of Berkshire’s operating businesses, and, of course, comments on Berkshire’s massive, roughly $318 billion equities portfolio.
Interestingly, Abel called out four stocks that Berkshire owns, which together account for a large portion of the portfolio. These are “businesses we understand well, have a high regard for their leaders, and expect will compound over decades.” Abel also said he expects “limited activity in these holdings,” providing big clues about Berkshire’s investment strategy that Buffett rarely did.
Here are the four stocks Abel referenced that he expects to compound for decades.
Apple — 18.9% of portfolio
The iconic consumer tech giant Apple has long been the largest position in Berkshire’s portfolio, at one point accounting for 40% of it. Buffett reportedly got interested in the company, which Berkshire first bought in 2016, when Buffett saw how distraught his friend became when he thought he’d lost his iPhone.
Still, some might have been a bit surprised to see Abel include Apple on this list, since Berkshire has trimmed its stake in Apple by about 75% in recent years. As Buffett has said in the past, Berkshire usually does not trim positions, but will eventually sell the entire stake once it starts selling. Apple could be a unique case, given how large the position has become and how well large tech and artificial intelligence stocks have performed in recent years. At the time, Buffett may have thought it made sense to take gains and lower exposure after such a strong run.
Apple has received some criticism in recent years for not having as strong an AI strategy as its peers in the “Magnificent Seven.” But it also hasn’t devoted hundreds of billions to AI-related capital expenditures, a conservative approach that the team at Berkshire probably appreciates. The company also continues to buy back stock, another attribute Buffett and the team have frequently looked for in their holdings.