As a value investor, Warren Buffett’s investment horizon is generally long-term. Nevertheless, the Berkshire boss keeps selling company shares. But there are stocks in his holding portfolio that Buffett will probably never sell.
• Warren Buffett comments on “forever investments” in letter to shareholders
• American Express & Coca-Cola holdings praised again
• Buffett names two other holdings that he does not want to sell
“Berkshire is built to last”. These words from investment legend Warren Buffett are recorded in writing in the latest letter to investors in the investment holding company Berkshire Hathaway. But according to Buffett, not only is the company itself made to last, some of Berkshire’s investments are also unlikely to leave the portfolio.
American Express and Coca-Cola remain unaffected
Last year, Buffett had already identified two forever holdings in his letter to shareholders: American Express and Coca-Cola. Berkshire Hathaway has been a shareholder in both companies for many years. Buffett referred to the two titles again this year. Although the holdings are not as large as the investment in Apple, they are “significant assets and illustrate our thought processes,” emphasized Buffett.
Both companies will “almost certainly increase” their dividends in 2024, said the star investor confidently. So there’s no reason for Berkshire to make any adjustments to its investments. “We will certainly leave our holdings untouched throughout the year,” he promised. Because, “Could I build a better global business than these two did?” For American Express and Coca-Cola, he confirmed his holding company’s long-term investment and also advised investors: “Once you find a really wonderful company, stick with it. Patience pays off, and a wonderful business can make up for the many mediocre decisions you make cannot avoid balancing.”
Occidental Petroleum remains “expected to remain unlimited”
But in addition to the credit card provider and the soft drink manufacturer, there are a number of other stocks in Buffett’s portfolio that are apparently indispensable for the star investor. He names two more in this year’s letter to shareholders – Berkshire’s stake in these companies is not huge either, but it will “probably be held indefinitely.”
One of Berkshire’s arguably forever holdings is Occidental Petroleum. At the end of 2023, the Buffett Group owned 27.8 percent of the common shares in the oil company and the option for a further increase. This moved Occidental to sixth place among Buffett’s largest holdings in the fourth quarter of 2023. “Although we like our property and the option very much, Berkshire has no interest in buying or managing Occidental,” said Buffett, directly countering emerging speculation about a possible complete takeover by Berkshire.
The star investor also commented on the reasons why Buffett would like to see Occidental Petroleum in Berkshire Hathaway’s portfolio forever in the shareholder letter. Firstly, he likes the company’s extensive oil and gas holdings in the USA. On the other hand, he emphasized Occidental’s leadership role in carbon capture, although the economic feasibility of these initiatives still needs to be proven, said Buffett. “Nobody knows what oil prices will do in the next month, year or decade. But Vicki [Vicki Hollub, CEO von Occidental, Anm. d. Red.] knows how to separate oil from rock, and that is an unusual talent that is valuable to their shareholders and their country” .
Group of Japan stocks planned as a permanent investment
While American Express, Coca-Cola and Occidental are large US holdings of Berkshire Hathaway, another investment that Buffett says has a perpetual horizon comes from Asia.
These are five Japanese stocks that have similarities to Berkshire Hathaway itself, particularly in terms of management style. According to the information, Berkshire each holds a stake of 9 percent in the five companies Itochu, Marubeni, Mitsui, Mitsubishi and Sumitomo, and its conglomerate has committed not to increase the investment above 9.9 percent.
Berkshire invested 1.6 trillion yen in this area, and at the end of 2023 the shares were worth 2.9 trillion yen, Buffett calculates his success, but also referred to the loss in value of the Japanese currency in recent years.
In addition to the shareholder-friendly policy, Buffett also cited a possible door-opening effect for further investments in the region or future partnerships as an advantage of his Japan investments. “Their interests are far broader than ours. And on the other hand, the Japanese CEOs have the certainty that Berkshire always has huge liquid resources that would be immediately available for appropriate partnerships – regardless of size.”
Apple: No shares forever?
In his letter to shareholders, Buffett did not mention by far the largest position in the Berkshire portfolio, the stake in the US technology giant Apple, as an example of an investment that he would probably never sell. It is possible that the iPhone company will have its own capital dedicated to it in next year’s letter, and that Buffett will present investments for eternity from the Berkshire portfolio for the third year in a row.
In the past, the star investor had repeatedly praised Apple and highlighted it as his favorite stock. Apple is simply “a better company than any other we own,” the 93-year-old said last year.
Editorial team finanzen.net
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