As a value investor, Warren Buffett loves to buy quality assets on the cheap. But there is one defeated asset he won’t pick up any time soon: Bitcoin.
The price of the world’s largest cryptocurrency has fallen by more than 35% over the past two months to around $41,700. This could be an opportunity for curious investors who are standing on the sidelines.
A lot of investment icons, such as Cathie Wood and Kevin O’Leary, have been Bitcoin supporters. But Buffett, arguably the most famous investor of our time, is not a fan of him.
“I don’t have any bitcoin. I don’t own any cryptocurrency; I would never do that,” the billionaire told CNBC last year. He previously explained to Yahoo Finance that when you buy crypto, “you don’t have anything that produces anything.”
In other words, Buffett loves assets with obvious physical use. Take a look at his Berkshire Hathaway’s three most important holdings.
Apple is by far Buffett’s largest holding, accounting for more than 40% of Berkshire’s portfolio by market capitalization.
One of the reasons behind this focus is the massive increase in the tech giant’s share price. Over the past five years, Apple shares have risen more than 480%.
Earlier this year, management revealed that the company’s installed active device base exceeded 1.65 billion devices, including more than one billion iPhones. But the company does more than just make smartphones and computers; He built an ecosystem.
While competitors offer cheaper devices, many consumers don’t want to live outside of Apple’s network of highly compatible products and services. This means that with higher inflation, Apple can pass on higher costs to the global consumer base without worrying about lower sales.
The business has been growing at a commendable pace. In the September quarter, revenue was up 29% year over year to $83.4 billion.
After a multi-year bull run, Apple is trading at $172 per share.
Bank of America (BAC)
As the second largest holding in Berkshire’s portfolio, Buffett’s Bank of America has served well.
The stock is up 49% year-to-date — not a bad thing for a traditional leader outside of the tech sector.
While Bank of America doesn’t produce merchandise in the same way Apple does, its important role in our financial system gives stocks intrinsic value.
Bank of America offers a wide range of banking, asset management and other financial and risk management products and services to consumers, small to medium businesses, and large corporations.
And while many companies fear rising interest rates, banks love them. So it should come as no surprise that in today’s environment, banks can return a lot of cash to shareholders.
Bank of America repurchased $9.9 billion of its common stock in the third quarter. In June, the company raised its quarterly dividend rate by 17% to 21 cents per share.
At the current share price, the bank is offering an annualized dividend yield of 1.7%.
American Express (AXP)
American Express shares are up 36% year-to-date, although in the last month they are down about 10%.
Berkshire owns 151.6 million shares in the company, valued at approximately $24.5 billion. This makes the credit card giant the third largest it owns.
Just like Bank of America, American Express offers a basic service. While the use of Bitcoin as a currency remains very limited, Amex payment products and services cater to a wide range of consumers and businesses small and large.
Businesses are usually seen as resistant to inflation. American Express makes most of its money with discount fees; Merchants are charged a percentage of each Amex card transaction. As the prices of goods and services go up, the company gets bigger bills.
In the third quarter, the company’s revenue jumped 25% year-over-year to $10.9 billion.
Berkshire also owns shares of competitors Visa and Mastercard, but Buffett is clearly betting on American Express because those other two positions are much smaller.
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