Warren Buffett’s investment approach has proven wildly successful over time. Berkshire Hathaway‘s (NYSE: BRK.A) (NYSE: BRK.B) stock performance has consistently outpaced most major market indices since Buffett took control in 1965. His strategy involves concentrating investments in companies with strong business models and ultra-long-term growth trajectories.

Three of Buffett’s largest holdings stand out for their stability and growth potential in the current market. These companies — Apple (NASDAQ: AAPL), Bank of America (NYSE: BAC), and American Express (NYSE: AXP) — represent a significant portion of Berkshire Hathaway’s stock portfolio and are well-positioned to deliver above average returns for shareholders. Read on to find out more.

Image Source: The Motley Fool.

Apple: A wide-moat tech giant

Apple represents a substantial 43.5% of Berkshire’s stock portfolio, underscoring Buffett’s confidence in the tech giant. While the stock’s dividend yield is modest at 0.43%, its price-to-earnings ratio of 34.8 reflects high market expectations.

Analysts are optimistic about Apple’s future, particularly with the anticipated rollout of Apple Intelligence. This development is expected to significantly boost earnings and revenue. Forecasts suggest a 15.6% increase in top-line growth over 2024 and 2025, an impressive projection for a mature company with a $3.44 trillion market cap.

Apple’s strength lies not just in its hardware but also in its software and services segment, which generated $85.2 billion in revenue in fiscal 2023, accounting for 22% of total revenue.

The company’s ecosystem, encompassing cloud services, digital ads, Apple Pay, Apple Card, Apple Music, Apple TV+, and the App Store, creates a robust platform for customer retention and profitability.

In early May 2024, Apple made headlines with a $110 billion share repurchase authorization, the largest in U.S. history. While this is a budget rather than a guarantee, Apple’s track record of significant buybacks — more than $20 billion in three of the past four quarters and $81.82 billion over the past year — suggests strong potential for shareholder value creation.

Bank of America: A tier 1 bank

Bank of America stock accounts for 10.5% of Berkshire’s stock portfolio. The financial services company pays a generous 2.25% annualized yield and shares trade at 15 times trailing earnings, well below the S&P 500‘s 27.5 price-to-earnings ratio. Wall Street is forecasting top-line growth of over 16% over the course of 2024 and 2025.

Bank of America is poised to succeed on a nationwide scale, and there seems to be no structural reason it can’t be one of the strongest bank franchises going forward. Bank of America is seeing exceptional digital adoption, and there still seems to be something left in the tank for expense savings, potentially helping the bank better absorb costs associated with inflation.

American Express: A core Buffett holding

American Express comprises 9% of Berkshire’s stock portfolio. The company trades at 18 times trailing earnings, with analysts forecasting a 17% revenue surge over the next two fiscal years.

American Express’s key advantage is its closed-loop network, allowing it to capture more revenue per transaction than many competitors. This unique model enables the company to act as both card issuer and payment processor, potentially leading to higher profit margins.

The company has shown strong performance in net interest income and loan growth. High card member spending and successful expansion among younger consumers have driven recent revenue increases.

American Express continues to adapt to the shift toward digital payments, investing in its mobile app and online services. The company’s focus on affluent customers and businesses provides some insulation against economic downturns.

American Express faces competition from traditional banks and fintech start-ups. However, its strong brand recognition, customer loyalty programs, and unique business model continue to set it apart. The company’s ongoing innovation and service expansion maintain its significance in Buffett’s portfolio, blending established success with growth potential.

Should you invest $1,000 in Berkshire Hathaway right now?

Before you buy stock in Berkshire Hathaway, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $722,626!*