What Warren Buffett Can Teach You About His Top 3 Holdings | Personal finance

(Stefon Walters)

There’s a reason Warren Buffett is often considered one of the – if not there — Greatest Investors to Ever Live: He’s very good at it. Tens of billions of good dollars. Due to his success, people often turn to his portfolio (via his company Berkshire Hathaway) to influence many of their investment decisions.

Berkshire Hathaway’s portfolio is packed with blue-chip stocks, including its top three holdings: Apple, Bank of Americaand Coca Cola. They each represent 41.3%, 10.2% and 7.2% of Berkshire Hathaway’s portfolio respectively (as of March 31, 2022).

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If you’re wondering why a company with 50+ holdings has 58.7% of its portfolio in three stocks, it’s because blue chip stocks have stood the test of time and proven to be great long-term investments, regardless of general economic conditions.

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Blue chip companies find a way to survive

For a company to be considered top notch, it has to be worth billions and be one of the top leaders in its industry, and you usually don’t get there unless you have a lot of resources. Useful resources during bear markets, recessions and everything in between. Warren Buffett has always preached long-term investing, and part of that is understanding that tough economic times are bound to happen, and if companies can’t survive them, they’re probably not very good long-term investments. .

Since the 1980s, Apple, Bank of America, and Coca-Cola have weathered Black Monday (1987), the dotcom bubble crash (late 1990s/early 2000s), the Great Recession (2008), and the onset of stages of the COVID-19 pandemic (2020). Not only have they been successful, but they have also been valuable investments ever since.

During the dot-com bubble in 2000, Apple traded at around $150 (the price then, not today’s price after stock splits over the years) and dropped to $13 in 2002 Since then, it has provided some of the best returns we have ever seen in the history of the stock market.

From November 2006 to March 2009, Bank of America shares fell more than 94%. Over the next decade, the stock increased by more than 750%. At the start of 2020, Coca-Cola saw its stock price drop by more than 36%. In just over two years since then, the stock has grown more than 60%.

Keep your eyes on the long-term prize

It can be hard to convince yourself to focus on the long term when you see your portfolio plummeting before your eyes during bear markets and tough stock market times, but it’s necessary. If you’re investing for the long term – and you should be – you have to believe that the companies you invest in will find ways to adapt to the times and deliver great long-term results.

One thing that Apple, Bank of America, Coca-Cola, and many other blue chip companies have in common is that they find a way to adapt to broader economic problems that they don’t have themselves. same created. Apple didn’t cause the dot-com bubble, Bank of America wasn’t the main culprit in the Great Recession, and Coca-Cola didn’t cause a global pandemic. Yet each time they had the resources available to adapt and weather the storm.

That’s why, like Warren Buffett, you should rely on blue-chip companies to represent the bulk of your portfolio. There is no foolproof investment, but blue chip stocks are as good as they come.

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Stefon Walters holds positions at Apple. The Motley Fool holds positions and recommends Apple and Berkshire Hathaway (B shares). The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long January 2024 $47.50 calls on Coca-Cola, long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short calls of $265 in January 2023 on Berkshire Hathaway (B shares) and short calls of $130 in March 2023 on Apple. The Motley Fool has a disclosure policy.

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