The Biggest Holding in Warren Buffett's "Secret" Portfolio Is Totally Average


When Berkshire Hathaway publishes its 13F filings each quarter, investors can get a detailed look at the stocks that CEO Warren Buffett’s company owns. Because the Oracle of Omaha has delivered such incredible investing performance, many people pay close attention to the stocks that his company has bought and sold over the last quarter. But only looking at Berkshire’s disclosures won’t show you every stock that the company owns.

The origin of Berkshire’s often-overlooked stock holdings dates back to 1998, when the company acquired reinsurance specialist General Re in a $22 billion deal. As part of the deal, Buffett’s investment conglomerate also acquired subsidiary companies owned by General Re. New England Asset Management (NEAM) was one of these companies, and it has continued to operate as an independent unit that makes investments and manages assets for clients.

Image source: The Motley Fool.

NEAM is a Berkshire Hathaway subsidiary, but the company makes its own holdings disclosures to the SEC — and they aren’t included in Berkshire’s 13F filings. Because of this dynamic, my colleague Sean Williams refers to NEAM as Warren Buffett’s “secret portfolio.”

This often-overlooked consortium of Berkshire holdings includes some big names that aren’t held in the company’s main stock portfolio. For example, Buffett has said that Berkshire won’t invest in Microsoft because he thinks that his friendship with founder and former CEO Bill Gates could be a conflict of interest — but the stock is in NEAM’s portfolio. New England Asset Management also holds positions in Broadcom and Ciscotech stocks that are notably absent from Berkshire’s direct holdings.

But NEAM’s holdings are actually heavily concentrated in one stock that accounts for less than 0.01% of the primary Berkshire Hathaway stock portfolio. Surprisingly, the biggest holding in Buffett’s “secret” portfolio is completely average — but it could have more than tripled your money over the last decade.

Betting big on average

Coming in at roughly 14% of the total portfolio’s weight, the SPDR S&P 500 ETF Trust (SPY 1.05%) is New England Asset Management’s biggest holding by far. The exchange-traded fund (ETF) aims to mirror the performance of the S&P 500 by matching its composition. It’s the world’s largest and oldest ETF and a go-to option for investors seeking a fund that will track with the performance of the benchmark index.

The fund is weighted toward companies with large market caps, which means that companies with larger sizes account for a greater share of total holdings. As a company’s valuation grows or shrinks, its composition percentage in the fund will shift accordingly.

The table below breaks down the top 10 largest holdings in the SPDR S&P 500 ETF Trust as of the most recent update from State Street.

Name Shares Held Weight
Microsoft 87,979,177 7.36%
Apple 173,058,594 6.77%
Nvidia 29,238,409 3.73%
Amazon 107,648,555 3.54%
Alphabet Class A Stock 70,054,357 2.19%
Meta Platforms
26,274,687 2.15%
Alphabet Class C Stock 58,959,689 1.86%
Berkshire Hathaway Class B Stock 21,537,446 1.68%
Broadcom 5,195,756 1.29%
Tesla 32,720,678 1.27%

Data source: State Street. Fund data from Jan. 29.

Investing in the SPDR S&P 500 ETF is a cost-effective way to gain exposure to a wide range of the world’s largest U.S.-based companies. The ETF has an expense ratio of slightly under 0.01%, which is quite low, and the seemingly average fund has served up returns that might surprise you.

“Consistently average” could help make you rich

Owning an ETF that tracks the S&P 500 is a way to minimize risk. On the other hand, investors don’t necessarily have to forego solid returns just because risk is relatively low. As Buffett has said, “It is not necessary to do extraordinary things to get extraordinary results.”

SPY Total Return Level Chart

SPY Total Return Level data by YCharts

Over the last decade, the SPDR S&P 500 ETF has delivered a total return of 228.5% after adjusting for dividends and fund expenses. The performance is virtually identical to the total return of the S&P 500 index across the stretch.

Simply investing in the most popular ETF for tracking the benchmark index would have allowed you to more than triple your money over the last decade. Notably, Buffett has said: “In my view, for most people, the best thing to do is to own the S&P 500 index fund.”

While investors may want to try to do better than average by building a portfolio that includes other stocks and funds, it’s hard to argue against the Oracle of Omaha’s belief that people will be well served by owning an ETF that tracks the benchmark index.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Cisco Systems, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.



Source link

About The Author

Scroll to Top