Buffett's Favorite 4 Sectors: ETFs in Focus
Billionaire investor Warren Buffett is known for his winning investing style. Many want to mirror the legend’s investing strategy and emerge a winner. Buffett’s company Berkshire Hathaway’s latest 13-F filing showed that Berkshire’s $313 billion portfolio was invested in 45 companies in the third quarter of 2023. Berkshire was a net seller of about $5.3 billion in stocks during the quarter.
The top 5 holdings make up about 79% of the total portfolio. These five stocks are Apple (AAPL), Bank of America BAC, American Express AXP, Coca-Cola KO, and Chevron CVX. Apart from these, Berkshire has significant weights in Occidental Petroleum OXY and Kraft Heinz KHC.
With this, Buffett’s portfolio is heavy on the below-mentioned sectors and ETFs. Let’s delve a little deeper.
Information Technology
Berkshire Hathaway has 50% of weights in Apple, up from about 39% in the fourth quarter of 2022. Apple shares surged 51.7% so far this year (as of Nov 17, 2023). Apple's Services business confirmed consistent growth, offsetting declining hardware sales.
The Services portfolio, which includes revenues from cloud services, App store, Apple Music, AppleCare, Apple Pay, and licensing and other services, has now become the cash cow. The services segment may make up for falling iPhone sales (read: What Tepid Outlook? Buy Apple ETFs for These 5 Factors).
For 2024, Apple anticipates potential growth opportunities with new MacBooks featuring M3 chips and the launch of the Vision Pro headset. Apple’s focus on augmented reality/virtual reality (AR/VR) technologies presents growth opportunities in the long haul. Apple-heavy ETF iShares U.S. Technology ETF IYW has a Zacks Rank #1 (Strong Buy).
Financials
Buffett’s favorite America Express has exposure to ETFMG Prime Mobile Payments Fund IPAY while Bank of America is heavy on the likes of iShares U.S. Financial Services ETF IYG.
Digital payments have been in the front and center of consumer behavior lately. Apart from showing an increased interest in online shopping, customers are resorting to digital payments to clear their bills. Even, merchants and utility providers are increasingly advocating the same. This explains Buffett’s interest in this field.
As far as banking stocks are concerned, though regional bank weakness could spell trouble to banking stocks, big banks still have strength. Higher rates and decent loan demand will aid net interest income (NII). The opening of financial centers and improving digital capabilities will likely bolster the top line.
Energy
Although Berkshire has cut the Chevron holding for four successive quarters, Chevron still remains Berkshire’s fifth-largest publicly traded holding, worth over $18 billion. More Occidental Petroleum shares were acquired in October, indicating that Berkshire is bullish on the energy sector. Berkshire now controls 25.9% of the outstanding shares in Occidental, per Forbes article.
Chevron is heavy on energy ETFs like Energy Select Sector SPDR Fund XLE and iShares U.S. Energy ETF IYE. Occidental Petroleum has focus on First Trust Nasdaq Oil & Gas ETF FTXN.
Operating backdrop for the energy sector is also upbeat. Chances of a recession in several economies is also lower (which indicates decent demand for energy), though a soft landing is expected in many geographies.
Consumer Staples
This is a safe sector as it is non-cyclical in nature. The consumer staples sector tends to do well even amid economic growth slowdown and high inflation. Since consumers have to buy staples products even if they cut back on their discretionary spending, big manufacturers of food and beverages normally have the power to pass on the increase in costs to customers.
Buffett’s favorite Coca-Cola has substantial weight in ETFs like iShares U.S. Consumer Staples ETF IYK. Kraft Heinz has a focus on Invesco Dynamic Food & Beverage ETF PBJ.
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Bank of America Corporation (BAC) : Free Stock Analysis Report
Chevron Corporation (CVX) : Free Stock Analysis Report
CocaCola Company (The) (KO) : Free Stock Analysis Report
American Express Company (AXP) : Free Stock Analysis Report
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
Advance Auto Parts, Inc. (AAP) : Free Stock Analysis Report
Energy Select Sector SPDR ETF (XLE): ETF Research Reports
Kraft Heinz Company (KHC) : Free Stock Analysis Report
iShares U.S. Energy ETF (IYE): ETF Research Reports
iShares U.S. Financial Services ETF (IYG): ETF Research Reports
iShares U.S. Consumer Staples ETF (IYK): ETF Research Reports
iShares U.S. Technology ETF (IYW): ETF Research Reports
Invesco Food & Beverage ETF (PBJ): ETF Research Reports
ETFMG Prime Mobile Payments ETF (IPAY): ETF Research Reports
First Trust NASDAQ Oil & Gas ETF (FTXN): ETF Research Reports
