Berkshire’s Portfolio-within-a-Portfolio
While some headlines claim that Apple accounts for half of Buffett’s portfolio, the reality is different. As of the third quarter of 2023, Berkshire’s assets comprised almost $319 billion in stocks, with Apple representing nearly half of the equity investment line, or around $157 billion. However, these assets only consider Berkshire’s investments in equity securities and ignore other significant components of Berkshire’s diverse portfolio.
Including the insurance business, which constitutes the bulk of Berkshire’s listed assets, there are $152 billion in cash, short-term Treasury securities, and an additional $50 billion invested in longer-term fixed-income securities, Kraft Heinz, and Occidental Petroleum. When factoring in these assets, Berkshire’s investment in Apple drops to around 30% of the portfolio.
Looking solely at the insurance business overlooks the core operations driving Berkshire Hathaway. The company has segregated its holdings in railroad, utility, and energy sectors on a separate section of the balance sheet.
This section includes a 92% stake in Berkshire Hathaway Energy, encompassing the MidAmerican Energy regulated utility, as well as an 80% controlling interest in truck stop operator Pilot Travel Centers.
When combining the listed assets of the railroad, utility, and energy segment, along with tangible and intangible assets within the insurance business, Berkshire’s assets’ book value totals nearly $1.02 trillion. Therefore, Apple’s position represents only around 15% of the overall value, not the widely presumed 50%.
It’s worth noting that while Berkshire is required to update the book value of its publicly traded stock holdings according to market value each quarter, there is no such automatic adjustment for wholly owned businesses.
For example, BNSF, the railroad subsidiary, reported $92.6 billion in total assets, $5.72 billion in revenue, and $1.7 billion in net income. These figures are comparable to Union Pacific’s $5.94 billion in sales and $1.53 billion in net income, but Union Pacific’s market cap is nearly $150 billion.
When making similar adjustments for other wholly owned businesses, Berkshire Hathaway’s current market value could approach $1.5 trillion, making the Apple position roughly 10% of the total.
An investment position constituting 10% of a company’s assets is undoubtedly significant. When considering the entirety of Berkshire’s holdings and updating their valuations to reflect market value, Apple likely represents a similar proportion of the company. However, it is crucial not to overstate Apple’s importance or draw incorrect conclusions about Buffett’s broader investment philosophy based solely on this position.