Warren Buffett’s Top 4 High Conviction Stocks: Overview for Investors

Berkshire Hathaway, which is led by value investor Warren Buffett, released its second-quarter earnings report on Aug. 7. Berkshire posted a robust rebound in earnings and the conglomerate’s equity positions continued to pay off handsomely.

Berkshire disclosed that 69 percent of its equity holdings are concentrated in just four stocks. Here are Buffett’s top four high conviction stocks.

As of June 30, Berkshire Hathaway’s portfolio of publicly traded companies was valued at about $307.9 billion. Apple, Berkshire's largest holding, had a market value of $124.3 billion. American Express and Bank of America are the other top holdings in Berkshire’s portfolio. Apart from the two stocks, the conglomerate has reduced its exposure to the financial sector. Berkshire exited its stakes in JPMorgan Chase and PNC Financial at the end of 2020 and significantly reduced its investment in Wells Fargo.

Coca-Cola, Buffett's long-term bet, had a market value of $21.6 billion as of June 30. The consumer behemoth continued to underperform the broader market with the stock up only 3 percent so far in 2021 after a flat year in 2020.

Apple accounts for a little under half of Berkshire’s equity portfolio value. The massive Apple investment was critical in helping the conglomerate in weathering the COVID-19 pandemic, since the company's other pillars, including insurance and energy, suffered a significant blow. Apple stock has risen 10 percent so far in 2021, following an 80 percent rise in 2020. Investors rushed to mega-cap growth firms that benefited from the stay-at-home trend in 2020.

Buffett hasn't invested in Tesla stock. He might not invest in it in the near future due to the electric vehicle company’s skyrocketing valuations. However, he invested in General Motors in the past.

In the second quarter, Berkshire posted operating earnings (excluding investment gains and losses) of $6.7 billion, which represents a growth of 21 percent YoY. The overall earnings, which reflect Berkshire’s fluctuating equity holdings, jumped 6.8 percent YoY to $28 billion in the quarter.

Buffett continued to aggressively buy back Berkshire shares instead of making large acquisitions. In the second quarter, Berkshire repurchased $6 billion of its own shares, which brought the YTD total to $12.6 billion. In 2020, the conglomerate repurchased $24.7 billion of its own stock. Berkshire's cash pile was at $144.1 billion as of June 30—unchanged from the previous quarter and still near a record despite the company's significant repurchase plan.

As the economy continues to recover from the COVID-19 pandemic, with more commodities and goods being carried across the country, Berkshire's Burlington Northern Santa Fe (BNSF) train stands to gain. Railroad, utility, and energy earnings increased by more than 27 percent YoY to $2.26 billion in the quarter.

The earnings results came as Berkshire stock wiped out all of its 2020 losses and reached a new high over time. So far in the third quarter, Berkshire’s class B shares have returned 2 percent, which brings its YTD gain to more than 23 percent.