39% of Warren Buffett's Portfolio Is Invested in These 3 Tech Giants – The Motley Fool

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Warren Buffett is one of the greatest investors of our time. Berkshire Hathaway (BRK.B 1.50%), the conglomerate he has headed for decades, has trounced the broader market since he took it over in 1965.
A big part of Berkshire’s financial success has also been driven by its large equities portfolio, which is now valued at more than $317 billion. For decades leading up to the 21st century, Buffett and Berkshire invested heavily in the banking, insurance, energy, media, and consumer staples sectors.
But more recently, Buffett and other members of Berkshire’s investing team have also waded into the fast-growing tech sector, and three big tech stocks now account for roughly 39% of Berkshire’s portfolio. Of course, one of these stocks holds the lion’s share of Buffett’s tech investments.
It only took a few years from the time that Berkshire Hathaway first took a stake in Apple (AAPL 1.03%) for the consumer tech giant’s ballooning stock price to turn it into the conglomerate’s largest equity position.
Buffett first apparently became interested in Apple after seeing how upset one of his friends got after losing his iPhone one night. This showed him just what an incredible brand Apple had created, a quality he looks for in all of his major holdings. Brand loyalty is huge because it gives a company pricing power, especially if people feel like they need a product in their daily lives as they do with several of Apple’s products.
The broad tech sector sell-off pulled down Apple’s stock price this year, and Berkshire Hathaway bought the dip during the first half. Despite the sell-off of Apple’s stock this year, Berkshire bought the dip in the first half of the year. Apple has struggled with supply chain issues and the slowdown in China this year due to COVID-19. But the company is still printing money, bringing in $24 billion of operating cash flow in its most recently reported quarter. Apple also buys back a lot of stock, which is something Buffett appreciates.
In 2022’s third quarter, Berkshire Hathaway opened a new stake in Apple’s key chipmaker, Taiwan Semiconductor (TSM 3.09%), also known as TSMC. It’s a fairly large stake, too — only 13 stocks in Berkshire Hathaway’s portfolio account for 1% or more of the total portfolio’s value.
It’s possible that Apple was the reason TSMC wound up on Buffett’s radar. TSMC manufactures chips for several of Apple’s flagship products, and the iPhone maker accounted for about a quarter of TSMC’s revenue in 2021. But TSMC also makes chips for an array of applications in a number of other industries, including the Internet of Things (IoT), the auto sector, and digital consumer electronics. In the third quarter, its IoT revenue grew by 33% from the prior quarter.
Taiwan Semiconductor’s stock has slumped by more than 42% this year, likely due to slowing economic growth in China and a murky outlook for chip demand. But in the third quarter, TSMC still grew its revenue by close to 48% year over year and had a return on equity of nearly 43%.
Computer and printer maker HP (HPQ 1.76%) was one of the pioneering start-ups of Silicon Valley back in the day. But today, it’s viewed quite differently by the market — less as a fast-growing tech company and more as a stable incumbent.
Berkshire Hathaway began purchasing shares in the first quarter of 2022 and continued to buy more before selling a portion of its shares. It still holds a sizable position in the tech company.
HP recently embarked on a three-year “future ready” plan under which management plans to lay off between 4,000 and 6,000 people by the end of its fiscal 2025. Those job cuts are part of a bigger plan for HP to build out its product portfolio and position itself for sustainable growth.
But HP is very shareholder-friendly. In its fiscal year 2022, which ended Oct. 31, the company returned $5.3 billion to its investors through share repurchases and dividends. It also has a dividend policy yielding about 3.7% at HP’s current share price. We know Buffett and Berkshire love investing in companies that return a lot of capital to shareholders.
Still, given Berkshire’s recent sale, it will be interesting to see whether the company was simply right-sizing its position in HP or is planning to exit the stock eventually. Either way, Buffett’s holding amounts to 11.9% of the current float, making Berkshire the printer company’s largest shareholder. As a result, investors should take this massive investment seriously.
Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, HP, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway, long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway, short January 2023 $265 calls on Berkshire Hathaway, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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