Most of Berkshire Hathaway's (NYSE: BRK-A) (NYSE: BRK-B) major stock holdings reported earnings before this week. Bank stocks, which are a big component of the conglomerate's stock portfolio, generally report at the start of earnings season, which was a couple of weeks ago. Other major Berkshire stocks like Coca-Cola and Phillips 66 also reported earnings prior to this week.
However, two major Berkshire stocks that just reported earnings posted some pretty excellent results. Between Apple's (NASDAQ: AAPL) strong report on Tuesday and Kraft Heinz's (NASDAQ: KHC) expectation-topping report on Friday, Berkshire's stock portfolio gained $4.6 billion in value.
Image source: The Motley Fool.
Price on Monday, 7/30
Data sources: Berkshire Hathaway SEC filings and TD Ameritrade. Current price as of 8/3/18 at 10 a.m. EDT.
The first trillion-dollar U.S. company could still have lots of room to grow
Apple's earnings were so strong that they catapulted the company past the $1 trillion market cap milestone -- the first U.S. company to do so. So, although Berkshire owns less than 5% of Apple's outstanding shares, it is the largest stock position in its portfolio by a wide margin.
For the quarter (it was Apple's fiscal third quarter), revenue soared by 17%, and earnings per share spiked by a staggering 40% on a combination of revenue growth, tax reform, and aggressive share repurchases. iPhone sales grew by 20%, and the average selling price of $724 handily surpassed expectations.
Service revenue, which includes things like Apple Music, App Store, Apple Pay, and more, grew by an impressive 31% to $9.5 billion. Services are now Apple's second-highest revenue component, behind the iPhone, and it's seen by many analysts as the most important part of Apple's growth story going forward. Wearables could also be a major growth driver going forward; although they still make up a relatively tiny portion of Apple's revenue, sales of wearable products (Apple Watch, AirPods, Beats) grew by 60% year over year.
Even after its post-earnings pop, Apple trades for just 17.7 times the current fiscal year's earnings (ending in September). This is cheap for a company growing revenue at a double-digit rate and with a 12-figure net cash position.
Berkshire's largest stock position by percentage ownership
Thanks to the accumulation of Berkshire's Apple investment and the strong performance of some of Berkshire's large bank stock positions, Kraft Heinz isn't Berkshire's largest stock investment by market value, as it once was. In fact, after losing roughly one-third of its value over the past year, Kraft Heinz is down to being No. 4.
However, Kraft Heinz is still the largest stake Berkshire owns in its stock portfolio, as a percentage of the company, with 26.7% of the food and beverage giant's outstanding shares.
Kraft Heinz' second-quarter results beat expectations on the top and bottom lines. Adjusted EPS of $1.00 per share handily surpassed the $0.92 analysts had been looking for, and revenue of $6.69 billion was more than $100 million more than was expected.
Perhaps more significantly, management seems rather optimistic going forward. In the company's press release, CEO Bernardo Hees said, "we expect our profitability to improve by year-end, with further momentum into 2019."
Could the actual gains be even greater?
One important thing to keep in mind is that the data discussed here is based on Berkshire's stock positions at the end of the first quarter, on March 31. While it's fairly certain that the Kraft Heinz stake hasn't changed, I wouldn't be at all surprised if Warren Buffett decided to add to Berkshire's already-massive Apple investment.
Based on Buffett's comments after he revealed the higher stake in the first quarter, as well as Berkshire's large (and growing) cash position, it's not out of the question that more Apple stock could be in Berkshire's portfolio as you're reading this. However, we'll have to wait until Berkshire's second-quarter 13-F is released in mid-August before we'll know for sure.
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Matthew Frankel owns shares of Apple and Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.