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Here's How Warren Buffett's Stock Portfolio Has Changed Over the Past 2 Years

Matthew Frankel, The Motley Fool

Warren Buffett has famously said in regard to Berkshire Hathaway's (NYSE: BRK-A) (NYSE: BRK-B) stock portfolio that "our favorite holding period is forever." Buffett's ideal stock is one that he can buy and whose business continues to grow reliably over time.

Having said that, Buffett does buy and sell stocks regularly, and Berkshire Hathaway's portfolio has changed considerably over the years. Even over the past few years, there have been some major additions and subtractions among Berkshire's largest stock positions.

Warren Buffett speaking to the media.

Image source: The Motley Fool.

Berkshire's top 10 holdings, 2015 to 2017

Berkshire's stock portfolio consists of more than 45 positions but is heavily weighted toward its largest holdings. So here's a look at how Berkshire's "top 10" stocks have changed since the third quarter of 2015.

Rank

Q3 2015

Q3 2016

Q3 2017

1

Wells Fargo

Kraft Heinz

Wells Fargo

2

Kraft Heinz

Wells Fargo

Kraft Heinz

3

Coca-Cola

Coca-Cola

Apple (NASDAQ: AAPL)

4

IBM (NYSE: IBM)

IBM

Coca-Cola

5

American Express

American Express

Bank of America (NYSE: BAC)

6

Phillips 66

Phillips 66

American Express

7

Procter & Gamble

U.S. Bancorp

Phillips 66

8

Wal-Mart (NYSE: WMT)

Moody's

IBM

9

U.S. Bancorp

Charter Communications

U.S. Bancorp

10

DaVita HealthCare

DaVita HealthCare

Moody's

Data source: Berkshire Hathaway 13-F filings.

Many of the major positions have remained the same. The Kraft Heinz, Coca-Cola, and American Express positions haven't changed much, to name a few examples. However, there have been a few big changes over the past couple of years that investors should be aware of.

Shifting to a new tech stock

Buffett is known for his avoidance of the tech sector, but he has made exceptions for well-established tech companies with big competitive advantages. For the past several years, this has been IBM, which until 2017 was one of Berkshire's "big four" stocks.

However, Buffett has been selling off Berkshire's IBM stake, saying that the competition in its industry has become more intense and that he's revalued the stock downward.

Instead, Buffett has been accumulating a position in Apple, which, thanks to several additions to the position and an all-time high for the stock, has become Berkshire's third largest stock position. Buffett loves the "stickiness" of Apple's product line, as well as the business' fundamentals, and so far, it has proved to be a wise investment.

A new bank stock in the top 10

Another addition to the top five is Bank of America, although this isn't exactly a new investment.

In the wake of the financial crisis, Buffett invested $5 billion in Bank of America preferred stock, and as part of the deal, he received warrants to buy 700 million shares of the bank for just $7.14. In other words, Buffett had the ability to swap his preferred stock for 700 million shares of common stock.

In his annual letter to shareholders, Buffett said that if Bank of America's dividend was raised to a point where Berkshire could generate more income by owning common stock, the warrants would be exercised. Well, Bank of America raised its dividend beyond Buffett's threshold, so Berkshire is now Bank of America's largest shareholder.

One move Buffett got wrong

One stock that appears in the top 10 in 2015 but not again is Wal-Mart. In the third quarter of 2015, Berkshire owned 56.2 million shares of the retail giant, with a total value of more than $3.6 billion, but the company decided to sell most of its position during 2016. Now, the company owns just over $130 million in Wal-Mart stock.

While Buffett referred to Wal-Mart as a "fabulous company" even after he sold Berkshire's shares, Buffett said the retail business had become too tough, and that the "online thing" was very difficult to figure out. Buffett believed that Wal-Mart would experience continued success, but he wasn't sure if the company could successfully compete with Amazon.com and other e-commerce headwinds.

It appears that Buffett may have been wrong to doubt Wal-Mart's ability to take on Amazon. In fact, in Wal-Mart's most recent earnings report, the company reported 50% year-over-year growth in e-commerce sales and its best same-store-sales growth in more than five years.

The market seems to agree. Wal-Mart's stock price is up nearly 40% so far in 2017, meaning that based on how much of Wal-Mart's stock Berkshire owned two years ago, Buffett missed out on more than $1.5 billion in gains.

Smaller stock moves

Berkshire's portfolio is extremely top-heavy -- in fact, the company's five largest holdings are worth more than its other 40 or so combined. So it makes sense that Berkshire's largest stock holdings get most of the attention. After all, a big move in these stocks could significantly affect the company's market value.

However, while Buffett and his team haven't been too active with its largest stocks, there have been lots of smaller moves over the past two years. Just to name a few examples, Berkshire sold its stakes in Suncor Energy, AT&T, General Electric, and Chicago Bridge & Iron and has added Synchrony Financial, Store Capital, and stakes in all four major U.S. airlines.

More moves to come?

Berkshire has been relatively quiet in the stock market lately. With the exception of the Apple investment and the conversion of its Bank of America warrants, the company hasn't made any stock investments recently that would be considered big by Berkshire's standards. Stock valuations are high, and Buffett and his team have said that it's been difficult to find attractive investments.

However, Berkshire is sitting on a massive stockpile of cash -- $109.5 billion as of the end of the third quarter -- so it's fair to assume that the company is on the lookout for ways to deploy that cash. So we could certainly see some major stock moves over the next two years, particularly if stock valuations start to come down.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Matthew Frankel owns shares of American Express, Apple, AT&T;, Bank of America, and Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Amazon, Apple, Berkshire Hathaway (B shares), and Moody's. 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 American Express and Synchrony Financial. The Motley Fool has a disclosure policy.