NOTE: We are not professional financial advisors, but we do our best to share resources for general education. We are not suggesting any particular company shares mentioned in this article. Rather, we are simply listing examples to showcase how Berkshire Hathaway made their investing decisions in the past. The portfolio assets highlighted in this article are valid as of May 2023, and have not been updated since.

If you're wondering how Warren Buffett built up the $300 billion Berkshire Hathaway portfolio, the answer is quite simple. He's a long term investor - but not just any long term investor. The Oracle of Omaha grew the holdings of his conglomerate through a unique approach called ‘value investing’.

And the best part is, you don't have to be the Oracle of your hometown to start building toward financial independence. In this article, we'll examine Berkshire Hathaway’s portfolio and its investing strategy that has made it a winner for many years. We'll also discover what lessons first-time investors can learn to build a simple, long term wealth journey.

Overview of Berkshire Hathaway

Believe it or not, Berkshire Hathaway started out as a textile manufacturing company back in 1839. In the early days, the company produced textiles such as cotton and wool. It had a hard time competing with cheap imported products and had financial troubles for a few years. The company operated under different names until Berkshire Hathaway was born in 1955.

Enter Warren Buffett. It's impossible to talk about Berkshire Hathaway without mentioning his investing genius. In 1965, a young Mr. Buffett saw an opportunity to buy Berkshire Hathaway and turn it around. He began buying up shares and soon became the largest shareholder.

Over the years, the struggling textile company transformed into a diversified conglomerate with partial ownership of successful companies. Mr. Buffett used the money from the insurance operations to build Berkshire Hathaway's portfolio which did well for a long time. The rest, as they say, is history.

Berkshire Hathaway has been successful because of its culture of honesty and openness. Mr. Buffett leads by example and this reflects in the way he runs the annual shareholder meetings. Shareholders can ask questions and hear from Mr. Buffett himself and other executives at the popular annual event.

The Oracle of Omaha is well-liked for his folksy personality and down-to-earth approach to investing. He makes complicated concepts simple by using simple examples and analogies. His way of talking has also helped people learn more about investing and trust Berkshire Hathaway.

Berkshire Hathaway’s investing strategy

Berkshire Hathaway is a heavyweight in investing with over $600 billion in market value. They have a solid history of doing better than the market in the long run. In fact, over the past 55 years since Warren Buffett took over, Berkshire Hathaway reported an average annual return of 20%. It outshone the 10.2% return of the S&P 500 index over the same period.

However, what sets Berkshire Hathaway apart from the competition is Mr. Buffett’s unique approach to investing.

Let’s break it down further.

• At the heart of Mr. Buffett's investing philosophy is the concept of value investing. Berkshire Hathaway likes to buy shares cheaper than what the price should be. According to Mr. Buffett, a company's real value isn't always shown in its share price. He invests with the hope that the shares will increase later when the market realises how valuable they really are.

This approach requires discipline and deep understanding of the companies being invested. Mr. Buffett also shows willingness to go against the herd and buy shares that are out of favour with the market. He believes that finding and holding onto undervalued companies can create better profits in the future.

• Mr. Buffett is famous for being patient and disciplined when he invests. Instead of trying to make quick money, Mr. Buffett and his team buy shares and hold onto them for a long time. They do this to allow the power of compounding to do its work of multiplying the returns. His famous quote "our favourite holding period is forever" shows how much he believes in long term investing. This strategy has helped Berkshire Hathaway earn a lot of money over the years.

• Berkshire Hathaway's strategy is to look for companies with a special advantage that keeps them safe from competition. Mr. Buffett likes to call this advantage a "moat". A moat could be a strong brand, a big share of the market, raving fans, or unique technology. Having a moat helps a company keep making money and remain successful. Companies such as Coca-Cola or Procter & Gamble might have an advantage that makes it challenging for rivals to enter the market. In this instance, the popularity of their brands is their moat. Because of this advantage, these companies are more likely to be steady and profitable in the long run.

• Mr. Buffett is known for avoiding companies with debt and investing in ones with strong cash flow. He likes companies that have a history of making extra money they can give to shareholders. This distributable cash can come in the form of dividends.

Of course, Berkshire Hathaway has had its fair share of missteps over the years. However, the company's long term and simple approach to investing has proven to be a winning strategy. It’s one that many investors have sought to emulate.

Berkshire Hathaway’s investment portfolio

Lots of people who want to invest look at how Berkshire Hathaway source ideas for their own investment strategy. So, what kinds of investments have been in Berkshire Hathaway's portfolio in the past?

Here are some examples:

1.Bank of America Corp. (BAC) - Berkshire Hathaway invested in Bank of America because the bank ran a stable balance sheet and earned impressive revenue. Warren Buffett thought that Bank of America could handle tough times and emerge stronger. He was right - Bank of America's share price surged after Berkshire Hathaway invested during the 2011 debt-ceiling crisis.

2.Procter & Gamble Co (PG) - Berkshire Hathaway’s portfolio consists of companies that have popular brands and appeal to consumers. Procter & Gamble Co is among them, being one of the biggest consumer goods companies globally. Mr. Buffett believed that the company has a strong business plan for creating and growing a range of different products. He first invested in 2005, and it has done well ever since.

3.Apple Inc. (AAPL) - In 2016, Berkshire Hathaway bought 9.81 million shares of Apple, which were worth around $1.1 billion at that time. Since then, the company has been buying even more shares and now owns over $150 billion worth of apple shares as of 2023.

This came as a surprise because Mr. Buffett had a history of avoiding tech shares. However, he was attracted to Apple because it maintains a well-known brand, loyal customers, and earns steady cash flow.

4.Coca-Cola Co. (KO) - Coca-Cola has long been one of the biggest positions in Berkshire Hathaway's portfolio. Mr. Buffett bought shares in the company for the first time in 1988, praising its recognisable brand and steady earnings growth. He also appreciates Coca-Cola's pervasive cultural presence around the world. Mr. Buffett has even admitted to consuming large amounts of Coca-Cola himself.

5.Visa (V) - Berkshire Hathaway also invested in companies that deal with electronic payments, like Visa. Mr. Buffett thinks that electronic payments will become even more popular in the future. Berkshire Hathaway invested in Visa in 2011, and Visa's share price shot up since.

These companies all have one thing in common: they have long-lasting competitive advantages. Mr. Buffett searches for companies that have a strong brand and business model, devoted customers, and forward-thinking leadership. He also prefers companies that have a history of returning some of their excess cash flow to shareholders through dividends or share buybacks.

Of course, investing in the same shares as Berkshire Hathaway won't be the right choice for everyone. We're also not suggesting any specific companies mentioned here. But we admire the way Berkshire Hathaway approaches investing.

"So, what can I learn from Berkshire Hathaway’s portfolio and investing strategy?"

You might be wondering: "what can average investors take away from all the information above? How can we use these lessons to improve our own investing strategy?"

Below are the insights you can consider:

Take a long term approach

Berkshire Hathaway's portfolio is a great example of long term investing. Mr. Buffett likes to hold the companies in his portfolio for a long time. He said himself that his favourite holding period is "forever.” Why? He believes that his investments can stand the test of time and are poised for long term growth.

To succeed in investing, think about the future, not just what's happening now. Don't let the ups and downs of the sharemarket distract you.

Invest in businesses you understand

Mr. Buffet and a handful of analysts in Berkshire Hathaway have famously stuck to this rule. In fact, the conglomerate invested in companies like Coca-Cola and Gillette for two reasons only. These businesses are easy to understand and their products are part of our daily life.

For average investors, that means investing in companies whose offerings and business models you believe in. By doing this, you'll be able to better see their long term prospects and make smart decisions.

Invest in companies with strong and wide moats

This is another key element in the formula of Berkshire Hathaway’s portfolio. Mr. Buffett's investment philosophy is to invest in high-quality companies that maintain "moats". These moats could be solid financials, strong brands, patents, or network effects. Investing in wide-moat shares helps create a portfolio that can survive through challenging times.

Diversify your portfolio

BH's portfolio does have a few large holdings, such as Apple and Coca-Cola. But it also has a mix of other investments across different industries and assets. This helps to reduce the risk and ensure the portfolio is prepared for any changes in the market.

Don't try to time the market

Finally, Mr. Buffett has always been a staunch advocate of buy-and-hold investing. He has cautioned against predicting and reacting to short term market movements. This means avoiding the temptation to sell when the market is down and buying when the market is up. Investors can avoid stress and uncertainty by focusing on fundamentals and a long term mindset.

So there you have it! The key to Berkshire Hathaway's impressive track record of investing is simple. It's the strategy that sticks to value investing, patience, discipline, and a lot of common sense. Investors can take a page from the Berkshire Hathaway playbook for inspiration and guidance.

Happy investing!