Berkshire has 30% of its portfolio in Apple, Alphabet: Expert says not ‘appropriate strategy’ for retail investors but…
AI Summary
Berkshire Hathaway has significantly increased its investments in Apple and Alphabet, now making up about 30% of its $351 billion portfolio. While both companies show strong long-term growth potential, retail investors should be cautious as they enter at higher valuations compared to Berkshire's earlier investments. A gradual investment approach is recommended for retail investors to mitigate risks associated with concentration and market timing.
Despite Warren Buffett and Charlie Munger once refusing to invest in companies like Apple and Google (now Alphabet), nearly 30% of Berkshire Hathaway's $351 billion portfolio is now invested in two Magnificent Seven AI stocks.
At the 2012 Berkshire Hathaway annual meeting, Buffet had said, "I would not be at all surprised to see them be worth a lot more money 10 years from now, but I wouldn't want to buy either one of them."
Buffett eventually changed his view on Apple, seeing it less as a technology company and more as a powerful consumer brand with exceptional pricing power. Between 2016 and 2018, Berkshire invested about $36 billion in Apple stock. However, he recently said in an interview that he “made a mistake” by not investing in Alphabet sooner.
Since taking the reins as CEO, Greg Abel has moved quickly to double down on Berkshire's exposure to Alphabet. During the first quarter, Berkshire nearly tripled its existing position in Alphabet. In the first quarter, Berkshire nearly tripled its stake in the Google parent, making it one of its biggest holdings. The company then invested another $10 billion in Alphabet through a private share sale as part of the tech giant's $80 billion fundraising, splitting the investment equally between its Class A and Class C shares.
Currently, Berkshire's equity portfolio stands at $351 billion, with Apple and Alphabet together representing roughly 30% of invested capital.
There is little doubt that both companies are high-quality businesses with strong long-term growth potential. But should retail investors follow Berkshire Hathaway's lead and invest in them?
Berkshire Hathaway's portfolio needs to be viewed in the right context. Many of its largest holdings, such as Apple and Coca-Cola, were accumulated over several years at significantly lower valuations. As these businesses compounded over decades, they naturally became a much larger part of the portfolio, says Sidharth Sogani, CEO of Blue Aster Capital (Bahrain) and CREBACO Global
In many cases, concentration results from long-term wealth creation rather than an aggressive allocation made on day one.
“The AI wave certainly strengthens the long-term prospects of companies like Apple. However, investors entering today are doing so at far more mature valuations than Berkshire did. A great business does not automatically translate into a great investment if the entry price does not offer an adequate margin of safety.”
For retail investors, replicating Berkshire's current portfolio concentration may not be the most appropriate strategy. Institutional investors build positions gradually, adding capital over time as conviction strengthens and opportunities arise. “Retail investors can follow a similar principle by starting with a modest allocation, evaluating how the investment thesis evolves, and increasing exposure only if their conviction continues to strengthen.”
Sogani also pointed out another risk: sector concentration. “Holding a large portion of a portfolio in one sector increases exposure to common risks, whether stemming from regulation, valuations, technological disruption, or broader economic cycles. Diversification should not be viewed as owning a large number of stocks, but as ensuring that portfolio risk is not driven by a single company or sector.”
The key takeaway from Berkshire Hathaway is not to replicate its portfolio as it stands today, but to understand the process behind it. Their concentration was built through disciplined capital allocation, staggered investments and decades of compounding. For most retail investors, that approach is far more relevant than simply mirroring the final portfolio weights.
Sanchari Ghosh is an Assistant Editor at Mint with over 12 years of experience in journalism, specialising in personal finance, DLT & DeFi, geopolitics and foreign policy, with a particular emphasis on how these areas intersect. <br> She writes extensively about how money works in everyday life—helping r...
Original Article
Published on Livemint