The Shifting Sands of Investment Leadership
Buffett's Legacy and the Evolution of Berkshire's Portfolio
Warren Buffett's retirement from his long-held CEO position at Berkshire Hathaway marks the end of an era. For over half a century, Buffett, alongside the late Charlie Munger, steered Berkshire to become a trillion-dollar enterprise. His successor, Greg Abel, is set to uphold the fundamental investment tenets established by the 'Oracle of Omaha,' yet the portfolio is already demonstrating signs of transformation, particularly concerning its largest holdings.
Apple's Dominance Faces Scrutiny and Strategic Reductions
For nearly a decade, tech giant Apple has been the undisputed heavyweight in Berkshire's investment arsenal by market value. While Apple's technological prowess and innovation have been undeniable, Buffett's initial attraction stemmed from its consumer goods characteristics, specifically its deeply loyal customer base and their willingness to pay a premium for products like the iPhone. The company's aggressive share buyback program, which significantly boosted earnings per share by repurchasing over $841 billion of its common stock since 2013, was also a major draw. However, in the period leading up to his retirement, Buffett systematically reduced Berkshire's stake in Apple, selling over 687 million shares and trimming the holding by 75%. This move was partially attributed to tax considerations and Apple's increasingly high valuation, trading at approximately 33 times trailing 12-month EPS, a figure deemed historically expensive given recent weaknesses in device sales. The new leadership under Greg Abel is likely to continue this trend of paring down the Apple position in 2026, aligning with a firm stance on acquiring investments at favorable prices.
American Express Emerges as a Potential Frontrunner
As Apple's position within Berkshire's portfolio diminishes, credit services powerhouse American Express is rapidly ascending as a strong contender for the top spot. On February 19, Apple's holding was valued at $59.39 billion, while American Express (Amex) stood at $51.95 billion. This is a dramatic shift from less than three years ago when Apple's stake was six times larger than Amex's. Unlike Apple, neither Buffett nor Abel has shown any inclination to divest shares of American Express. Buffett notably listed Amex as one of eight 'indefinite' holdings in his final letters to shareholders, signaling its enduring value to Berkshire. This unwavering commitment, coupled with Amex's 151,610,700-share position remaining untouched, strongly positions it to surpass Apple in market value this year.
The Resilient Business Model of American Express
American Express's robust performance is underpinned by several key factors. The company benefits significantly from a resilient U.S. economy, as periods of economic growth typically outlast recessions, allowing Amex to expand in tandem with the national economic cycle. Furthermore, Amex possesses a unique business model that enables it to 'double-dip' in transactions: it earns fees from merchants as the third-largest payment processor by credit card network purchase volume in the U.S., and it generates interest income and annual fees from its cardholders as a lender. Critically, Amex has a proven track record of attracting affluent clientele, who are less likely to alter their spending habits or default on payments during economic downturns, allowing the company to recover from recessions more quickly than many competitors. The substantial dividend provided by Amex also provides a powerful incentive for Berkshire to maintain its long-term holding. With a cost basis of a mere $8.49 per share and an annual dividend of $3.28 per share, Berkshire's yield on cost is nearing an impressive 39%, effectively doubling its initial $1.3 billion investment in Amex through dividend income alone in less than three years.