He's called the Oracle of Omaha and is considered the world's most successful investor, generating a personal fortune of US$107 billion over many decades of stock investing.
Luckily for us, his stock selections are public knowledge because the investment company he runs, Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B), is listed. So, we get regular updates on his holdings.
Here are Buffett's top 10 stocks by value, according to Berkshire Hathaway's FY22 full-year results released in February.
Top 10 stocks that Warren Buffett owns
| Stock | Number of shares | Value |
| Apple Inc. (NASDAQ: AAPL) | 915,560,382 | $139.7 billion |
| Bank of America Corp (NYSE: BAC) | 1,032,852,006 | $36.5 billion |
| Chevron Corporation (NYSE: CVX) | 167,353,771 | $27.3 billion |
| American Express Company (NYSE: AXP) | 151,610,700 | $26.9 billion |
| Coca-Cola Co (NYSE: KO) | 400,000,000 | $24 billion |
| Occidental Petroleum Corporation (NYSE: OXY) | 278,210,498 | $16.9 billion |
| Kraft Heinz Co (NASDAQ: KHC) | 325,634,818 | $13 billion |
| Moody's Corp (NYSE: MCO) | 24,669,778 | $7.4 billion |
| Activision Blizzard Inc (NASDAQ: ATVI) | 52,717,075 | $4.1 billion |
| BYD Ord Shs H (OTCMKTS: BYDDF) | 130,327,642 | $3.8 billion |
What are the lessons for investors buying ASX 200 stocks?
Buy large-cap ASX 200 stocks
Buffett's top 10 holdings are full of multi-billion-dollar global companies that own household-name brands.
Obviously, he's extremely positive on Apple given the almost 40% allocation of his total portfolio!
He refers to Apple as Berkshire Hathaway's "third-largest business" after its wholly-owned insurance and railroad companies. He reckons Apple is "probably the best business I know in the world".
You could also say he's in love with Bank of America, Chevron, and American Express, given they and Apple together comprise an astonishing 68% of the investment pie!
Large-cap companies are typically industry giants with large valuations (or market capitalisations). Their sheer size is a big factor enabling them to weather all types of economic conditions.
This means safety and stability for the investor.
As mature companies, their share price growth may be limited unless they are in rapidly growing and evolving industries, such as technology (like Apple), or have a global market for their products (also like Apple).
The trade-off in the limited share price growth is strong, reliable, and regular dividends. This makes them a favourite choice among income investors and those who want lower-risk investments.
Fun fact: Buffett's Coca-Cola investment returns $704 million in annual dividends.
The three biggest large-cap ASX 200 stocks available to investors are BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), and CSL Limited (ASX: CSL).
Buy and hold high-quality businesses for the long term
Buffett is a value investor, meaning he targets high-quality businesses and buys them when they are trading below their intrinsic worth or book value.
He also describes himself as a "business picker" rather than a "stock picker".
That means he uses fundamental analysis to get a real understanding of the companies he is considering buying, and to keep tabs on the ones he already owns. He spends most days in his office reading.
Buffett buys long, which means he's patient. He doesn't get caught up in the day-to-day price movements of his investments based on announcements with short-term share price ramifications.
Buffett's strategy means he has fun in both bear markets and bull markets. How smart is that?
Bear markets provide opportunities to buy below value, and bull markets power up those share prices.
A few examples of long-term holds within Buffett's top 10 stocks are Bank of America, which he first purchased in 2011, American Express (1964), Moody's (2000), and Coca-Cola (1988).
He bought Coca-Cola just months after the Black Monday 1987 market crash. He saw an opportunity to nab a high-quality business while the share price was down, and he went hard too — putting $1 billion into the stock. That's a big number today, let alone back in 1988!
There's also a lesson in moving with the times and adapting your investments in accordance with general business and societal trends, such as the rise of technology.
Buffett first bought Apple in 2016 and Activation Blizzard in 2021. Apple is the biggest US tech stock and Activation Blizzard is in the top 30.
The biggest ASX 200 information technology stocks are WiseTech Global Ltd (ASX: WTC) and Xero Limited (ASX: XRO). But they're babies in size compared to the big US tech stocks.
Keep cash on hand for opportunities
As we covered last month, Buffett moved US$23.3 billion (A$35 billion) from the market into cash between 30 June and 31 December 2022.
Berkshire Hathaway went into 2023 with cash, cash equivalents, and treasury securities (bonds) worth US$128.7 billion.
In his annual newsletter released in February, Buffett explained:
As for the future, Berkshire will always hold a boatload of cash and U.S. Treasury bills along with a wide array of businesses.
We will also avoid behavior that could result in any uncomfortable cash needs at inconvenient times, including financial panics and unprecedented insurance losses.
Spare cash means you can enjoy some satisfying dollar-cost averaging on ASX 200 stocks when the market is down.
Let's talk about diversification
In total, Buffett has 49 stocks in his portfolio, which sounds like a lot. But it's not when you look at the enormity of the whole pie (about US$340 billion).
In short, he's got huge sums invested in each of those 49 stocks. Using the top 10 as an example, if one of those companies goes bust, he'll lose billions. That's probably why they're all large caps. The likelihood of a large cap going under is incredibly small, so perhaps that's why Buffett feels safe to invest big.
Things look a little different when you're an ordinary investor with, say, $50,000 in ASX 200 stocks. You can't really afford to make mistakes and not having a diversified portfolio is a huge one for us.
We should point out that Buffett has good diversification across different industries.
Diversification is important because it gives you safety. The more ASX 200 stocks you hold and the more industries you are exposed to, the lesser your risk.
We don't know what is around the corner. Imagine holding a portfolio full of travel stocks in early 2020.
A quick way of ensuring you have great diversification is not to bother trying to pick ASX 200 stocks at all. Instead, take Buffett's advice and buy a low-cost S&P 500 index fund instead.
That's his key recommendation for ordinary investors looking to set themselves up for retirement.
The S&P/ASX 200 Index (ASX: XJO) closed the session yesterday at 7,362.2 points, down 0.05%.
