S&P 500: Warren Buffett’s second biggest bet after paying off Apple
Warren Buffett famously made his biggest bet: a huge stake in… apple (AAPL). But its financial position, the second largest sector, is beginning to bear fruit. And ETFs are a vehicle you can join.
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Financial stocks, eg American bank (Buck) And American Express (AXP), representing more than 21% of Buffett’s public holdings Berkshire Hathaway (BRKB), according to an Investor Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That’s No. 2 behind nearly 48% of the entire portfolio’s weight in technology stocks — which Apple accounts for almost entirely.
And recently, Buffett’s financial inclination has begun to work. SPDR Financial Sector Selection Fund (45) up 7.6% since the beginning of June. That tops the S&P 500’s 5.2% gain at the time. It also clears a 1.2% rally in the Select Technology Sector SPDR ETF (XLK). Also keep in mind that the S&P 500’s financial institutions make nearly 2%, while technology stocks only pay 0.7%.
Buffett’s big bet outside of the S&P 500’s tech stocks is part of an important shift in the market right now. Most of the “Magnificent Seven” technology stocks struggled in August after leading most of the year.
“For a number of years, I’ve called Warren Buffett’s Berkshire Hathaway ‘America’s #1 retirement stock’ because it offers a unique combination of security, growth, and undervaluation,” said Whitney Tilson of Empire Financial Research.
Warren Buffett’s Stocks: Finance Begins to Pay Off
Financial stocks may not be great. But they started to shine anyway.
Bank of America and American Express are Berkshire Hathaway’s second and third largest public positions after Apple. Bank of America alone accounts for 9.2% of the market capitalization of Berkshire’s listed portfolio in the US. It is smaller than Apple’s by 49%. But it’s still important. Berkshire Hathaway owns approximately 13% of Bank of America, compared to just 5.8% of Apple.
And those financials are starting to outperform even Apple. Shares of Bank of America are up 5.4% since June, topping Apple’s loss of 0.4%. American Express shares were up 1.4% in that time.
Analysis among the S&P 500 ETFs
If you do not want to choose the best financial stocks, then ETFs can help you. They group parts of the sector into a single bar that shows you the sector.
Keep in mind, however, that financial ETFs are very different from one another. Their impressive findings confirm this. The performance of the top 10 financial ETFs ranges from 2.3% to 14.9% since June 1st.
Selected financial sector SPDR is the ETF’s largest financial sports asset north of $34 billion. It exposes you to all the essential elements of the financial sector including banking, insurance and mortgage.
Interestingly, the largest share in the financial ETF is Berkshire Hathaway itself at 13.4%, says Vetta Fi. This is followed by a weight of 9.5% in c. B. Morgan Chase (JPM). Financial Sector Selection The SPDR may be the largest and most diversified of the financial ETFs. But it’s not the best performer. It has risen 7.6% since June and is down 0.1% this year so far.
Bank-focused financial ETFs have outperformed since June. SPDR S&P Regional Banking ETF, $3 billion in assets (Creates) have jumped 15% since June. It’s important to note, however, that it’s still down 24% this year so far. Several of its properties took a beating early in the year amid concerns about bank failures. The highest contract is Western alliance (WAL) with 2.4% of the portfolio.
Don’t over-bank the S&P 500 banks
Jack Ablin, chief investment officer at Crescent Capital Management, said caution was called for, even as “bank stocks received a bid from improving economic conditions.” Keep in mind that if you own the S&P 500, Financials is already the third highest weighted at 12.6%.
“It’s too early for the banks,” Ablin said. “The regulatory environment is being tightened which is making their lending business more difficult. There may be a consolidation game as countries and regions snap up their smaller brothers.”
Buffett’s biggest bets
Financial stocks ranked second in Berkshire Hathaway’s holdings
| section | weight in the general portfolio | sector %ch. From 1 June |
|---|---|---|
| information technology | 47.6% | 1.2% |
| Finance | 21.2 | 7.6 |
| Consumer Goods | 10.9 | 1.1 |
| energy | 9.5 | 13.5 |
| industries | 5.6 | 10.4 |
| Telecommunications Services | 2.0 | 6.4 |
| Consumer Dictionary | 1.8 | 9.4 |
| health care | 1.1 | 5.3 |
| Material | 0.3 | 8.0 |
| Standard & Poor’s 500 | 5.2 |
