Warren Buffett’s Successor, Greg Abel, Has a New No. 3 Holding at Berkshire Hathaway

For the first time in well over half a century, the trillion-dollar conglomerate that Warren Buffett built, Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB), is in uncharted territory. The Oracle of Omaha retired as CEO on Dec. 31, effectively handing the keys over to longtime protégé Greg Abel.

Abel has wasted no time making his presence felt. In under six months, he’s completely revamped Berkshire’s $336 billion portfolio. Most notably, indefinite holding Coca-Cola (NYSE: KO) has stepped aside as Berkshire Hathaway’s No. 3 position, having been replaced by the new apple of Abel’s eye: Google parent Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG).

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Alphabet may be the new Apple for Greg Abel

According to Form 13F filings with regulators, Abel was a decisive buyer of Alphabet stock (both classes) during the first quarter. Despite being a net seller of stocks as a whole, he more than tripled Berkshire’s stake in Alphabet’s Class A stock (GOOGL) by purchasing 36,403,656 shares, and opened a new position in Alphabet’s Class C stock (GOOG) with a 3,585,215-share buy.

But Abel wasn’t done. On June 1, Alphabet announced an $80 billion equity offering (which was subsequently upped to $84.75 billion). Berkshire agreed to buy $10 billion in a private placement ($5 billion of each share class) at a slight discount to Alphabet’s share price at the time.

Although it hasn’t been confirmed if this private placement has closed, as of this writing on June 21, its presumptive closure would vault Alphabet into the No. 3 position in Berkshire Hathaway’s portfolio, just ahead of Coca-Cola.

While Apple remains the largest holding by market value, we haven’t witnessed such decisive buying from Berkshire’s investment team, now led by Abel, in a long time.

Abel’s full-bore buying of Alphabet stock clearly shows that tech stocks are back on the menu. While the Oracle of Omaha often shied away from tech stocks, because it wasn’t a sector he understood very well, this isn’t the case with Abel and his investment team.

Alphabet has established itself as an artificial intelligence (AI) leader. Though Wall Street’s focus for years has been on the AI infrastructure build-out, Alphabet has taken the reins as an AI applications pioneer. Its integration of generative AI and large language model solutions into Google Cloud helped reaccelerate sales growth for this segment to 63% in the March-ended quarter.

In addition to introducing a serious AI-driven growth element to Berkshire Hathaway’s portfolio, Alphabet possesses a sustainable moat. Search engine Google accounts for around 90% of global internet search traffic, according to GlobalStats. This translates into exceptional ad pricing power for Alphabet.

But even though Alphabet is working its way up the ranks in Berkshire Hathaway’s investment portfolio, Coca-Cola isn’t going anywhere. It’s Berkshire’s longest-tenured stock (continuously held since 1988) and offers unrivaled geographic diversity, with ongoing operations in all countries, save North Korea, Cuba, and Russia.

Coca-Cola also provides Abel’s company with an otherworldly dividend. Factoring in Berkshire’s minuscule cost basis of $3.2475 per share for its Coca-Cola stake, the company is netting a roughly 65% annual yield on cost!

Nevertheless, Abel looks to have found his Apple — and its name is Alphabet.

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Sean Williams has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.

Move Over, Coca-Cola: Warren Buffett’s Successor, Greg Abel, Has a New No. 3 Holding at Berkshire Hathaway was originally published by The Motley Fool