This is a truly groundbreaking year for Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB). For the first time in well over half a century, the trillion-dollar Berkshire isn’t being led by billionaire <a href="https://www.fool.com/investing/how-to-invest/famous-investors/warren-buffett-investments/?utm_source=yahoo-host-full&utm_medium=feed&utm_campaign=article&referring_guid=b85d625a-9914-4cd8-a093-e1c503bfce86″ rel=”nofollow noopener” target=”_blank”>Warren Buffett. Following the Oracle of Omaha’s retirement as CEO on Dec. 31, the torch was officially passed to his protégé, Greg Abel.
Abel hasn’t wasted any time transforming Berkshire Hathaway’s $359 billion investment portfolio. In addition to jettisoning 16 holdings in the first quarter, he’s rearranged the puzzle pieces of his company’s top-five positions. Longtime holdings Coca-Cola (NYSE: KO) and Bank of America (NYSE: BAC) have both been knocked down a peg, with the new apple of Abel’s eye, Google parent Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG), officially becoming Berkshire’s No. 3 position.
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Coca-Cola isn’t going anywhere, but BofA may be a different story
Despite ceding its spot as Berkshire’s third-largest holding, Coca-Cola isn’t going anywhere. Coke was labeled as an “indefinite” holding by former CEO and current board chair Warren Buffett, and Abel has vowed to (more or less) adhere to the same investing principles that the Oracle of Omaha followed.
The real beauty of Berkshire’s stake in Coca-Cola is its jaw-dropping yield on cost. Coca-Cola is Berkshire’s longest-tenured holding (since 1988) and sports an ultra-low cost basis of around $3.25 per share. Given that Coca-Cola has increased its dividend for 64 consecutive years and is currently doling out $2.12/share annually, Berkshire’s yield relative to its cost basis is an astounding 65%!
Suffice it to say, Coca-Cola isn’t going anywhere.
Bank of America is another story. Although Warren Buffett has always been a huge fan of financial stocks, BofA isn’t the bargain it once was. Since Berkshire’s former CEO initially took a position in Bank of America’s preferred stock in August 2011, its common stock has vaulted from a 62% discount to book value to a 59% premium to book value.
Perhaps it’s no surprise that Berkshire’s bosses have pared down their company’s stake in BofA for eight consecutive quarters.
There’s a new apple of Abel’s eye
However, the biggest change observed under Greg Abel has been the relentless buying of Alphabet stock. Including an announced $10 billion private placement, Abel green-lit the purchase of $17 billion of Alphabet’s Class A (GOOGL) and Class C (GOOG) stock, combined, in the second quarter.
