Seeking Alpha
, VIN COLBY (6 clicks)
Long only, dividend growth investing, large-cap, mega-cap
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Summary

  • Warren Buffett's top 7 holdings make up 73.76% of the entire Berkshire portfolio.
  • Wells Fargo is Warren Buffett's biggest single holding.
  • Royal Bank of Canada, with a current yield of 3.9% to WFC's 2.85%, is an excellent substitute.

The concentration of Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) stock portfolio is amazing. The top 7 holdings make up 73.76% of the entire portfolio.

Berkshire Hathaway portfolio top 7 holdings as of March 31 2014:

% of portfolio

Action in Q1 2014

(NYSE:WFC) - Wells Fargo

21.79

(NYSE:KO) - Coca Cola Co.

14.62

(NYSE:AXP) - American Express

12.90

(NYSE:IBM) - International Bus. Machines

12.44

Add 0.34%

(NYSE:WMT) - Wal-Mart Stores

4.19

Add 17.32%

(NYSE:PG) - Procter & Gamble

4.02

(NYSE:XOM) - Exxon Mobil Corp.

3.80

Source: dataroma.com

In this article, I will give a higher-yielding alternative to the largest holding (21.79%) of this portfolio - Wells Fargo & Co.

Wells Fargo - Royal Bank of Canada (NYSE:RY)

Current P/E

Current yield

Price change / 12 m

Wells Fargo

12.22

2.85%

-0.8%

Royal Bank of Canada

13.11

3.90%

+22.5%

According to its 2013 Annual Report, the Royal Bank of Canada, RBC Royal Bank or RBC Financial Group is the largest financial institution in Canada, as measured by deposits, revenues and market capitalization. The bank serves 15 million clients and has 79,000 employees worldwide.

Current EPS are CAD 5.54, with a CAD 2.54 dividend. Total assets of the bank are CAD 860 billion.

Considering its scope (it ranks first or second in market share for most personal banking products in Canada and its retail banking network is the largest in Canada, with 1,255 branches and 4,622 ATMs, it gets 18% of revenues from the US and 18% internationally, the rest 64% are Canadian revenues), this bank is a smaller and rather good substitute for Wells Fargo.

What concerned me at first glance was the dilution in shares, but Wells Fargo also dilutes its shares:

Change

No of stocks 2013

No of stocks 2008

Wells Fargo

117.7%

5,371

4,563

Royal Bank of Canada

103.9%

1,467

1,412

It can be seen that Wells Fargo dilutes shares at a far faster pace than RY.

For investors desiring security as well as growth, I think this stock should appeal greatly. Canada has weathered the last financial storm much better than the US, and Royal Bank of Canada has never stopped paying or reduced its dividend in the last decade, which is more than can be said of Wells Fargo.

Source: Higher-Yield Alternative To Warren Buffett's Top Holding