Berkshire Hathaway (BRK.A -1.23%) (BRK.B -1.25%) CEO Warren Buffett is effectively in a class of his own when it comes to investing. Since taking the reins in 1965, he’s led his company’s Class A shares (BRK.A) to an aggregate gain of better than 3,600,000%, as of this past weekend. Put another way, Berkshire Hathaway’s share price could collapse 99% and it would still be handily outperforming the benchmark S&P 500 since the beginning of 1965.
Although no investor is infallible, Buffett has a way of picking winners over the long term. It’s why Wall Street and the investing community pay such close attention to the stocks he and his team buy and sell each quarter.
But an even more important exercise might be to note what sectors the Oracle of Omaha favors above all others. Though there are 11 different sectors to choose from, Buffett has demonstrated for more than a decade that he prefers to invest his money into three specific sectors.
Even though it’s not the top sector in Berkshire Hathaway’s portfolio, based on invested assets, there’s little doubt in my mind that financial stocks are Warren Buffett’s favorite place to put his money to work. By financials, I’m primarily talking about bank stocks, insurance companies, and payment processors.
Generally speaking, financial stocks aren’t going to wow investors on the growth front. They’re almost always cyclical businesses, which means they ebb and flow with the U.S. and global economy.
But there’s an important distinction to make about these ebbs and flows. Whereas recessions typically last for a couple of quarters, periods of economic expansion are commonly measured in years. Disproportionately long bull markets are what allow bank stocks and payment processors to thrive over the long run.
Within the financial space, bank stocks tend to be Buffett’s favorite, followed by insurance companies. Over the past decade, Bank of America (BAC -1.99%) and…
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