In this article, we discuss the 10 best stocks to buy according to Warren Buffett.
Warren Buffett, the chief of Berkshire Hathaway, was one of the biggest winners during the financial crisis of 2009. As speculation, asset bubbles, and the dangers of using leverage once again come to the fore, many investors are looking to mimic the investing strategy that Buffett deployed during the crisis to profit from it. Back in 2010, Buffett had praised the Federal Reserve and the Treasury for acting quickly in order to prevent the collapse of the banking system. As inflation reaches record highs in 2022, the Fed appears somewhat less certain.
There has been a massive exodus from growth stocks as a looming interest rate hike pushes investors towards value plays, even though some experts have criticized the Fed for waiting too long to raise rates. The thoughts of Buffett can shed some light on navigating a market slowdown. During an interview with the Financial Crisis Inquiry Commission in 2010, the billionaire underlined that the “important decision” in evaluating a business was the pricing power. He added that he did not buy stocks for returns but rather for the “business” that the stock offered.
Some of the prominent stocks in the Berkshire Hathaway portfolio at the end of the fourth quarter of 2021 included Apple Inc. (NASDAQ:AAPL), American Express Company (NYSE:AXP), and Bank of America Corporation (NYSE:BAC), among others discussed in detail below.
Our Methodology
The stocks were picked from the fourth quarter regulatory filings of Berkshire Hathaway. The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey.
Best Stocks to Buy According to Warren Buffett
10. The Bank of New York Mellon Corporation (NYSE:BK)
Number of Hedge Fund Holders: 46
The Bank of New York Mellon Corporation (NYSE:BK) provides financial products and services. Top hedge funds hold bullish positions in the company. At the end of the third quarter of 2021, 46 hedge funds in the database of Insider Monkey held stakes worth $4.6 billion in The Bank of New York Mellon Corporation.
Latest filings show that Berkshire Hathaway owned over 72 million shares of The Bank of New York Mellon Corporation at the end of December 2021 worth $4.2 billion, representing 1.26% of the portfolio. The fund registered no new activity around the company during the quarter.
Just like Apple Inc., American Express Company, and Bank of America Corporation, The Bank of New York Mellon Corporation is one of the stocks that elite investors are buying.
In its Q3 2020 investor letter, First Eagle Investment Management, an asset management firm, highlighted a few stocks and The Bank of New York Mellon Corporation was one of them. Here is what the fund said:
“The world’s largest custody bank, Bank of New York Mellon has been challenged by the persistently low-rate environment. While custody tends to be a wide-moat business, revenue generation is highly sensitive to net interest margins. Low rates have also hurt Bank of New York’s other primary line of business—investment management—as it has been forced to waive fees on its money market funds to preserve their net asset value.”
9. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 51
Chevron Corporation (NYSE:CVX) is an integrated oil and gas firm that operates from California. Securities filings reveal that Berkshire Hathaway owned over 38 million shares of Chevron Corporation at the end of the fourth quarter of 2021 worth $4.4 billion, representing 1.35% of the portfolio. The fund increased its stake in the firm by 34% compared to filings for the third quarter.
There is positive hedge fund sentiment around Chevron Corporation. At the end of the third quarter of 2021, 51 hedge funds in the database of Insider Monkey held stakes worth $4.4 billion in Chevron Corporation, up from 50 in the preceding quarter worth $4.2 billion.
In its Q3 2021 investor letter, Goehring & Rozencwajg Associates highlighted a few stocks and Chevron Corporation was one of them. Here is what the fund said:
“After successfully replacing 25% of Exxon’s board of directors despite owning just 0.02% of the outstanding equity, Engine No. 1, the climate-focused activist hedge fund, met with Chevron’s management late last summer. In discussions that were later described as “cordial,” Chevron executives shared their plan to reduce carbon emissions. Subsequently, Chevron announced new plans to further reduce carbon output, along with their intention to appoint a new director with “environmental expertise.” Although it remains unclear exactly what Engine No. 1 is planning, rumors suggest the fund has contacted other investors, strongly suggesting they intend to launch a second campaign in the not-too-distant future.
What should Chevron expect?
It was recently reported by The Wall Street Journal that Exxon was considering abandoning two massive natural gas projects: the 75 trillion cubic foot (tcf ) Rovuma LNG project (capital cost $30 bn) and the 5 tcf Ca Voi Xanh offshore-Vietnam gas project (capital cost $10 bn). Exxon board members (most likely including the three supported by Engine No. 1) have publically expressed concerns about both projects. According to internal reports, these projects are among the highest CO2 producers in Exxon’s pipeline; it is no surprise these projects have been called into question. However, we find the plight of both fields to be perplexing since production would almost certainly be used to displace coal in electricity generation, cutting CO2 emissions by nearly 50%. This fact seems to be lost on the new Exxon board members.”
8. U.S. Bancorp (NYSE:USB)
Number of Hedge Fund Holders: 42
U.S. Bancorp (NYSE:USB) is a financial services holding firm. Hedge funds have been piling into the stock in recent months. At the end of the third quarter of 2021, 42 hedge funds in the database of Insider Monkey held stakes worth $8.39 billion in U.S. Bancorp, up from 41 the preceding quarter worth $8.30 billion.
According to the latest data, Berkshire Hathaway owned more than 126 million shares of U.S. Bancorp at the end of December 2021 worth $7.1 billion, representing 2.14% of the portfolio. The fund registered no new activity around the stock during the fourth quarter.
In its Q4 2020 investor letter, Mairs & Power, an asset management firm, highlighted a few stocks and U.S. Bancorp was one of them. Here is what the fund said:
“On the negative side, one of the Fund’s biggest detractor in 2020 was U.S. Bancorp (USB). Like all banks, U.S. Bank was hurt by the difficult interest rate environment and credit cycle concerns. We believe banks are strong enough to survive the current sector doldrums, and they remain some of the market’s most attractive opportunities.”
7. Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 57
Verizon Communications Inc. (NYSE:VZ) provides technology and communications services. Berkshire first bought a stake in the company during the first quarter of 2021. This holding was sold off entirely by late 20016. Buffett opened a new position in the company in the third quarter of 2020. That stake was more than tripled in the coming quarters. At the end of December 2021, the fund owned over 158 million shares in Verizon Communications Inc. worth $8.2 billion, representing 2.49% of the portfolio.
Elite hedge funds continue to hold large stakes in Verizon Communications Inc.. At the end of the third quarter of 2021, 57 hedge funds in the database of Insider Monkey held stakes worth $10.3 billion in Verizon Communications Inc., compared to 63 in the previous quarter worth $10.9 billion.
In its Q1 2021 investor letter, Miller/Howard Investments, an asset management firm, highlighted a few stocks and Verizon Communications Inc. was one of them. Here is what the fund said:
“We sold Verizon (VZ) based on concerns over how much they might spend in ongoing spectrum auctions. Management may legitimately view spending billions of dollars to expand their spectrum holdings as necessary, but we believe the payoff will be slow and will make it challenging to grow the dividend at a good pace.”
6. Moody’s Corporation (NYSE:MCO)
Number of Hedge Fund Holders: 58
Moody’s Corporation operates as an integrated risk assessment firm. Wall Street is exceedingly bullish on the stock. At the end of the third quarter of 2021, 58 hedge funds in the database of Insider Monkey held stakes worth $15.6 billion in Moody’s Corporation, up from 44 in the previous quarter worth $16 billion.
Regulatory filings show that Berkshire Hathaway owned more than 24 million shares of Moody’s Corporation at the end of the fourth quarter of 2021 worth $9.6 billion, representing 2.91% of the portfolio.
In addition to Apple Inc., American Express Company, and Bank of America Corporation, Moody’s Corporation is one of the stocks that institutional investors have their eye on.
In its Q4 2020 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Moody’s Corporation was one of them. Here is what the fund said:
“Moody’s Corporation provides credit ratings, financial intelligence, and analytical tools to assist businesses in making decisions. Moody’s reported excellent financial results due to continued growth in rated debt issuance. However, the stock detracted on investor expectations that issuance trends will moderate into 2021.The announced retirement of long-time CEO Ray McDaniel may have also weighed on sentiment. We continue to own the stock due to our views of the company’s long runway for growth and strong competitive advantages.”
5. The Kraft Heinz Company (NASDAQ:KHC)
Number of Hedge Fund Holders: 33
The Kraft Heinz Company (NASDAQ:KHC) markets food and beverage products. It is one of the favorite food stocks on Wall Street. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm First Eagle Investment Management is a leading shareholder in The Kraft Heinz Company with 6.4 million shares worth more than $232 million.
Regulatory filings show that Berkshire Hathaway owned more than 325 million shares of The Kraft Heinz Company at the end of the fourth quarter of 2021 worth $11.6 billion, representing 3.53% of the portfolio. The fund registered no new activity around the stock during the fourth quarter.
In its Q4 2020 investor letter, Berkshire Hathaway highlighted a few stocks and The Kraft Heinz Company was one of them. Here is what the firm said:
“We exclude our Kraft Heinz holding — 325,442,152 shares — (In the list of 15 common stock investments that at yearend were our largest in market value) because Berkshire is part of a control group and therefore must account for that investment using the “equity” method. On its balance sheet, Berkshire carries the Kraft Heinz holding at a GAAP figure of $13.3 billion, an amount that represents Berkshire’s share of the audited net worth of Kraft Heinz on December 31, 2020.
Berkshire and its subsidiaries hold investments in certain businesses that are accounted for pursuant to the equity method. Currently, the most significant of these is our investment in the common stock of The Kraft Heinz Company (“Kraft Heinz”). Kraft Heinz is one of the world’s largest manufacturers and marketers of food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee and other grocery products. Berkshire currently owns 325,442,152 shares of Kraft Heinz common stock representing 26.6% of the outstanding shares.
We recorded equity method earnings from our investment in Kraft Heinz of $95 million in 2020, $493 million in 2019 and losses of approximately $2.7 billion in 2018. Equity method earnings (losses) included the effects of goodwill and identifiable intangible asset impairment charges recorded by Kraft Heinz. Our share of such charges was approximately $850 million in 2020, $450 million in 2019 and $3.7 billion in 2018. We received dividends from Kraft Heinz of $521 million in each of 2020 and 2019 and $814 million in 2018, which we recorded as reductions in our carrying value.
Shares of Kraft Heinz common stock are publicly-traded and the fair value of our investment was approximately $11.3 billion at December 31, 2020 and $10.5 billion at December 31, 2019. The carrying value of our investment was approximately $13.3 billion at December 31, 2020 and $13.8 billion at December 31, 2019. As of December 31, 2020, the carrying value of our investment exceeded the fair value based on the quoted market price by $2.0 billion (15% of carrying value). In light of this fact, we evaluated our investment in Kraft Heinz for impairment. We utilize no bright-line tests in such evaluations. Based on the available facts and information regarding the operating results of Kraft Heinz, our ability and intent to hold the investment until recovery, the relative amount of the decline and the length of time that fair value was less than carrying value, we concluded that recognition of an impairment loss in earnings was not required. However, we will continue to monitor this investment and it is possible that an impairment loss will be recorded in earnings in a future period based on changes in facts and circumstances or intentions.”
4. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 61
The Coca-Cola Company (NYSE:KO) is a Georgia-based beverage firm. It is one of the long-term holdings of Berkshire. The fund first purchased a stake in the company in the fourth quarter of 2010. It has featured in the portfolio constantly since then. At the end of December 2021, the fund owned 400 million shares of The Coca-Cola Company worth $23.6 billion, representing 7.15% of the portfolio.
Other top hedge funds are also bullish on The Coca-Cola Company stock. Among the hedge funds being tracked by Insider Monkey, Chicago-based firm Citadel Investment Group is a leading shareholder in The Coca-Cola Company with 10.6 million shares worth more than $632 million.
3. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 57
American Express Company is a New York-based payments and travel company. It is one of the top payment stocks in the hedge fund universe. Among the hedge funds being tracked by Insider Monkey, Washington-based firm Fisher Asset Management is a leading shareholder in American Express Company with 15.7 million shares worth more than $2.5 billion.
According to the latest data, Berkshire Hathaway owned over 151 million shares of American Express Company at the end of the fourth quarter of 2021 worth $24.8 billion, representing 7.49% of the portfolio.
In its Q2 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and American Express Company was one of them. Here is what the fund said:
“In financials, American Express has done an excellent job demonstrating the resiliency of its franchise in the midst of a global pandemic that drove a 60% decline in its core travel and entertainment business. The company’s spend-centric model has been helped by fiscal stimulus ensuring a flush consumer, while management continues to execute well by adding millions of new consumer and small and medium business accounts, which should benefit the franchise over the medium to long term. We remain optimistic regarding the company’s prospects as travel and entertainment activity rebounds, adding to our position in the quarter.”
2. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 72
Bank of America Corporation provides banking and financial products. Securities filings reveal that Berkshire Hathaway owned more than 1 billion shares in Bank of America Corporation at the end of December 2021 worth $44.9 billion, representing 13.57% of the portfolio.
Bank of America Corporation is one of the most prominent bank stocks. At the end of the third quarter of 2021, 72 hedge funds in the database of Insider Monkey held stakes worth $46.4 billion in Bank of America Corporation, down from 87 in the previous quarter worth $46.5 billion.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Bank of America Corporation was one of them. Here is what the fund said:
“Higher long-term interest rates supported financials such as Bank of America, which has shown both defensive and offensive characteristics in the past year. We believe it continues to be the least risky large bank from a credit standpoint, with conservative underwriting and controlled risk taking, a leading consumer deposit franchise, scale and technology. It is also a leader in its commitments to sustainability, or as it terms it, responsible growth. Disclosure and reporting at all levels form a large part of this commitment, including gender diversity and equality, environmental commitments and support of communities in which it operates. In the first quarter Bank of America announced it is setting a goal of net-zero greenhouse gas (GHG) emissions in its supply chain and operations, and notably also in its financing activities, before 2050.”
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 120
Apple Inc. is a California-based technology firm. Among the hedge funds being tracked by Insider Monkey, Washington-based firm Fisher Asset Management is a leading shareholder in Apple Inc. with 63.9 million shares worth more than $11.3 billion.
Latest filings indicate that Berkshire Hathaway owned more than 887 million shares of Apple Inc. at the end of the fourth quarter of 2021 worth more than $157 billion, representing a whopping 47.5% of the portfolio.
In its Q1 2021 investor letter, Distillate Capital, an asset management firm, highlighted a few stocks and Apple Inc. was one of them. Here is what the fund said:
“Apple is an even more notable situation and one that highlights our free cash valuation methodology and bears further discussion given its Q3 ‘20 sale from our strategy. For an extended period, Apple was extraordinarily inexpensive on a free cash flow basis and was the largest position in our strategy, exceeding 5% of the portfolio.”
You can also take a peek at 9 Tech and Software Stocks to Buy According to Hamilton Helmer’s Strategy Capital and Analysts Are Downgrading These 10 Stocks.
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This article is originally published at Insider Monkey.
