In this article, we discuss the 10 biggest losers in Warren Buffett’s latest portfolio.
Warren Buffett of Berkshire Hathaway is perhaps the most notable investor on Wall Street, managing billions of dollars for clients through a rather concentrated investment portfolio. Buffett’s stock picking strategies are simple yet calculated. He has time and again advised investors to only pick stocks that are backed by fortress balance sheets, have weathered market turbulence and come out stronger, and offer attractive valuations.
While the Berkshire chief is known for his investing success and the impressive returns to clients and shareholders alike, even he is not immune to mistakes along the way. For example, the Oracle of Omaha purchased Dexter Shoe Company in 1993, which he calls his worst deal ever. He not only miscalculated the company’s future growth prospects, but he also failed to account for the threat from cheap Chinese shoemakers. He observed how challenging it was for the US local producers to remain profitable in the shoe industry, since the majority of the products were imported and manufactured abroad.
Similarly, another mistake Buffett openly admits is not investing in Alphabet Inc. (NASDAQ:GOOG) when the company was trading at a much lower price. He regrets not viewing the full capacity of Google and its long-term outlook. Similarly, his limited understanding of technology also led to a much later investment in Amazon.com, Inc. (NASDAQ:AMZN) than he would have preferred. According to Buffett, he underestimated Jeff Bezos’ ability to scale his company to current levels, and for Amazon to lead so many market sectors.
While investors aim to replicate the $363.5 billion Berkshire portfolio, which holds market leaders like Apple Inc. (NASDAQ:AAPL), The Coca-Cola Company (NYSE:KO), and Bank of America Corporation (NYSE:BAC), we discuss the biggest losers in Warren Buffett’s latest portfolio in this article.
Our Methodology
We used the Q1 2022 Berkshire Hathaway portfolio to list the companies with the largest share price declines year to date as of May 20. We also mentioned the hedge fund sentiment around these stocks, so investors can assess how the smart money feels about the companies in case they want to replicate their strategies. Hedge fund sentiment around each stock has been derived from Insider Monkey’s database of 924 elite hedge funds tracked at the end of the fourth quarter of 2021.
Biggest Losers in Warren Buffett’s Latest Portfolio
10. Floor & Decor Holdings, Inc. (NYSE:FND)
Number of Hedge Fund Holders: 36
Year-to-Date Loss as of May 20: 47.32%
Floor & Decor Holdings, Inc. (NYSE:FND) is a Georgia-based multi-channel specialty retailer and distributor of commercial hard surface flooring and related accessories. Floor & Decor Holdings, Inc. (NYSE:FND) shares have declined 47.32% year-to-date, making the stock one of the biggest losers in Warren Buffett’s Q1 portfolio. Despite the falling stock price, securities filings for the first fiscal quarter of 2022 reveal that Warren Buffett boosted his Floor & Decor Holdings, Inc. (NYSE:FND) stake by 467%, holding 4.78 million shares worth $387.18 million.
On May 5, Floor & Decor Holdings, Inc. (NYSE:FND) posted earnings for Q1 2022, reporting an EPS of $0.67, beating estimates by $0.02. The revenue grew 31.46% year-over-year to $1.03 billion, topping market consensus by $27.46 million.
Citi analyst Steven Zaccone on May 13 lowered the price target on Floor & Decor Holdings, Inc. (NYSE:FND) to $106 from $137 and kept a Buy rating on the shares. The analyst took a proactive “first cut” at fiscal 2023 earnings estimates and revised his “Bear Case scenarios” to account for increasing recession risk at nine retailers.
According to Insider Monkey’s Q4 data, 36 hedge funds were bullish on Floor & Decor Holdings, Inc. (NYSE:FND), up from 33 funds in the prior quarter. In Q1 2022, Colin Moran’s Abdiel Capital Advisors disclosed a prominent stake in the company, with 4.2 million shares worth about $347 million.
Like Apple Inc. (NASDAQ:AAPL), The Coca-Cola Company (NYSE:KO), and Bank of America Corporation (NYSE:BAC), Warren Buffett remains bullish on Floor & Decor Holdings, Inc. (NYSE:FND).
Here is what Headwaters Capital has to say about Floor & Decor Holdings, Inc. (NYSE:FND) in its Q1 2022 investor letter:
“Floor & Decor (“FND”) -38%. The sell-off in Floor and Décor was driven by general concerns around slowing consumer discretionary spending as stimulus benefits wane and consumers shift their spend toward services. More specifically, there is also concern that slowing home sales due to higher mortgage rates will negatively impact home remodel spending. I believe a lot of this remodel concern is misplaced given that the US housing stock continues to age and consumers are sitting on record levels of home equity due to recent home price appreciation, which should support continued strong remodel activity. As of FND’s analyst day on March 14th, management had not yet seen signs of slowing consumer spending given that the company reiterated guidance for same store sales growth of at least 10% for 2022. FND is currently trading at a 20% discount to its pre-COVID multiple, which represents an attractive valuation for a competitively advantaged specialty retailer with a long runway for new store growth.”
9. Moody’s Corporation (NYSE:MCO)
Number of Hedge Fund Holders: 58
Year-to-Date Loss as of May 20: 24.59%
Moody’s Corporation (NYSE:MCO)’s stock price as of May 20 has declined by 24.59% so far this year, making it one of the top losers in Warren Buffett’s latest portfolio. Moody’s Corporation (NYSE:MCO) has been part of the Berkshire portfolio since Q4 2010, and in the first quarter of 2022, the hedge fund disclosed an $8.3 billion stake in the company, representing 2.28% of the total 13F holdings. Moody’s Corporation (NYSE:MCO) is a financial services company that offers credit ratings, research, and data analysis for the global capital markets.
On May 2, Moody’s Corporation (NYSE:MCO) posted earnings for the first fiscal quarter of 2022, announcing an EPS of $2.89, in line with market forecasts. The $1.52 billion revenue declined 4.88% compared to the prior-year quarter, surpassing analysts’ estimates by $16.90 million. The company also declared a $0.70 per share quarterly dividend, payable on June 10 to shareholders of record on May 20.
Deutsche Bank analyst Faiza Alwy lowered the price target on Moody’s Corporation (NYSE:MCO) to $372 from $408 and maintained a Buy rating on the shares. The company slashed its fiscal 2022 guidance because of weaker issuance volumes, the analyst told investors in a research note.
Among the hedge funds tracked by Insider Monkey, 58 funds were long Moody’s Corporation (NYSE:MCO) at the end of December 2021, with collective stakes worth $16.85 billion. Chris Hohn’s TCI Fund Management held a significant position in Moody’s Corporation (NYSE:MCO) in the first quarter of 2022, with 7.2 million shares worth $2.45 billion.
Here is what Qualivian Investment Partners has to say about Moody’s Corporation (NYSE:MCO) in its Q2 2021 investor letter:
“Moody’s: Revenue, operating profit margins, and EPS all exceeded expectations, and annual guidance for these items (and for free cash flow) was raised. In MIS (Moody’s Investors Service) which houses the traditional ratings business, the outlook for debt issuance was raised for the remainder of the year, while MA (Moody’s Analytics) also came in ahead of expectations. The company leveraged strong revenue growth with strong operating profit margin improvement of 200 bps, with EPS coming in $0.22 ahead of consensus estimates. Management alluded to having interesting opportunities in their M&A pipeline, which we will have to assess when the time comes, but Moody’s management team has been very effective at allocating capital in the past toward value-creating bolt-on acquisitions, especially in their Moody’s Analytics business, a key growth driver for the company.”
8. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 279
Year-to-Date Loss as of May 20: 36.86%
Amazon.com, Inc. (NASDAQ:AMZN) is an American multinational e-commerce and technology company that made its way into the Berkshire portfolio in the first quarter of 2019. The hedge fund, as of Q1 2022, owns 533,300 Amazon.com, Inc. (NASDAQ:AMZN) shares, worth $1.7 billion. The stock price has dropped about 37% year-to-date.
Amazon.com, Inc. (NASDAQ:AMZN)’s Q1 results were far below market consensus estimates. The company announced on April 28 a loss per share of $7.56, missing estimates by $16.05. The $116.44 billion revenue grew 7.30% compared to the prior-year quarter, but fell short of analysts’ estimates by $67.09 million.
On May 20, Citi analyst Ronald Josey removed Amazon.com, Inc. (NASDAQ:AMZN) from the firm’s Focus List, citing macro volatility and a lack of short-term catalysts. However, with the shares down 26% since Q1 earnings, most of the risk is priced in, especially for investors with a longer-term investment horizon, the analyst noted. He believes Amazon.com, Inc. (NASDAQ:AMZN) can gain greater share of retail sales in a more volatile macro backdrop, particularly as it preps for Prime Day in July and as comps get notably easier in the second half of 2022. He maintained a Buy rating on Amazon.com, Inc. (NASDAQ:AMZN) with a $4,100 price target.
Insider Monkey’s Q4 data suggests that Amazon.com, Inc. (NASDAQ:AMZN) was found in 279 public hedge fund portfolios, up from 242 funds in Q3. Fisher Asset Management held a major stake in Amazon.com, Inc. (NASDAQ:AMZN) in the first quarter of 2022, with 2.3 million shares worth $7.70 billion.
Here is what Miller Value Partners Opportunity Equity has to say about Amazon.com, Inc. (NASDAQ:AMZN) in its Q1 2022 investor letter:
“For frame of reference, Amazon (NASDAQ:AMZN) bottomed at the same valuation in the financial crisis (side note: Amazon bottomed at 4x EV/GP after the tech bubble burst)! So there’s historical precedent for the lows being in. We will see whether that holds true this time. Regardless, we think there’s significant upside over a 5-year time horizon. The one other topic I want to briefly address is our volatility. We hope to write something about the topic in more depth in the future, but we want our clients and prospective investors to understand our views on it. We think that volatility is significantly misunderstood. We believe it creates opportunities from which we can profit.”
7. The Bank of New York Mellon Corporation (NYSE:BK)
Number of Hedge Fund Holders: 49
Year-to-Date Loss as of May 20: 25.19%
The Bank of New York Mellon Corporation (NYSE:BK) is an American provider of financial products and services, operating via Securities Services, Market and Wealth Services, Investment and Wealth Management, and Other segments. The stock has declined 25.19% year to date as of May 20.
Warren Buffet has consistently held a position in The Bank of New York Mellon Corporation (NYSE:BK) since Q4 2010, with minor exceptions. In Q1 2022, Buffett’s fund owned 72.3 million shares of the company, worth $3.5 billion, representing 0.98% of the total 13F securities.
The Bank of New York Mellon Corporation (NYSE:BK) reported its Q1 results on April 18, posting earnings per share of $0.94, topping analysts’ estimates by $0.08. The $3.93 billion revenue, however, fell short of market predictions by $12.30 million.
On May 19, Deutsche Bank analyst Brian Bedell downgraded The Bank of New York Mellon Corporation (NYSE:BK) to Hold from Buy with a price target of $45, down from $54. The downgrade was part of the analyst’s mid-Q2 outlook for brokers, asset managers, and exchanges.
In the first quarter of 2022, Jean-Marie Eveillard’s First Eagle Investment Management reported a $784 million stake in The Bank of New York Mellon Corporation (NYSE:BK). Overall, in Q4 2021, 49 hedge funds were bullish on the stock.
Here is what Ariel Investments has to say about The Bank of New York Mellon Corporation (NYSE:BK) in its Q4 2021 investor letter:
“Rising interest rates, after a surprisingly long period of low absolute rates and negative “real” rates, will create a headwind. While there has been much debate about the cause of these low rates, we believe the most important factor has been the $120 billion in monthly federal reserve open market bond purchases and the accumulation of an $8 trillion balance sheet. The former will end, and the latter will shrink. It is not just the Fed that has aggressively purchased bonds, bidding up prices and lowering yields. Bond traders and hedge fund managers have added to positions, confident that being on the same side as the Fed was the wise place to be. Now as the Fed is about to become a seller of bonds rather than a buyer, Wall Street’s “smart money” is likely to follow suit. Against this backdrop, fixed income securities and bond substitutes such as high dividend paying utilities and absolute return hedge funds are substantially overpriced and are not likely to produce attractive returns going forward.
This expectation of a reversion to the mean for interest rates helped 2021 performance, though not as much as we had hoped. The yield on the U.S. 10-year Treasury did indeed increase from +0.92% at the beginning of the year to +1.52% at year-end. An underreported story was the poor performance of bonds last year. The Barclays Aggregate Index declined -1.67% for the year ending December compared to a return of +28.71% for equities as measured by the S&P 500. Interest rates have continued to climb in 2022 with the 10-year Treasury at +1.79% as we go to print. This move higher in rates has contributed to our good, early start to 2022. Smaller positions in The Bank of New York Mellon Corporation (BK) also benefited from higher rates, principally with their ability to invest customer cash.”
6. Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders: 84
Year-to-Date Loss as of May 20: 57.38%
Snowflake Inc. (NYSE:SNOW) posted a year-to-date loss of 57.38% as of May 20, making it one of the biggest losers in Warren Buffett’s latest portfolio. Snowflake Inc. (NYSE:SNOW) operates a cloud-based data platform in the United States and internationally. Berkshire Hathaway disclosed a $1.40 billion stake in the company in Q1 2022.
On May 20, Barclays analyst Raimo Lenschow lowered the price target on Snowflake Inc. (NYSE:SNOW) to $218 from $313 and reiterated an Overweight rating on the shares. The analyst’s software survey results show that demand trends and expectations “took a step back from the prior quarter”. He likes Intuit, Splunk, and Workday for the off-cycle Q1 earnings cycle.
Among the hedge funds tracked by Insider Monkey, 84 funds were bullish on Snowflake Inc. (NYSE:SNOW) at the end of the fourth quarter of 2021, up from 73 funds in the earlier quarter. Brad Gerstner’s Altimeter Capital Management is a significant shareholder of Snowflake Inc. (NYSE:SNOW) as of Q1 2022, with 17 million shares worth about $4 billion.
Warren Buffett’s position in Snowflake Inc. (NYSE:SNOW) remains intact despite losses, just like Apple Inc. (NASDAQ:AAPL), The Coca-Cola Company (NYSE:KO), and Bank of America Corporation (NYSE:BAC).
Here is what Baron Global Advantage Fund has to say about Snowflake Inc. (NYSE:SNOW) in its Q1 2022 investor letter:
“Snowflake grew revenues…106% (to $1.2 billion — while new bookings in the fourth quarter alone were $1.2 billion in contract value) with 12% margins. The stock was down 32% in the first quarter. We believe that these companies, along with many others that we own, are the long-term beneficiaries of digital transformation, a multi-decade paradigm shift sweeping global economies today. Frank Slootman, Snowflake’s CEO, explained it this way in his most recent earnings call with investors:
“Snowflake’s growth is driven by digital transformation and long-term secular trends in data science and analytics, enabled by cloud-scale computing and Snowflake’s cloud-native architecture. Snowflake is a single data operations platform that addresses a broad spectrum of workload types and incredible performance economy and governance. As a platform, Snowflake enables the data cloud, a world without silos and the promise of unfettered data science.”
In plain English it means that we want to make better decisions and we have all this data available to us. Snowflake will enable businesses to utilize all their data to improve their decision-making. (Click here to read full text)
5. General Motors Company (NYSE:GM)
Number of Hedge Fund Holders: 90
Year-to-Date Loss as of May 20: 42.13%
General Motors Company (NYSE:GM) is a Michigan-based automobile manufacturer that designs and sells trucks, crossovers, cars, and automobile parts and accessories in North America, the Asia Pacific, the Middle East, Africa, South America, the United States, and China. General Motors Company (NYSE:GM) stock is down 42.13% year-to-date as of May 20.
Warren Buffett is a long-term shareholder of General Motors Company (NYSE:GM), initially investing in the company back in Q1 2012. The billionaire, as of Q1 2022, held 62 billion shares of General Motors Company (NYSE:GM), worth $2.7 billion. It is one of the biggest losers in the Berkshire portfolio.
On May 11, Wells Fargo analyst Colin Langan double downgraded General Motors Company (NYSE:GM) to Underweight from Overweight, slashing the price target to $33 from $74. According to the analyst, battery electric vehicle costs have “massively risen” and raw material supply is tight, yet difficult regulations in the US possibly require higher BEV sales, the analyst told investors. In addition to that, the analyst sees headwinds from price normalization, inflationary costs, and the 2023 UAW contract negotiations.
According to Insider Monkey’s Q4 data, 90 hedge funds were bullish on General Motors Company (NYSE:GM), up from 77 funds in the preceding quarter. Harris Associates is a significant position holder in the company, with 41 million shares worth $1.79 billion.
Here is what Oakmark Global Fund has to say about General Motors Company (NYSE:GM) in its Q1 2022 investor letter:
“General Motors (NYSE:GM) was a detractor during the quarter, due to increased macro uncertainty, higher fuel prices, and concerns over rising input costs, which pressured the company in particular and the auto industry as a whole. While we are closely monitoring the potential impact of these dynamics, industry demand remains robust, driven by strong consumer balance sheets and pent-up demand after multiple years of constrained production. We also remain confident in GM’s ability to navigate a complex operating environment, which the company has consistently demonstrated over the past few years. Finally, the long-term picture remains bright. We believe GM is significantly undervalued, is well-positioned for the long-term transition to electric vehicles and has numerous needle-moving ancillary business opportunities (most notably Cruise, which is an industry leader in autonomous vehicle technology) that are underappreciated.”
4. Nu Holdings Ltd. (NYSE:NU)
Number of Hedge Fund Holders: 28
Year-to-Date Loss as of May 20: 61.82%
Nu Holdings Ltd. (NYSE:NU) is a Brazilian digital financial services and technology company, offering card-based and mobile payment solutions. Berkshire Hathaway added Nu Holdings Ltd. (NYSE:NU) to its Q4 portfolio by purchasing 107.1 million shares worth more than $1 billion. In the first quarter of 2022, the stake is valued at almost $827 million.
On May 13, Susquehanna analyst James Friedman lowered the price target on Nu Holdings Ltd. (NYSE:NU) to $10 from $14 and maintained a Positive rating on the shares. The analyst observed that despite margin headwinds, Nu Holdings Ltd. (NYSE:NU) seems the most well positioned to survive a deterioration in credit quality, compared to industry peers.
According to Insider Monkey’s Q4 data, 28 hedge funds reported owning bullish positions in Nu Holdings Ltd. (NYSE:NU), with combined stakes worth $4.6 billion.
3. StoneCo Ltd. (NASDAQ:STNE)
Number of Hedge Fund Holders: 35
Year-to-Date Loss as of May 20: 51.71%
StoneCo Ltd. (NASDAQ:STNE) offers financial technology solutions to businesses and vendors to conduct electronic commerce across in-store, online, and mobile channels in Brazil. Berkshire Hathaway first invested in StoneCo Ltd. (NASDAQ:STNE) in the fourth quarter of 2018, and in Q1 2022, the hedge fund owned a $125 million position in the company. As of May 20, the share price has dropped 51.71% year-to-date.
Cantor Fitzgerald analyst Josh Siegler initiated coverage of StoneCo Ltd. (NASDAQ:STNE) on April 8 with an Overweight rating and a $15 price target. While the analyst believes that Brazilian inflation will remain high in 2022, he thinks the stock has overcorrected. The market may be overlooking StoneCo Ltd. (NASDAQ:STNE)’s ability to limit the financial expense impact via increased prepayment fees, the analyst added.
According to Insider Monkey’s Q4 data, 35 hedge funds were long StoneCo Ltd. (NASDAQ:STNE), with collective stakes worth $892.5 million, compared to 37 funds in the last quarter, holding stakes in the company amounting to $2.2 billion. D E Shaw, in the first quarter of 2022, reported a $64.2 million stake in StoneCo Ltd. (NASDAQ:STNE).
Here is what ClearBridge Investments Global Growth Strategy has to say about StoneCo Ltd. (NASDAQ:STNE) in its Q4 2021 investor letter:
“We also sold and trimmed several names in the emerging market and emerging growth areas, to manage risk and pursue growth companies with a better long-term risk/reward. These included Brazilian payments provider StoneCo. Having expected a rebound in their performance post a profit warning earlier in the year, rising interest rates in Brazil and investments in newly acquired companies increased operating costs and depressed earnings.”
2. VeriSign, Inc. (NASDAQ:VRSN)
Number of Hedge Fund Holders: 34
Year-to-Date Loss as of May 20: 34.33%
VeriSign, Inc. (NASDAQ:VRSN) is a Virginia-based company that provides domain registry services. Berkshire Hathaway has consistently held its VeriSign, Inc. (NASDAQ:VRSN) stake since Q4 2012. In the first fiscal quarter of 2022, the hedge fund reported owning 12.8 million VeriSign, Inc. (NASDAQ:VRSN) shares, worth $2.85 billion.
Baird analyst Rob Oliver on April 29 downgraded VeriSign, Inc. (NASDAQ:VRSN) to Neutral from Outperform with a price target of $210, down from $260. He slashed fiscal 2022 estimates given a lower domain outlook amid a softening of demand after the pandemic-driven surge, as well as incremental weakness in the macro environment, the analyst told investors, who also expects the “sudden domain uncertainty could weigh on shares”.
Among the hedge funds tracked by Insider Monkey, 34 funds were bullish on VeriSign, Inc. (NASDAQ:VRSN) at the end of Q4 2021, down from 40 funds in the last quarter. Jim Simons’ Renaissance Technologies held a significant position in the company at the end of the first quarter of 2022, with more than 4 million shares worth $893.5 million.
Here is what Baron Asset Fund has to say about VeriSign, Inc. (NASDAQ:VRSN) in its Q4 2021 investor letter:
“Verisign, Inc. provides internet infrastructure services worldwide and is best known for its exclusive role managing the .com and .net domains, for which it receives annual fees from all those domain owners. Shares of Verisign gained after reporting strong revenue growth and operating margins that exceeded Wall Street forecasts. We continue to be positive on Verisign’s business, based on its strong competitive position, capacity for global growth in domain names, and its ongoing ability to generate substantial free cash flow.”
1. RH (NYSE:RH)
Number of Hedge Fund Holders: 58
Year-to-Date Loss as of May 20: 50.10%
RH (NYSE:RH) is a California-based company that offers home furnishings such as furniture, lighting, textiles, bathware, decor, and outdoor and garden fittings. Warren Buffett added RH (NYSE:RH) to his portfolio in Q3 2019, by purchasing 1.20 million shares priced at $142.38 each. In Q1 2022, Berkshire Hathaway boosted its RH (NYSE:RH) stake by 20%, holding 2.17 million shares worth $707.6 million. Year to date, RH (NYSE:RH) stock has declined by 50.10%, making it one of the biggest losers in Warren Buffett’s latest portfolio.
On May 16, Morgan Stanley analyst Simeon Gutman initiated coverage of RH (NYSE:RH) with an Equal Weight rating and a $400 price target. The analyst views RH (NYSE:RH) as a “transcendent brand with the most long-term upside potential” in his coverage. However, a 12-month view gives him “pause” with a “category reversion and potential recession” looming.
According to Insider Monkey’s Q4 data, 57 hedge funds were long RH (NYSE:RH), with combined stakes worth $4.8 billion. In Q1 2022, Stephen Mandel’s Lone Pine Capital was a significant shareholder of the company, with 1.70 million shares worth $557.35 million.
Here is what Polen Global SMID Company Growth Fund has to say about RH (NYSE:RH) in its Q4 2021 investor letter:
“Our most significant detractors from performance over the fourth quarter includes RH. Upscale home-furnishings company RH underperformed over the quarter and the year amid rising costs that weighed on expectations and heightened concerns of reduced discretionary spending amid the ongoing pandemic. We expect the company to grow revenues as it rolls out additional galleries across the globe and thoughtfully expands into adjacencies like guest homes and design services. Along with steady margin growth through fixed cost leverage, which the company has consistently shown it can achieve, we believe this expansion should lead to favorable cash earnings growth going forward.”
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Disclosure: None. 10 Biggest Losers in Warren Buffett’s Latest Portfolio is originally published on Insider Monkey.
