In this article, we discuss Warren Buffett’s 8 new stock picks in 2022.
There are few value investors who have accumulated as much fame as Warren Buffett of Berkshire Hathaway, the Omaha-based hedge fund with a portfolio value of over $363 billion at the end of the first quarter of 2022. As interest rates rise and inflation soars, investors have been eagerly waiting for Buffett to give his take on the latest crisis enveloping the stock market. His trading activity, disclosed through mandatory 13F filings, has also attracted a lot of interest since Buffett is famous for being “greedy when others are fearful”.
Speaking at the annual shareholder meeting of Berkshire Hathaway in late April, Buffett reiterated his long-held position that inflation did not affect products that people liked in the long run, noting that the “best thing a person could do is invest in a wonderful business that makes products that are in demand regardless of the performance of the dollar”. Buffett also took a stance against rampant speculation in stocks, comparing the marketplace to a “gambling parlor” and once again stressing that he would not buy Bitcoin since it produced nothing of value.
Buffett also conceded that inflation was affecting his portfolio as well, highlighting that inflation swindled stock and bond investors alike. He further claimed that inflation “swindles the person who keeps their cash under their mattress, it swindles almost everybody”. The latest moves that Buffett has made at the market outline these thoughts in more detail. Some of the top stocks in the investment portfolio of Berkshire Hathaway include Apple Inc. (NASDAQ:AAPL), Bank of America Corporation (NYSE:BAC), and American Express Company (NYSE:AXP).
The legendary investor has embarked on a buying spree as the market becomes more volatile, following a pattern of buying the dip on certain sectors in an economic crisis. Buffett did this during the dotcom crash in 2000 and the housing crash of 2008. In the first three months of 2022, Buffett bought eight new stakes in companies in the financial, healthcare, and energy sectors. For an investor whose top holdings have been consistent for the past ten years, this represents a whole new outlook on the market.
During the first quarter of 2022, the portfolio value of Berkshire Hathaway rose by $33 billion, compared to filings for the fourth quarter of 2021. In the first three months of 2022, the hedge fund led by Buffett made new purchases in eight stocks, additional purchases in seven equities, sold out of 3 firms, and reduced holdings in four companies. The top ten holdings of the fund comprise more than 87% of the overall portfolio.
Our Methodology
The companies listed below were picked from the investment portfolio of Berkshire Hathaway at the end of the first quarter of 2022. The stocks that are a new addition to the portfolio, compared to filings for the fourth quarter of 2021, were selected. Data from around 900 elite hedge funds tracked by Insider Monkey in Q4 2021 was used to identify the number of hedge funds that hold stakes in each firm.
‘Greedy When Others are Fearful’: Warren Buffett’s New Stock Picks in 2022
8. Occidental Petroleum Corporation (NYSE:OXY)
Number of Hedge Fund Holders: 58
Occidental Petroleum Corporation (NYSE:OXY) is an integrated oil and gas firm. Buffett opened a new position in the stock in early 2022 comprising over 136 million shares worth $7.7 billion, representing 2.12% of the Q1 portfolio. The company was last featured in the Berkshire portfolio in late 2019 and early 2020. That position, comprising close to 19 million shares purchased at an average price of $40 per share, was closed in the first quarter of 2020. Occidental stock has climbed in recent months as oil prices reach record highs amid supply disruptions from Russia.
On May 12, Susquehanna analyst Biju Perincheril maintained a Positive rating on Occidental Petroleum Corporation stock and raised the price target to $73 from $71, noting that the firm was on track to pay down debt before a $3 billion share buyback program.
At the end of the fourth quarter of 2021, 58 hedge funds in the database of Insider Monkey held stakes worth $3.8 billion in Occidental Petroleum Corporation, compared to 60 the preceding quarter worth $3.1 billion.
Among the hedge funds being tracked by Insider Monkey, Florida-based investment firm GQG Partners is a leading shareholder in Occidental Petroleum Corporation, with 26 million shares worth more than $1.5 billion.
Just like Apple Inc., Bank of America Corporation, and American Express Company, Occidental Petroleum Corporation is one of the stocks that elite investors are buying amid rising market volatility.
7. HP Inc. (NYSE:HPQ)
Number of Hedge Fund Holders: 39
HP Inc. (NYSE:HPQ) is a personal computing firm. In late March, the company announced that it would be purchasing communications technology firm Poly in a deal worth $3.3 billion. The firm is seeking a more growth-oriented portfolio through the acquisition. At the end of the first quarter of 2022, Berkshire Hathaway owned over 104 million shares of the firm worth $3.7 billion, representing 1.04% of the portfolio. This is a new position of the fund since Berkshire has not previously held the stock.
On April 8, UBS analyst David Vogt downgraded HP Inc. stock to Neutral from Buy with a price target of $40, highlighting that although the firm had solid execution, the shares were “likely to tread water” as the risk/reward profile was now balanced.
Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm AQR Capital Management is a leading shareholder in HP Inc., with 3 million shares worth more than $114 million.
At the end of the fourth quarter of 2021, 39 hedge funds in the database of Insider Monkey held stakes worth $963 million in HP Inc., compared to 34 the preceding quarter worth $1 billion.
6. Citigroup Inc. (NYSE:C)
Number of Hedge Fund Holders: 97
Citigroup Inc. (NYSE:C) is a diversified financial services firm. Continuing on his well-known strategy of buying the dip on financials, Buffett purchased over 55 million shares of the company worth close to $3 billion in the first quarter of 2022, representing 0.81% of the portfolio. In earnings results for the first quarter of 2022, Citigroup beat market expectations on earnings per share and revenue by $0.56 and $1.1 billion respectively. The shares of the firm have soared in the past few months as interest rates rise.
On May 3, Oppenheimer analyst Chris Kotowski maintained an Outperform rating on Citigroup Inc. stock and lowered the price target to $93 from $100, underlining that loan growth and rising interest rates were good for the banks.
At the end of the fourth quarter of 2021, 97 hedge funds in the database of Insider Monkey held stakes worth $6.6 billion in Citigroup Inc., compared to 79 the preceding quarter worth $5.5 billion.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Harris Associates is a leading shareholder in Citigroup Inc., with 26 million shares worth more than $1.4 billion.
In its Q1 2021 investor letter, Artisan Partners Limited Partnership, an asset management firm, highlighted a few stocks and Citigroup Inc. was one of them. Here is what the fund said:
“We fully exited position in Citigroup Inc.. Global financial services company Citigroup Inc. made a $900 million clerical error and received a public reprimand from federal regulators. This, after a decade focused on process control, information technology and risk systems, makes the error substantially more costly than just the $900 million mistake. Regulators believe the company’s risk management improvements have fallen short of expectations. To rectify the situation, a process and technology spending surge could negatively affect 2021-2022 profits by 10% to 20%. Trust and confidence are important in large financial institutions, and this incident combined with the CEO’s sudden retirement shook ours.”
5. Paramount Global (NASDAQ:PARA)
Number of Hedge Fund Holders: 64
Paramount Global (NASDAQ:PARA) is a media and entertainment firm. Latest 13F data shows that Berkshire opened a new position in the stock comprising over 68 million shares worth $2.6 billion, representing 0.71% of the portfolio in the first quarter of 2022. In earnings results for the first quarter, the company reported a 95% growth in streaming subscription revenue. The total streaming subscriptions for the firm grew over 62 million after 6.8 million additions to the streaming platform of the firm in early 2022.
On May 7, investment advisory Deutsche Bank maintained a Buy rating on Paramount Global stock and lowered the price target to $43 from $45. Analyst Bryan Kraft issued the ratings update.
At the end of the fourth quarter of 2021, 64 hedge funds in the database of Insider Monkey held stakes worth $1 billion in Paramount Global, the same as in the previous quarter worth $1.2 billion.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Ariel Investments is a leading shareholder in Paramount Global, with 5.6 million shares worth more than $213 million.
Along with Apple Inc., Bank of America Corporation, and American Express Company, Paramount Global is one of the stocks that hedge funds are monitoring.
4. Celanese Corporation (NYSE:CE)
Number of Hedge Fund Holders: 35
Celanese Corporation (NYSE:CE) is a specialty materials firm. Berkshire Hathaway owned over 7.8 million shares of the company at the end of the first quarter of 2022 worth $1.1 billion, representing 0.3% of the portfolio. Celanese has an impressive dividend history stretching back sixteen years. Over the past twelve years, the payouts have consistently grown. On April 19, the company declared a quarterly dividend of $0.68 per share, in line with previous. The forward yield was 1.85%.
On April 8, JPMorgan analyst Jeffrey Zekauskas maintained an Overweight rating on Celanese Corporation stock with a price target of $190, noting that the firm was benefiting from extended tightness in global acetyls markets.
At the end of the fourth quarter of 2021, 35 hedge funds in the database of Insider Monkey held stakes worth $1 billion in Celanese Corporation, up from 26 in the previous quarter worth $735 million.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Holocene Advisors is a leading shareholder in Celanese Corporation, with 1.5 million shares worth more than $223 million.
In its Q4 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Celanese Corporation was one of them. Here is what the fund said:
“In Q4, the portfolio participated in the up market but trailed its benchmark. Relative performance during the period was held back by our comparative sector and industry exposures, as well as by underperformance among our health care holdings. Our sales activity in Q4 was focused on our successes. We fully exited Celanese Corporation, a chemicals and advanced materials producer, as shares have benefited from rising raw materials prices.”
3. McKesson Corporation (NYSE:MCK)
Number of Hedge Fund Holders: 57
McKesson Corporation (NYSE:MCK) provides healthcare services. In late March, authorities in Europe approved the sale of the European businesses of McKesson to Phoenix. The latter will take control of the former’s interests in Italy, Ireland, Portugal, Belgium, and Slovenia as part of the deal. The sale of the French business of McKesson is still under review as the company is the largest wholesaler in France. Berkshire owns more than 2.9 million shares in the firm worth $894 million, representing 0.24% of the portfolio.
On May 11, Credit Suisse analyst AJ Rice kept an Outperform rating on McKesson Corporation stock and raised the price target to $377 from $333, noting that the firm had posted quarterly results below expectations but announced affirmative initial guidance for 2023.
Among the hedge funds being tracked by Insider Monkey, New York-based firm Pzena Investment Management is a leading shareholder in McKesson Corporation, with 2.7 million shares worth more than $827 million.
At the end of the fourth quarter of 2021, 57 hedge funds in the database of Insider Monkey held stakes worth $2.5 billion in McKesson Corporation, up from 51 in the previous quarter worth $2.2 billion.
In its Q4 2021 investor letter, Broyhill Asset Management, an asset management firm, highlighted a few stocks and McKesson Corporation was one of them. Here is what the fund said:
“Shares of McKesson Corporation tacked on another 23% during the second half. Even after gaining 44% for the full year, the stock still trades at a 50% discount to the market. Like our Dollar Tree investment, investor sentiment around McKesson languished for years as deflating generic drug prices compressed operating margins and the uncertainty of opioid litigation capped valuation multiples. But pricing has stabilized, a global opioid settlement appears imminent, and prescription trends are rapidly recovering at the same time vaccine-related revenues are accelerating.
Since FY19, revenues have grown at 7% annually, driving earnings per share growth, which should shake out at 11% – 14% through FY22. Over this three-year period, McKesson Corporation has generated $15 billion in cumulative free cash flow (roughly two-thirds of its market capitalization at the beginning of the period), returning roughly half of that to shareholders through repurchases (shares outstanding have declined by 24% on $6B of buybacks) and dividends (which have increased 22% over this period), while reducing leverage from 2.8x to 1.6x.
Does that sound like a business that should change hands at half the market’s valuation? We don’t think so. Even assuming shares traded back to three-quarters of the market’s multiple (in line with the average of the past decade), shares could return 15% – 20% annually over the next few years.”
2. Markel Corporation (NYSE:MKL)
Number of Hedge Fund Holders: 37
Markel Corporation (NYSE:MKL) is a financial holding company. Latest data reveals that Berkshire Hathaway owned 420,293 shares in the company at the end of the first quarter of 2022 worth $620 million, representing 0.17% of the portfolio. The revenues of Markel have climbed four-fold in the past decade, with net income growing at a rate of over 20% during the period. The insurance business of the firm, generally a solid bet in times of inflation, has also shown pricing power.
On April 28, Truist analyst Mark Hughes maintained a Hold rating on Markel Corporation stock and raised the price target to $1,500 from $1,400, noting that the quarterly results of the firm had shown improved underwriting performance.
At the end of the fourth quarter of 2021, 37 hedge funds in the database of Insider Monkey held stakes worth $733 million in Markel Corporation, compared to 25 in the preceding quarter worth $689 million.
Among the hedge funds being tracked by Insider Monkey, London-based firm Polar Capital is a leading shareholder in Markel Corporation, with 98,750 shares worth more than $145 million.
In its Q3 2021 investor letter, Vltava Fund, an asset management firm, highlighted a few stocks and Markel Corporation was one of them. Here is what the fund said:
“It is interesting that although Berkshire Hathaway’s business model is fundamentally very simple, produces excellent results, and has been in the public eye for decades, almost no one has managed to replicate it. The implementation of this idea is seemingly very difficult. In fact, the sole company that has been largely successful in following Berkshire’s footsteps is Markel Corporation. Its foundation is likewise a successful and highly profitable insurance business that produces free capital for further investments into both public and non-public shares in combination with exemplary asset allocation.
Much of the credit for this goes to its co-CEO, Tom Gayner. Markel Corporation was originally a family business founded in 1930 by the Markel family. Tom Gayner came onto the scene in 1990, when he took over the investment part of Markel, and since 2016 he has held the position of co-CEO alongside Richard White. Tom Gayner is first and foremost an excellent investor and asset allocator. At Markel, he is currently in charge of a USD 28 billion investment portfolio, as well as the part that invests in private companies and goes by the name Markel Ventures. He has been instrumental in driving the stock price from USD 10 to USD 1,200 during his tenure. That is about the same percentage increase that Berkshire’s shares had over the same period.” (Click here to read full text)
1. Ally Financial Inc. (NYSE:ALLY)
Number of Hedge Fund Holders: 48
Ally Financial Inc. (NYSE:ALLY) is a digital financial services firm. The company posted earnings for the first quarter of 2022 on April 14, reporting earnings per share of $2.03, beating expectations by $0.12. The revenue over the period was $2.1 billion, up over 10% year-on-year and beating expectations by $10 million. Buffett opened a new position in the stock during the first quarter of 2022. This stake comprises close to 9 million shares worth $389 million, representing 0.1% of the portfolio.
On April 18, Wells Fargo analyst Donald Fandetti maintained an Overweight rating on Ally Financial Inc. stock and lowered the price target to $50 from $57, noting that the firm was poised to exceed high end of guidance numbers in the coming months.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Harris Associates is a leading shareholder in Ally Financial Inc., with 26 million shares worth more than $1.1 billion.
At the end of the fourth quarter of 2021, 48 hedge funds in the database of Insider Monkey held stakes worth $2.3 billion in Ally Financial Inc., compared to 57 in the preceding quarter worth $2.5 billion.
You can also take a peek at 10 Best Stocks for Animal Lovers and 10 Best Nickel Stocks to Buy Now.
Follow Insider Monkey on Twitter
Suggested Articles:
- 10 Best Roth IRA Stocks to Buy According to Reddit
- 10 Best Dividend Stocks for Roth IRA
- 10 Best Money Saving Tips According to Experts
This article is originally published at Insider Monkey.
