We recently compiled a list of the 10 best performing Warren Buffett stocks in 2024. In this article, we are going to take a look at where HEICO Corporation (NYSE:HEI) stands against the other Top-Performing Warren Buffett Stock of 2024.
Warren Buffett has etched his name as the most successful investor on Wall Street by steering a small company into a trillion-dollar empire. The milestone stems from the billionaire investor’s value investing strategy that has always focused on undervalued stocks with tremendous upside potential.
In a year where the overall market has been on an upward trajectory thanks to solid financial results amid a resilient economy and expectations of interest rate cuts, Buffett has outperformed the overall market. His investment firm gaining more than 28% compared to a 17% gain for the S&P 500 over the same period underscores Buffett’s competitive edge in picking and investing in market-beating stocks.
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Buffett, who rose to prominence in the 1960s, has transformed his investment firm into a conglomerate with stakes in companies in the insurance, railroad, retail, manufacturing, and energy sectors. According to Andrew Kligerman, TD Cowen’s Berkshire analyst, Buffett’s performance in 2024 is a testament to his stock-picking skills focused on businesses trading at relatively lower valuations.
Nevertheless, the billionaire investor has been in defensive mode despite the stellar performance for the better part of 2024. Concerned by valuations getting out of hand amid the high interest rate environment and deteriorating economic conditions, Buffett has dumped massive amounts of stocks in companies whose valuations got out of hand.
With the massive sale of stakes, the billionaire has successfully generated significant value as most of the stocks had gained significantly amid the bull run in the market. The stock sale has also allowed the billionaire investor to raise the cash pile in his investment firm to a record $277 billion.
Although Buffett has previously argued against diversification, it’s understandable why his firm decided to reduce stakes in some of the companies. The investments had been a huge success for his firm, locking profits with the overall market at all-time highs.
The fact that Buffett invests through a conglomerate structure, often considered archaic, underscores his edge in the highly competitive investment world. At 94, the ‘Oracle of Omaha’ has started showing signs of slowing down. The appointment of Greg Abel as his successor signals he may not have a significant say in investment decisions in the near future.
What might come as a surprise is that the best-performing Warren Buffett stocks in 2024 are not among the big names that account for the biggest share of Buffett’s portfolio. Instead, they are companies that have remained resilient amid the high interest rate environment that has rattled the stock market.
Additionally, they boast of stocks well positioned to benefit as the macroeconomic environment improves, with the US Federal Reserve cutting interest rates by 50 basis points. The US economy is avoiding recession as the Fed continues to tweak its monetary policy, which should allow the companies to generate more shareholder value and, therefore, continue powering high.
Buffett’s investment portfolio also includes companies with tremendous potential and ability to generate free cash flow owing to resilient core businesses. Consequently, the companies have emerged as a source of passive income, allowing Buffett to generate billions of dollars in dividends. Last year alone, the Oracle of Omaha raked $4.36 billion in dividends from his investments.
Our Methodology
We analyzed Berkshire Hathaway’s Q2 2024 portfolio and picked the best-performing stocks on a year-to-date basis, as of September 20. The list is sorted in ascending order of the year-to-date performance of the stocks.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
HEICO Corporation (NYSE:HEI)
Warren Buffett’s Q2 2024 Stake: $185.37 Million
Year to Date Gain as of September 20: 48.71%
Number of Hedge Fund Investors In Q2 2024: 53
HEICO Corporation (NYSE:HEI) is proving to be a solid investment player in the industrial sector. The company designs, manufactures, and sells aerospace, defense, and electronic-related products and services and has been flying high, as depicted by the stock’s 48.71% year-to-date gain.
Investors have demonstrated greater trust in Heico’s growth path and standing in the market, pushing the stock to higher levels. The firm’s steady performance, strategic purchases, and robust demand for its offerings in the defense and aerospace industries are major elements behind the significant increase in its stock value.
HEICO Corporation (NYSE:HEI) delivered solid third-quarter results that affirmed growth in the core business earnings, exceeding the average forecasts. Operating income increased by 45% in the quarter as net sales jumped 37%. Net income was up 34% to $136.6 million.
Even though there was a minor drop in total sales for the Electronic Technologies Group (ETG) due to reduced demand in non-aerospace and defense areas, especially in the medical products segment, the company is still hopeful about its future expansion opportunities.
Amid the solid financial results, HEICO Corporation (NYSE:HEI)’s acquisition strategy is also positioning it for tremendous growth, underscoring the rally in the market. The acquisition of assets from Honeywell International to back important cockpit display products and the purchase of Cape well Aerial Systems’ divisions in aerial delivery and descent. These strategic decisions not only expand HEICO Corporation’s range of offerings but also set it up for sustained growth in the defense industry.
53 out of the 912 hedge funds part of Insider Monkey’s Q2 2024 database had bought a stake in HEICO Corporation (NYSE:HEI). Warren Buffett’s Berkshire Hathaway owned the biggest stake, which was worth $185.37 million.
Overall HEI ranks 5th on our list of 10 best performing Warren Buffett stocks in 2024. While we acknowledge the potential of HEI as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HEI, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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