In this article, we discuss the stocks Warren Buffett trusts despite suffering losses.
2022 has been a trying year for both Wall Street professionals and average investors alike. Since the beginning of the year, the S&P 500 has declined by as much as 24% from its all-time closing high, while the tech-heavy Nasdaq Composite has taken an even worse beating, with a peak-to-trough drop since its record-closing high in November of 34%. While such an environment would deter most investors from dipping into the market, there are those like Berkshire Hathaway’s Warren Buffett that see it as an opportunity for success. Despite an incredible amount of volatility, the Oracle of Omaha has not lost faith in the U.S. equity market, going on a buying spree and doubling down on his bets on a number of large-cap stocks.
The billionaire investor’s $300 billion 13F investment portfolio consists of 47 companies as of June 30, two stocks less than the previous quarter. Although he invested more money into his stock portfolio, Buffett’s hedge fund’s value fell from $364 billion at the end of the first quarter, a consequence of the slowing economy, high inflation, tighter labor markets, and rising rates in Q2 2022. While the market weakness boosted Buffett’s purchasing power, it also led to a $53 billion investment loss for Berkshire Hathaway. However, according to a recent CNBC interview, the billionaire investor considers the loss as meaningless, stating that:
“The amount of investment gains/losses in any given quarter is usually meaningless and delivers figures for net earnings per share that can be extremely misleading to investors who have little or no knowledge of accounting rules.”
Some of the most prominent stocks that Warren Buffett trusts despite suffering losses include Amazon.com, Inc. (NASDAQ:AMZN), Snowflake Inc. (NYSE:SNOW), and U.S. Bancorp (NYSE:USB), among others listed below.
Our Methodology
We used the Q2 2022 13F portfolio of Warren Buffett’s Berkshire Hathaway for this analysis, selecting the stocks with the highest year-to-date decline in their share prices. We have arranged the list according to the hedge fund sentiment around the securities as of Q2 2022, which was gauged from Insider Monkey’s database of 900+ elite hedge funds.
Warren Buffett Trusts in These 10 Stocks Despite Losses
10. STORE Capital Corporation (NYSE:STOR)
Berkshire Hathaway’s Stake Value: $180.69 million
YTD Percentage Decline in Share Price as of August 21: 20.55%
Number of Hedge Fund Holders: 22
STORE Capital Corporation (NYSE:STOR) is a publicly traded American real estate investment trust (REIT) headquartered in Scottsdale, Arizona. The company provides financial solutions to customers in a wide variety of industries across the service, retail, and manufacturing sectors, with a focus on investing in profit-center real estate. Warren Buffett, as of Q2 2022, owned more than 6.92 million shares worth approximately $181 million.
In June, Jefferies analyst Linda Tsai lowered the price target on Store Capital Corporation to $27 from $29 and maintained a ‘Hold’ rating on STOR shares. The analyst noted that REITs underperforming during a period of recession was by no means a guarantee, and stated that real estate has demonstrated “robust returns” during past stagflation periods. The analyst recommends that investors look into property types with rent inflation potential to offset occupancy pressures, such as Industrial, Storage, and Residential properties.
According to Insider Monkey’s Q2 data, 22 hedge funds were bullish on STORE Capital Corporation on June 30, compared to 24 funds in the prior quarter. As of Q2 2022, Millennium Management’s Israel Englander was a notable stakeholder of the company, with 3.06 million shares worth $79.8 million.
Similar to Amazon.com, Inc., Snowflake Inc., and U.S. Bancorp, Warren Buffett maintained his faith in STORE Capital Corporation during Q2.
9. Liberty Latin America Ltd. (NASDAQ:LILA)
Berkshire Hathaway’s Stake Value: $20.5 million
YTD Percentage Decline in Share Price as of August 21: 41.37%
Number of Hedge Fund Holders: 29
Liberty Latin America Ltd. (NASDAQ:LILA) is a Bermuda-based company that operates as a telecommunications company, offering video, broadband Internet, telephony, and mobile services. Warren Buffett added Liberty Latin America Ltd. to his portfolio in Q1 2018, and in Q2 2022, the billionaire owned 2.6 million shares of the company worth $20.5 million.
On August 3, Liberty Latin America Ltd. posted Q2 revenue of $1.22 billion, up 4.3% year-over-year, and beating the market consensus by $20 million.
According to Insider Monkey’s database, Liberty Latin America Ltd. was part of 29 hedge funds’ portfolios at the end of June 2022, compared to 36 funds in the preceding quarter. Ashe Capital is the leading stakeholder of the company, with roughly 12.4 million shares worth $96.5 million.
Here is what Steel City Capital had to say about Liberty Latin America Ltd. in its Q1 2022 investor letter:
“Liberty Latin America (Nasdaq: LILA): LILA is the Rodney Dangerfield of the John Malone empire – it don’t get no respect. The company is a leading telecommunications provider (broadband, television, wireless) operating in over 20 countries across Latin America and the Caribbean. Shares have had a tough go since spinning out from Liberty Global in 2018. At separation, the valuation was rich, but a lot of so-called value investors rushed in anyways because they thought any investment opportunity that checked the boxes of “spin-off” and “John Malone” had to be a money-maker. Wrong. Add to this some pretty ugly financial performance brought about by Hurricane Maria in Puerto Rico and a cumbersome (but not all the complicated) capital structure, and it’s easy to see why shares have performed so poorly. But as you’ve no doubt read in prior quarters’ letters, I’m a big believer in the notion that past performance is not indicative of future results. Today’s market cap is ~$2.1 billion (and shrinking via an ongoing buyback program) and I can very easily underwrite free cash flow north of $400 million in 2024. This reflects a P/FCF multiple of 5.25x / a free cash flow yield of nearly 20%. This is exceptionally cheap for a company with recurring cash flow streams and a very long opportunity to grow via penetration in the years to come.”
8. Floor & Decor Holdings, Inc. (NYSE:FND)
Berkshire Hathaway’s Stake Value: $301 million
YTD Percentage Decline in Share Price as of August 21: 31.97%
Number of Hedge Fund Holders: 29
Headquartered in Smyrna, Georgia, Floor & Decor Holdings, Inc. is a multi-channel American specialty retailer of hard surface flooring and related accessories. Warren Buffett’s hedge fund held 4.78 million Floor & Decor Holdings, Inc. shares in Q2 2022, worth about $301 million.
On July 27, Wells Fargo analyst Zachary Fadem lowered the price target on Floor & Decor Holdings, Inc. to $85 from $95 and maintained an ‘Overweight’ rating on the shares. While shares are down 45% year-to-date, suggesting recessionary scenarios, the analyst believes that the “numbers still need to come down.”
According to Insider Monkey’s data, 29 hedge funds were bullish on Floor & Decor Holdings, Inc. at the end of June 2022, compared to 30 funds in the prior quarter. Colin Moran’s Abdiel Capital Advisors is one of the leading position holders in the company, with 4.3 million shares worth $274 million.
Here is what Argosy Investors had to say about Floor & Decor Holdings, Inc. in its Q1 2022 investor letter:
“Floor & Decor Holdings, Inc., was “cyclical” risk sales in the sense that the stock has benefitted from some pandemic-related boosts in sales and/or they are more exposed to economic downturns. Floor & Décor is a terrific business that we would love to own more of at a better price. Given the significant amount of home renovations that have occurred during the pandemic, we thought better of our continued ownership in this stock until we were at a more favorable point in the economic cycle.”
7. StoneCo Ltd. (NASDAQ:STNE)
Berkshire Hathaway’s Stake Value: $82.55 million
YTD Percentage Decline in Share Price as of August 21: 55.28%
Number of Hedge Fund Holders: 30
StoneCo Ltd. (NASDAQ:STNE) is a financial technology and software solutions company that provides an end-to-end, cloud-based technology platform for merchants to conduct electronic commerce using in-store, online, and mobile channels. Although the stock has experienced a sharp drop of close to 55% year-to-date, Warren Buffett’s Berkshire Hathaway held on to its 10.7 million shares of the company as of the end of Q2, which were worth approximately $82.5 million on June 30.
Susquehanna analyst James Friedman lowered his price target on StoneCo Ltd. to $20 from $28 and kept a ‘Positive’ rating on the shares on July 11. According to the analyst, the company is sequentially improving its profitability despite continued interest rate headwinds. Although Friedman was encouraged by StoneCo Ltd.’s conviction, he stated that his target was reduced on lower estimates and peer group compression.
According to Insider Monkey’s Q2 data, 30 hedge funds were long StoneCo Ltd., down from 43 funds in the previous quarter. Nitin Saigal and Dan Jacobs’ Kora Management was a prominent stakeholder of the company, with 4.6 million shares worth roughly $35.8 million.
Here is what Nordstern Capital had to say about StoneCo Ltd. in its Q2 2022 investor letter:
“‘To grow its customer base, X.com had been giving out lines of credit to prospective customers, part of its plan for a full suite of financial services products. But with X.com expanding as fast as it had, appropriate underwriting had taken a back seat.’ – Jimmy Soni, in ‘The Founders’
StoneCo Ltd. (Stone) today is seen as a payment provider with lower margins than its peers in a structurally difficult environment in Brazil: strong competition, declining take rates, increasing funding costs. The last two quarterly updates indicated improvement in all business lines for Stone and management did forecast further margin increases throughout all of 2022. In contrast to the other payment providers, Stone also has a sizable software business. In addition, Stone is working towards becoming a full-fledged financial services provider. Both endeavors add costs to the P&L, but do not yet add meaningful profits, which is about to change. Particularly the lending business could become bigger and more profitable than the current bread-and-butter payments business. However, the lending business was suspended last year after experiencing issues that resemble those of the early PayPal from more than two decades ago (“X.com” was renamed “PayPal” in 2001)…” (Click here to see the full text)
6. VeriSign, Inc. (NASDAQ:VRSN)
Berkshire Hathaway’s Stake Value: $2.14 billion
YTD Percentage Decline in Share Price as of August 21: 21.89%
Number of Hedge Fund Holders: 35
Verisign, Inc. (NASDAQ:VRSN), an American company based in Reston, Virginia, is a global provider of domain name registry services and internet infrastructure. At the end of Q2 2022, Warren Buffett’s hedge fund still held 12.8 million shares of VeriSign, Inc., worth about $2.14 billion.
For the first quarter of 2022, Verisign, Inc. reported GAAP EPS of $1.54, beating market estimates by $0.02. The company’s quarterly revenues came in at $352 million, above consensus estimates by $3.13 million.
Of the hedge funds tracked by Insider Monkey’s database, 35 reported having ownership of stakes in Verisign, Inc. as of the end of the second quarter of 2022. Of these, Jim Simons’ Renaissance Technologies was one of the most significant shareholders of VeriSign, Inc. with 3.59 million shares worth more than $662 million.
In addition to Amazon.com, Inc., Snowflake Inc., and U.S. Bancorp, Warren Buffett remains bullish on VeriSign, Inc..
Here is what investment firm Baron Funds had to say about the prospects of Verisign, Inc. 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.”
5. Celanese Corporation (NYSE:CE)
Berkshire Hathaway’s Stake Value: $1.07 billion
YTD Percentage Decline in Share Price as of August 21: 33.66%
Number of Hedge Fund Holders: 36
Celanese Corporation (NYSE:CE), formerly known as Hoechst Celanese, is an American technology and specialty materials company that operates as a global chemical leader in the production of differentiated chemistry solutions used in most major industries and consumer applications. Warren Buffett raised his stake in Celanese Corporation by 17% in Q2, holding 9.15 million shares worth more than $1 billion.
On August 2, Barclays analyst Michael Leithead lowered the price target on Celanese Corporation to $165 from $190 and kept an ‘Overweight’ rating on the shares. The analyst thinks the second quarter represented another solid quarter for the company, with the one negative in the quarter being its acetate tow margin weakness.
Among the hedge funds tracked by Insider Monkey, Lyrical Asset Management is a notable stakeholder of Celanese Corporation, with roughly 1.3 million shares worth $152 million. Overall, 36 hedge funds were bullish on the stock at the end of June 2022, with collective stakes amounting to $1.82 billion.
Here is what Vltava Fund had to say about Celanese Corporation in its Q1 2022 investor letter:
“We then used the money freed up to, among other things, open three new positions. The stock price declines during the Russian invasion brought a lot of good prices to the market. Out of all the possibilities we considered, we picked the stocks of Celanese (CE).
Celanese is the world’s largest producer of acetic acid and its chemical derivatives, including vinyl acetate monomers and emulsions. Their applications are used in a wide range of industries, such as automotive tobacco, coatings, construction, energy, telecommunications, food, and medical. Celanese recently closed the acquisition of a large part of DuPont’s business, which will make Celanese an even bigger player in the industry while reducing the cyclicality of its business. The acquisition is quite large and should deliver significant value to shareholders that in our view is not at all presently reflected in the share price. Celanese is a business that stands more or less aside from the main interests of most investors, but it is a company with very high returns on capital, strong free cash flow, and historically very efficient resource allocation.”
4. U.S. Bancorp (NYSE:USB)
Berkshire Hathaway’s Stake Value: $5.5 billion
YTD Percentage Decline in Share Price as of August 21: 16.48%
Number of Hedge Fund Holders: 43
U.S. Bancorp is an American bank holding company based in Minnesota. The company offers a variety of financial services, including lending and depository services, cash management, as well as investment management services.
On July 12, Citi analyst Keith Horowitz lowered his price target on U.S. Bancorp to $50 from $53 and maintained a ‘Neutral’ rating on the shares. The analyst refreshed his U.S. bank models ahead of the second quarter earnings season, dropping his price targets to reflect the losses from the recent Federal Reserve stress test. According to Horowitz, a lot of uncertainty is priced into bank stocks, making the risk/reward setup for the group “very attractive.”
At the end of the second quarter of 2022, 43 hedge funds tracked by Insider Monkey owned stakes in U.S. Bancorp, up from 40 in the previous quarter. Those stakes held a collective value of over $6.54 billion. First Eagle Management was the company’s leading shareholder in Q2, owning a $439 million stake.
ClearBridge Investments mentioned U.S. Bancorp in its Q4 2021 investor letter. Here is what the firm had to say:
“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We have increased our exposure to interest-rate sensitive banks by adding to existing positions in U.S. Bancorp.”
3. Moody’s Corporation (NYSE:MCO)
Berkshire Hathaway’s Stake Value: $6.7 billion
YTD Percentage Decline in Share Price as of August 21: 20.53%
Number of Hedge Fund Holders: 48
Moody’s Corporation is an American business and financial services company that acts as the holding company for Moody’s Investors Service and Moody’s Analytics. The company provides investors with credit ratings, risk analysis, and research for stocks, bonds, and government entities.
On August 19, Oppenheimer analyst Owen Lau raised the price target on Moody’s Corporation to $348 from $313 and kept an ‘Outperform’ rating on the company’s shares. According to the analyst, there are early indicators, such as the most recent fund flows and IG/HY spreads, that point towards supply issuance and demand reaching equilibrium soon. Although Q3 issuance remains challenging, the analyst remains bullish on the long term trend and the company’s competitive position.
Chris Hohn’s TCI Fund Management was one of Moody’s Corporation’s largest investors among the funds tracked by our database, owning a $2.24 billion stake that consisted of 8.24 million shares. Overall, 48 hedge funds reported owning stakes in Moody’s Corporation as of the second quarter of 2022.
2. Snowflake Inc. (NYSE:SNOW)
Berkshire Hathaway’s Stake Value: $851.79 million
YTD Percentage Decline in Share Price as of August 21: 54.25%
Number of Hedge Fund Holders: 81
Snowflake Inc. is a cloud computing data company. Warren Buffett’s Berkshire Hathaway owns 6.12 million shares of Snowflake Inc. as of Q2, worth about $852 million. Despite a 54% year-to-date drop, billionaire Warren Buffett has not lost trust in Snowflake, Inc..
Barclays analyst Raimo Lenschow raised the price target on Snowflake Inc. to $210 from $158 and kept an ‘Overweight’ rating on the shares. According to the analyst, investors are likely searching for confidence that the company’s consumption model will remain strong in a more challenging spend environment and he expects “another quarter of elevated volatility post earnings.”
At the end of Q2 2022, 65 hedge funds were long Snowflake Inc., holding stakes worth $5.12 billion in the company. This is compared to 81 positions in the previous quarter with stakes worth $9.73 billion. Brad Gerstner’s Altimeter Capital Management is the biggest stakeholder of the company, with 17 million shares worth $5.75 billion.
Here is what ClearBridge Aggressive Growth Strategy had to say about Snowflake Inc. in its Q2 2022 investor letter:
“Snowflake operates a cloud-based data platform for small and medium-sized businesses and enterprise customers. The company is a key beneficiary of software spending moving to the cloud, as well as the increasing strategic importance of data. With the potential to address the large and growing market for data cloud, a roughly $250 billion plus opportunity by 2026, we see a long runway for growth ahead. Although the company is already profitable, we believe Snowflake still has significant room for free cash flow margin expansion.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Berkshire Hathaway’s Stake Value: $1.13 billion
YTD Percentage Decline in Share Price as of August 21: 21.58%
Number of Hedge Fund Holders: 252
One of the most prominent stocks in Warren Buffett’s investment portfolio, Amazon.com, Inc. stock has dropped more than 21% year-to-date. The billionaire investor raised his stake in Amazon.com, Inc. by 1,900% in Q2, giving him ownership of 10.6 million shares worth $1.13 billion, accounting for 0.37% of his total 13F portfolio’s exposure.
Amid August 17 reports that Amazon.com, Inc. will impose an incremental $0.35 per item fee on Fulfilled By Amazon items sold in the U.S. or Canada during the holiday season, Morgan Stanley analyst Brian Nowak noted that this incremental fee comes after the company raised its FBA fees by about 5% earlier in the year. According to the analyst, the incremental fee will lead to about $570 million and $90 million in Q4 and Q1 EBIT respectively, and calls the move a “positive signal.” Nowak maintained an ‘Overweight’ rating and $175 price target on Amazon.com, Inc. shares.
According to Insider Monkey’s Q2 data, 252 hedge funds were bullish on Amazon.com, Inc., compared to 271 funds in the previous quarter. Skye Global Management is a prominent position holder in the company, with 15.4 million shares worth $1.6 billion.
Here is what Alphyn Capital had to say about Amazon.com, Inc. in its Q2 2022 investor letter:
“It is interesting to see how sentiment on Amazon went from positive to negative in one quarter, as it transpired that it too was not as immune to post-covid slowdowns as some, myself included, had expected. However, I feel confident that Amazon, as the apex predator in the e-commerce space, will navigate market softness better than most other retailers. Moreover, once it finishes with its current capex cycle, it will continue to improve margins. Andy Jassy is reportedly spending one-third of his time focused on capacity and supply issues in the retail division.”
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This article is originally published at Insider Monkey.
