In this article, we discuss Berkshire Hathaway’s stock portfolio and Warren Buffett’s recent buys.
The CEO of Berkshire Hathaway, Warren Edward Buffett, is the most successful investor in the world. He is the highest paid hedge fund manager of all time and has a net worth of $118.3 billion as of August 23, 2023. Warren Buffett’s net worth is way less than what it would have been if he had kept the money to himself. Along with his close friend Bill Gates, he launched the Giving Pledge program in 2010, where they asked billionaires to donate at least 50% of their wealth to charitable causes. Buffett himself has given away $51 billion to such causes. He has pledged to donate 99% of his wealth to charity after his death.
Warren Buffett was born in Omaha and due to his lifetime of success, he has been named the ‘Oracle of Omaha’. He was born to the US congressman, Howard Buffett, who has been a major influence on his life. He liked math since his school days and under his high-school yearbook entry, it was written: “likes math; a future stockbroker.” Warren Buffett had a knack for business from a young age. He started his career at a very young age by selling chewing gum, Coca-Cola, and magazines. He started investing in the stock market at the age of 11 and filed taxes at the age of 13.
Every successful hedge fund manager has their own investing strategy. Warren Buffett likes to pay close attention to companies’ fundamentals and buys them for the long term. His value investing strategy is dependent on earnings and dividend accruement over the years. One of his famous quotes about his investment strategy is:
“Nobody buys a farm based on whether they think it’s going to rain next year. They buy it because they think it’s a good investment over 10 or 20 years.”
Warren Buffett is not a big fan of portfolio diversification. In Q2 2023, over 91% of Berkshire Hathaway’s portfolio was represented by the firm’s top 10 stock picks. Over half of Berkshire’s portfolio is covered by one company, Apple Inc. (NASDAQ:AAPL), which the firm has owned since the first quarter of 2016. At that time, the average price of Apple Inc. (NASDAQ:AAPL)’s stock was $24.91 and it reached over $174 by Q2 2023. Here is what Warren Buffett says about portfolio diversification:
“Wide diversification is only required when investors do not understand what they are doing.”
Warren Buffett’s Latest Bets
In the second quarter of 2023, Berkshire Hathaway’s 13F portfolio was worth a staggering $348.194 billion, compared to nearly $325.109 billion in the previous quarter. The firm purchased 3 new stocks in the quarter and increased holdings in two. The firm closed out 3 stocks including Vitesse Energy, Inc. (NYSE:VTS) which Berkshire Hathaway had bought in the first quarter of 2023. Furthermore, the hedge fund decreased holdings in 5 stocks in the second quarter of 2023.
In the second quarter, Warren Buffett made all his new bets on the home construction segment. Home construction companies might be seeing a positive run as new home purchase mortgage applications increased by 35.5% in July. On July 14th, Raymond James also upgraded several home construction stocks including Lennar Corporation (NYSE:LEN), which is one of Mr. Buffett’s latest buys. Analyst Buck Horne said:
“We are keenly aware that the optics of turning more positive on homebuilders after the group has already achieved a new all-time high is far from ideal[…]But we must always reassess what we missed earlier.”
Horne emphasized coming up with a new valuation approach as his team was late in discerning the bottled-up demand for single-family homes added to the “proven resilience of builders’ de-risked operating models.”
It looks like Wall Street analysts also agree with Warren Buffett’s bets which isn’t a surprise. Some of his top picks include Apple Inc., Bank of America Corporation (NYSE:BAC), and American Express Company (NYSE:AXP). If you want to view more stocks from Warren Buffett’s portfolio, you can check out Warren Buffett’s 11 Growth Stock Picks.
Our Methodology
For this article, we chose the latest buys of Warren Buffett’s Berkshire Hathaway. As Warren Buffett is known to be a long-term investor, we chose the stocks that his firm added in the fourth quarter of 2022 and the first two quarters of 2023. We did not add Vitesse Energy, Inc. to the list which was bought in the first quarter of 2023 because Berkshire Hathaway sold out of the company’s stock in the second quarter of 2023.
The stocks in the article are listed according to their percentage of Berkshire Hathaway’s portfolio as of Q2 2023.
Buffett Stock Portfolio: Warren Buffett’s Recent Buys
6. Lennar Corporation (NYSE:LEN)
Stock added to the portfolio in: Q2 2023
Percentage of Berkshire Hathaway’s portfolio as of Q2 2023: > 0.01%
Lennar Corporation is a home construction company headquartered in Florida. The company is one of the largest home construction companies in the United States. Lennar Corporation closed approximately 69,000 houses in 2022.
As of the last three months, 10 out of 16 analysts are bullish on Lennar Corporation and have kept a Buy or Outperform rating on the company stock. The average price target of Lennar Corporation by Wall Street analysts is $134.40, which shows a nearly 15% upside to the company’s stock price of $117.17 at the time of market close on August 23. On July 14, Raymond James upgraded Lennar Corporation’s stock to Outperform from Market Perform.
Lennar Corporation was added to Warren Buffett’s portfolio in the second quarter of 2023. Berkshire Hathaway initiated the position with 152,572 shares worth nearly $17.24 million, representing less than 0.01% of the firm. Other hedge funds were also bullish on the company stock in the second quarter of 2023. Lennar Corporation was owned by 66 hedge funds in Q2 compared to 51 in the previous quarter. Their combined stake value in the company was $2.65 billion in Q2, up from $1.85 billion in Q1.
Greenhaven Associates was the biggest stakeholder of Lennar Corporation in Q2 with over 9.066 million shares worth $1.136 billion. Its second-largest stakeholder, Balyasny Asset Management, increased its holdings in the company by 232% in Q2 to over 1.1 million shares worth $138.200 million.
Apple Inc., Bank of America Corporation, and American Express Company are some of the best stocks in Warren Buffett’s stock portfolio in addition to Lennar Corporation.
5. Diageo plc (NYSE:DEO)
Stock added to the portfolio in: Q1 2023
Percentage of Berkshire Hathaway’s portfolio as of Q2 2023: 0.01%
Diageo plc (NYSE:DEO) is a UK-based alcoholic beverage company. It owns some of the most famous alcohol brands such as Johnnie Walker, Gordon’s Gin, Don Julio, J&B, Smirnoff, and Guinness. Diageo plc (NYSE:DEO) is the 6th largest beverage company in the world as of April 2023.
According to Berkshire Hathaway’s Q2 13F filings, Diageo plc (NYSE:DEO) is the firm’s 8th smallest holding out of 48 (based on the percentage of the firm’s portfolio). Warren Buffett initiated a position in the company in the first quarter of 2023 with 227,750 shares worth $39.510 million and his position in the company remained unchanged in the second quarter. In Q2, Diageo plc (NYSE:DEO) represented 0.1% of Berkshire Hathaway’s portfolio. The most prominent stakeholder in the company in Q2 was Markel Gayner Asset Management with 1.35 million shares worth $244.63 million.
4. NVR, Inc. (NYSE:NVR)
Stock added to the portfolio in: Q2 2023
Percentage of Berkshire Hathaway’s portfolio as of Q2 2023: 0.02%
NVR, Inc. (NYSE:NVR) is an American home construction, mortgage banking, and title services company headquartered in Virginia, USA. The company’s stock is the second most expensive stock in the US stock market – $6,133.95 at the time of market close on August 23. Despite that, NVR, Inc. is one of the cheapest stocks in Warren Buffett’s portfolio at a trailing twelve-month PE ratio of 13.26.
NVR, Inc. posted its second-quarter 2023 results on July 25. The company reported a net income of $404.0 million or $116.54 per diluted share compared to $433.3 million or $123.65 per diluted share in the same quarter of 2022. The company’s revenue also declined by 12% year-over-year to $2.34 billion.
In the first half of 2023, NVR, Inc.’s consolidated revenue was $4.52 billion, down 10% from the previous year’s $5.04 billion. Its 1H 2023 EPS of $216.52 was also down 9.8% from 1H 2022’s $240.05.
NVR, Inc. is another new addition to Berkshire Hathaway’s portfolio. The firm initiated a position in the company with 11,112 shares worth $70.568 million in the second quarter of 2023, covering 0.02% of Warren Buffett’s portfolio. Berkshire Hathaway was the fifth most prominent hedge fund holder of NVR, Inc. in Q2 while Diamond Hill Capital held the most prominent stake with 96,989 shares worth $615.940 million.
NVR, Inc. is one of the prominent stock picks of Warren Buffett’s Berkshire Hathaway along with Apple Inc., Bank of America Corporation, and American Express Company.
Right Tail Capital made the following comment about NVR, Inc. in its second quarter 2023 investor letter:
“One investment where I’ve been a patient long term holder over much of the past 5 years has been NVR, Inc..
NVR is one of the largest homebuilders in the US, operating in over 30 markets. There are several attributes that are underappreciated about NVR. First and foremost, it’s not your normal land-owning homebuilder: NVR options their land which leads to outsized returns and less risk by having less capital tied up in land. Many homebuilders cite the positives of owning land such as more control over the entire building process and higher margins.
NVR mitigates the lack of control inherent in their option strategy by working extremely closely with local land developers. These partners appreciate NVR’s trustworthiness, pristine balance sheet and quick turnarounds. As one developer tells me, “They do what they say they’ll do and they honor their commitments to buy a set number of lots.” While owning land may lead to higher margins during most economic times, it takes up much capital and is incredibly illiquid. It’s also likely worth much less during tougher economic times…exactly when you might want to have more cash on hand…” (Click here to read the full text)
3. D.R. Horton, Inc. (NYSE:DHI)
Stock added to the portfolio in: Q2 2023
Percentage of Berkshire Hathaway’s portfolio as of Q2 2023: 0.2%
D.R. Horton, Inc. (NYSE:DHI) is another home construction company that was added to Buffett’s stock portfolio in the second quarter of 2023. It is the largest home construction company in the United States. Berkshire Hathaway initiated a position in D.R. Horton, Inc. in Q2 2023 with approximately 5.97 million shares worth $726.454 million.
D.R. Horton, Inc. posted its Q3 2023 results on July 20. The company reported a GAAP EPS of $3.90, outperforming the estimates by $1.11. On top of that, the company’s revenue was up 10.6% year-over-year to $9.73 billion, exceeding the market expectations by $1.32 billion. Due to its solid earnings, D.R. Horton, Inc. raised its FY 2023 guidance. The company expects consolidated revenue in the range of $34.7 billion – $35.1 billion, up from prior $31.5 billion – $33.0 billion.
On July 24, Raymond James upgraded D.R. Horton, Inc.’s stock to Outperform from Market Perform after robust Q3 results. The firm has a $160 price target on the company stock.
Baron Real Estate Fund made the following comment about D.R. Horton, Inc. in its second quarter 2023 investor letter:
“Our investments in homebuilder companies – Toll Brothers, Inc., Lennar Corporation, and D.R. Horton, Inc. – performed well in the first six months of 2023. The share price of Toll Brothers increased nearly 60% and the shares prices of Lennar and D.R. Horton each gained more than 35%.
Year-to-date, each company has witnessed a meaningful uptick in demand to buy homes:
Home buyers continue to come off the sidelines and buy homes despite 30-year mortgage rates remaining in the 6.5% to 7.0% range. Several factors are contributing to the recent strength, including pent-up demand to buy homes and fears that mortgage rates could move higher. • The sticker shock of rapidly rising mortgage rates appears to have cooled down. Homebuilders have made homes more affordable to prospective home purchasers by offering mortgage rate buydowns to the mid-5% mortgage rate range while maintaining strong profitability margins. • A dearth of inventory in the existing home market and an overall housing supply shortage is driving home buyers to “stretch their wallet” due to fears that they could miss the opportunity to buy a home.
We remain optimistic about the long-term potential for the Fund’s investments in Toll Brothers, Lennar, and D.R. Horton for several reasons…” (Click here to read the full text)
2. Nu Holdings Ltd. (NYSE:NU)
Stock added to the portfolio in: Q4 2022
Percentage of Berkshire Hathaway’s portfolio as of Q2 2023: 0.24%
Nu Holdings Ltd. (NYSE:NU) is a Brazilian neobank. Neobanks or challenger banks are fintech firms operating exclusively online through apps and software. It was founded in 2013 and launched its IPO in December 2021.
In the second quarter of 2023, Nu Holdings Ltd. was owned by 44 hedge funds with a combined stake value of over $2.865 billion. In the previous quarter, it was owned by 38 hedge funds with a stake worth over $1.6 billion. Berkshire Hathaway was the most significant hedge fund holder of Nu Holdings Ltd. in Q2 with over 107 million shares worth $845.167 million. Warren Buffett added the company to his investment portfolio in the fourth quarter of 2022.
In Q2 2023, Nu Holdings Ltd. was highly profitable compared to the same quarter of the previous year. In Q2 2022, the company posted a net loss of $29.9 million, while in the same quarter of 2023, Nu Holdings Ltd. recorded a net income of $224.9 million. The company’s gross profit margin increased to 42% in Q2 2023, compared to 31% in Q2 of the previous year. Additionally, Nu Holdings Ltd. generated a revenue of $1.9 billion to beat the Wall Street forecasts by $120 million.
1. Capital One Financial Corporation (NYSE:COF)
Stock added to the portfolio in: Q1 2023
Percentage of Berkshire Hathaway’s portfolio as of Q2 2023: 0.39%
Capital One Financial Corporation (NYSE:COF) is an American bank holding company headquartered in Richmond, Virginia, USA. Berkshire Hathaway added the banking firm to its portfolio in the first quarter of 2023 with 9.922 million shares worth $954.099 million. In the second quarter, Warren Buffett’s firm increased its holdings in Capital One Financial Corporation by 26% to 12.471 million shares worth $1.364 billion.
According to the Insider Monkey database, Capital One Financial Corporation was owned by 51 hedge funds in Q2 2023. The company was a part of 12 billionaire-owned or managed hedge funds in the quarter including Steve Cohen’s Point72 Asset Management which increased its stake by 205% in Capital One Financial Corporation in the second quarter to 1.365 million shares, valued at $149.3 million.
ClearBridge Investments made the following comment about Capital One Financial Corporation in its first quarter 2023 investor letter:
“We also added Capital One Financial Corporation, a largely domestic diversified financial services company with a focus on credit cards that also operates a leading auto lending business. We believe recent regulatory changes such as the Current Expected Credit Losses (CECL) methodology of the U.S. Treasury and the ability of credit card companies to manage credit risks have improved the risk profile of leading credit card businesses but have been underappreciated by the market. With its substantial financial reserves, we believe that Capital One is well-positioned to navigate future economic uncertainty. Additionally, we believe this current market and credit cycle is fundamentally different than prior ones due to stronger consumer balance sheets, excess savings, strong wage growth and strong employment environment. As a result, we believe Capital One’s current price has already been overly discounted, and we expect it to offer compelling upside despite further risks of drawdown when a recession emerges.”
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This article is originally published at Insider Monkey.
