In this article we discuss the 10 best stocks to buy according to Warren Buffett based on the billionaire’s Q1 portfolio. If you want to skip our detailed analysis of Buffett’s history and hedge fund performance, go directly to the 5 Best Stocks to Buy According to Warren Buffett.
Warren Buffett is an American business tycoon, philanthropist, and one of the greatest investors of all time. As of June 2021, he has a net worth of over $109 billion. Buffett runs Berkshire Hathaway, which owns more than 60 companies. He believes in the value-based investing model and only invests in the stocks that exhibit solid fundaments, strong earnings power, and the potential for continued growth.
As of Q1 2021, Buffett’s stock portfolio is composed of 48 stocks and its value increased marginally from $270 billion to $270.4 billion.
Apple Inc (NASDAQ: AAPL) remains the biggest stake of Buffett, accounting for 40% of Berkshire’s entire Q1 portfolio. The fund owns 887.14 million shares of the company, worth $108.4 billion. This huge stake reflects the confidence Berkshire has in Apple Inc (NASDAQ: AAPL) whose stock is up over 400% in the last 5 years.
Last year, Buffett sold huge stakes in bank stocks, including JPMorgan Chase & Co. (NYSE: JPM), The PNC Financial Services Group, Inc. (NYSE: PNC) and Wells Fargo & Company (NYSE: WFC) amid financial volatility caused by the coronavirus crisis. This move was the result of, in the words of a finance professor David Kass at the University of Maryland’s Robert H. Smith School of Business, “extreme caution” practiced by Buffett as bank stocks are prone to losses and vulnerability during difficult times such as the one heralded by the pandemic.
However, in the first quarter of 2021, Berkshire Hathaway has kept its position in Bank of America Corporation (NYSE: BAC), The Bank of New York Mellon Corporation (NYSE: BK), and U.S. Bancorp (NYSE: USB). Berkshire made no change to its stake in Bank of America Corporation (NYSE: BAC) in the first quarter, ending the period with over 1 billion shares of the company, which have a total worth of $39.1 billion.
Buffett is an exception in an industry that is reeling from losses. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s now review the 10 best stocks to buy according to Warren Buffett. For this analysis, we examine Berkshire’s latest 13F portfolio. The top 10 holdings represent 87% of the stock portfolio.
Best Stocks to Buy According to Warren Buffett
10. General Motors Company (NYSE: GM)
Buffet’s Stake Value: $3,849,820,000
Percent of Warren Buffett’s 13F Portfolio: 1.42%
Number of Hedge Fund Holders: 86
General Motors Company (NYSE: GM) is the tenth-largest holding of Berkshire Hathaway. As of Q1 2021, it owns nearly 67 million shares of the company, worth $3.84 billion. In the first quarter, Berkshire sliced its stake in the company by 8%. General Motors Company (NYSE: GM) is moving to end production of all diesel vehicles by 2035 and increase its budget by $7 billion on electric car development.
The Q1 2021 results of the company reported earnings of $3 billion, a huge gain as compared to the same quarter last year.
A recently founded investment management firm, Junto Investments, published its Q4 2020 Investor Letter. Here is what the firm has to say about General Motors Company (NYSE: GM):
“General Motors was the biggest gainer. We managed to buy it at a screamingly cheap price in the middle of March. A lot of interesting news has emerged about GM recently, including the new electric product delivery system BrightDrop and GM Cruise’s team-up with Microsoft Azure to commercialize self-driving cars in 2021. GM’s intrinsic value is crystallizing and the company is worth a whole lot more than is still reflected in the market.”
9. DaVita Inc. (NYSE: DVA)
Buffet’s Stake Value: $3,890,020,000
Percent of Warren Buffett’s 13F Portfolio: 1.43%
Number of Hedge Fund Holders: 34
DaVita Inc. (NYSE: DVA) is a healthcare company focused on transforming care delivery to improve the quality of life. The company is the largest provider of kidney care in the U.S. Berkshire Hathaway owns about 36 million shares of the company, worth $3.8 billion in Q1 2021. DaVita Inc. (NYSE: DVA) holds 37% of the healthcare market in the U.S., making it one of the best stocks to buy according to Warren Buffett.
The Q1 2021 reports state revenue of over $2.8 billion and earnings per share of $2.09, 14% above the expectations. The stock has gained 36% over the last 12 months. The company expects revenues to reach $11.5 billion in 2021 and per-share earnings are expected to grow by 20%. Like Apple Inc (NASDAQ: AAPL), Verizon Communications Inc. (NYSE: VZ), The Kraft Heinz Company (NASDAQ: KHC), Bank of America Corporation (NYSE: BAC) and The Bank of New York Mellon Corporation (NYSE: BK), DaVita Inc. (NYSE: DVA) is one of the best stocks to buy according to Warren Buffett.
8. U. S. Bancorp (NYSE: USB)
Buffet’s Stake Value: $7,172,993,000
Percent of Warren Buffett’s 13F Portfolio: 2.65%
Number of Hedge Fund Holders: 43
U.S. Bancorp (NYSE: USB) is an American bank holding company and provides various financial services in the U.S. It is one of the best stocks to buy according to Warren Buffett, as Berkshire Hathaway has a $7.1 billion stake in the company. The USB stock was hard hit by the pandemic and saw a low of $29 in March 2020. The stock is up 30% year to date.
In Q1 2021, the financial services company reported net revenue of $5.5 billion, 5% less than the year-ago period, and a net income of $2.3 billion.
Mairs & Power published its fourth-quarter 2020 ‘Growth Fund’ investor letter. The firm mentioned U.S. Bancorp (NYSE: USB) and emphasized their views on the company. Here is what it has to say:
“On the negative side, one of the Fund’s biggest detractors in 2020 was U.S. Bancorp (USB). Like all banks, U.S. Bank was hurt by the difficult interest rate environment and credit cycle concerns. We believe banks are strong enough to survive the current sector doldrums, and they remain some of the market’s most attractive opportunities.”
Like Apple Inc (NASDAQ: AAPL), Verizon Communications Inc. (NYSE: VZ), The Kraft Heinz Company (NASDAQ: KHC), Bank of America Corporation (NYSE: BAC) and The Bank of New York Mellon Corporation (NYSE: BK), U.S. Bancorp (NYSE: USB) is one of the best stocks to buy according to Warren Buffett.
7. Moody’s Corporation (NYSE: MCO)
Buffet’s Stake Value: $7,366,643,000
Percent of Warren Buffett’s 13F Portfolio: 2.72%
Number of Hedge Fund Holders: 55
Moody’s Corporation (NYSE: MCO) is an American business and financial services company. Berkshire Hathaway owns over 25 million shares in the company, worth $7.3 billion. The company’s Q1 2021 reports showed a revenue of $1.6 billion, up 24% from the prior year period. The adjusted EPS also grew to $4.06, compared with $2.73 the prior year. Berkshire Hathaway is Moody’s Corporation’s (NYSE: MCO) largest shareholder, with 13% of its shares.
Moody’s Corporation (NYSE: MCO) suffered in the initial months of 2020 due to the pandemic, touching the low of $165 in March 2020. However, it has now seen performance improvement and currently, the share price stands at $335. Like Apple Inc (NASDAQ: AAPL), Verizon Communications Inc. (NYSE: VZ), The Kraft Heinz Company (NASDAQ: KHC), Bank of America Corporation (NYSE: BAC), The Bank of New York Mellon Corporation (NYSE: BK) and U.S. Bancorp (NYSE: USB), Moody’s Corporation (NYSE: MCO) is one of the best stocks to buy according to Warren Buffett.
Baron Funds, an investment management firm, published its Q4 2020 ‘Baron FinTech Fund’ investor letter and mentioned Moody’s Corporation (NYSE: MCO). Here is what the firm has to say:
“Moody’s Corporation (NYSE: MCO) provides credit ratings, financial intelligence, and analytical tools to assist businesses in making decisions. Moody’s reported excellent financial results due to continued growth in rated debt issuance. However, the stock detracted on investor expectations that issuance trends will moderate into 2021. The announced retirement of long-time CEO Ray McDaniel may have also weighed on sentiment. We continue to own the stock due to our views of the company’s long runway for growth and strong competitive advantages.”
6. Verizon Communications Inc. (NYSE: VZ)
Buffet’s Stake Value: $9,235,649,000
Percent of Warren Buffett’s 13F Portfolio: 3.41%
Number of Hedge Fund Holders: 69
Verizon Communications Inc. (NYSE: VZ) is an American multinational telecommunications company, with services and solutions in voice, data, and video on its award-winning network and platforms. As of Q1 2021, Berkshire Hathaway owns over 159 million shares of the company, worth $9.2 billion. Warren Buffett has increased his stake in the company by 9% in the first quarter.
Verizon Communications Inc. (NYSE: VZ) reported first-quarter 2021 results in April with a 4.1% increase in total revenue, compared with the same period last year.
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Disclosure: None. 10 Best Stocks to Buy According to Warren Buffett is originally published on Insider Monkey.
