In this article we discuss Barry Ritholtz’s and Josh Brown’s top 5 stock picks. If you want to read our detailed analysis of Barry Ritholtz and Josh Brown’s history and hedge fund performance, go directly to Top 10 Stock Picks of Barry Ritholtz and Josh Brown.
5. Berkshire Hathaway Inc. (NYSE: BRK-B)
Barry Ritholtz and Josh Brown’s Stake Value: $3,022,000
Percentage of Barry Ritholtz and Josh Brown’s 13F Portfolio: 0.25%
Number of Hedge Fund Holders: 111
Berkshire Hathaway Inc. (NYSE: BRK-B) is a U.S conglomerate specializing in freight rail transportation, insurance, and utility businesses in the global market.
In its recent financial report, Berkshire Hathaway Inc. (NYSE: BRK-B) reported $7.02 billion in operating earnings for Q1 2021, up from $5.87 billion in Q1 2020.The growth is mainly attributed to an increase in earnings from insurance underwriting. During the quarter, the company spent around $6.6 billion to buy back stock. This is a drop from the $9.0 billion spent in Q4 2020.
Vltava Fund, in their Q1 2021 investor letter, mentioned Warren Buffett’s Berkshire Hathaway Inc. Here is what Vltava Fund has to say in its letter:
“Despite the considerable rise in stock markets over the past year, there are still many attractive opportunities. Human nature also is playing a bit into our hands. Investor crowds often chase popular stocks, hot IPOs, or mysterious SPACs and completely leave aside stocks they consider boring and not sexy enough. A typical example of this category is our long-term largest position in Berkshire Hathaway. Since we bought it for the first time, its price has nearly quadrupled and yet it remains just as undervalued today as it was at that time. Considering the current rate at which it is buying back its own shares and the amount of cash that Berkshire Hathaway has, my greatest wish as a shareholder is for the company’s share price to remain as low as possible for as long as possible.”
4. Facebook, Inc. (NASDAQ: FB)
Barry Ritholtz and Josh Brown’s Stake Value: $2,491,000
Percentage of Barry Ritholtz and Josh Brown’s 13F Portfolio: 0.21%
Number of Hedge Fund Holders: 257
In its financial report for Q1 2021, Facebook, Inc. (NASDAQ: FB) reported 1.88 billion daily active users (DAUs) for March 2021, while monthly active users (MAUs) were 2.85 billion. This represents an increase of 10% and 15% respectively year-over-year. Mid-April, Wedbush rated the stock as “Neutral” and set a price target of $355.
Distillate Capital, in its Q1 2021 investor letter, mentioned Facebook, Inc. (NASDAQ: FB). Here is what Distillate Capital has to say about Facebook, Inc. in its letter:
“Facebook has come in and out of the portfolio before and did so this quarter on the back of substantial improvement in projected free cash flows such that its valuation now meets the criteria for inclusion.”
3. Alphabet Inc. (NASDAQ: GOOGL)
Barry Ritholtz and Josh Brown’s Stake Value: $3,911,000
Percentage of Barry Ritholtz and Josh Brown’s 13F Portfolio: 0.33%
Number of Hedge Fund Holders: 185
Alphabet Inc. (NASDAQ: GOOGL) is one of the best stocks to buy, based on the portfolio of Barry Ritholtz and Josh Brown.
Alphabet Inc. (NASDAQ: GOOGL)’s Google is also in the process of expanding access to its mobile wallet with entry into the global market following new partnerships with Wise and The Western Union Company (NYSE: WU).
Alphabet Inc. (NASDAQ: GOOGL)’s Google’s total revenue in Q1 2021 amounted to $55.3 billion, mainly boosted by an increased online activity and an increase in advertising activities. The company’s cloud services have also seen significant growth contributing $4.0 billion to the company’s revenue basket. China Renascence recently upgraded the company’s stock from “Hold” to “Buy,” and has set a price target of $3,000.
Polen Global Growth Fund, in its Q1 2021 investor letter, mentioned Alphabet Inc. Here is what the fund said:
“For our top contributors, each generated strong returns for different, but fundamentally based reasons, in our opinion. Alphabet saw renewed strength recently as advertisers generally resumed spending after a short pause during the pandemic.
Alphabet experienced some challenging quarters in 2020 as many companies paused their advertising spend. But, the business bounced back recently, spurring a strong recovery in the company’s share price. Even during such a challenging period, the company still compounded revenue at 14% in constant currency for 2020.
This is partly due to Alphabet’s multiple growth engines. For example, while its search business was negative one quarter and only grew by 6% during another, YouTube ads and Google Cloud Platform (GCP) grew at over 30% and 46% during the quarter, respectively. YouTube and GCP combined now contribute over 50% of the company’s growth, which we believe is a testament to a strong culture of innovation, a long-term mindset, and prudent capital allocation. With search bouncing back this most recent quarter–growing 17% –we believe that Alphabet continues to be well-positioned to durably compound earnings at or above 15% for many years to come. It remains one of our largest positions.”
2. Amazon.com, Inc. (NASDAQ: AMZN)
Barry Ritholtz and Josh Brown’s Stake Value: $9,493,000
Percentage of Barry Ritholtz and Josh Brown’s 13F Portfolio: 0.79%
Number of Hedge Fund Holders: 243
Amazon.com, Inc. (NASDAQ: AMZN) is a global consumer company that retails consumer products in North America and worldwide. The global retail giant has announced plans to hire an additional 75,000 workers in its distribution centers across the United States and Canada.
Amazon.com, Inc. (NASDAQ: AMZN) has released the latest updated version of its Echo Show line with the introduction of a new Echo Show 8 ($169.99). It has an 8-inch HD display, 13-megapixel wide-angle camera, and Echo Show 5 ($99.99), which has a 5.5-inch display and an upgraded HD camera with twice the pixels. Echo Show 8 also has an octa-core processor and dual stereo speakers.
In the recent Brand Protection Report, Amazon said it blocked 10 billion suspected phony listings before they could be launched live on its e-commerce platform. This is a 67% increase compared to 2020, when the company hired more than 10,000 people and spent over $700 million to block phony listings. Evercore ISI analyst Mark Mahaney rated the stock as “Outperform” and has a price target of $4,000.
Amazon is the third most popular stock among over 850 hedge funds tracked by Insider Monkey.
Polen Focus Growth Fund, in its Q1 2021 investor letter, mentioned Amazon.com, Inc. (NASDAQ: AMZN). Here is what the fund said:
“We purchased Amazon in February 2021, which accounts for 5% of the Portfolio’s weighting. For most of the last decade, Amazon did not meet our guardrails. We also did not have enough visibility into future free cash flow margins to indicate that the company would sustainably meet our guardrails and, relatedly, if valuation supported the double-digit annualized returns we seek. We now believe we have that visibility.
In 2008, almost all of Amazon’s revenue and operating profits came from its e-commerce business. Amazon Prime and Amazon Web Services (AWS) were new and relatively small back then. The company had roughly 5% operating profit margins overall, entirely from the e-commerce business. In 2009, the company began harvesting its retail business profits to accelerate investment in its distribution and logistics infrastructure globally and very heavily build out and scale AWS data centers. The company’s return on equity began to decline at that time and turned negative for three full years from mid-2012 to mid-2015 (margins and free cash flow declined similarly). So, beginning in 2010 and continuing to mid-2018, Amazon’s business was outside our guardrails. We chose to stick to our guardrails and not own Amazon.
Amazon’s profit drivers have changed quite dramatically over the years. Starting in the back half of 2018, Amazon came back above our hurdles. Revenue generation overcame ongoing heavy investments in areas such as delivery infrastructure, data center infrastructure, and shipping.
Our research suggests that today, after considering cost allocation, Amazon’s underlying profit drivers from higher-margin AWS and Advertising could grow much faster than its low-margin e-commerce business (excluding Prime), its historical driver of revenues and operating profits.
Amazon Prime, AWS, and Advertising together account for only about 20% of revenue today, but we believe over 150% of operating profits. Looking forward, growth higher-margin businesses means Amazon’s total margins and profit dollars could rise quite dramatically.
It is important to note that Amazon proved to be an exception to our guardrails. Based on our experience, very few companies that remain outside our guardrails for an extended period operate from a position of competitive strength but rather, from a position of competitive pressure. Today, we feel we have better visibility into the future earnings growth and margins from AWS and Advertising and believe these could drive 30%+ annual earnings growth for the next five years. Even with significant P/E multiple compression, we would still expect double-digit investment returns.”
1. Microsoft Corporation (NASDAQ: MSFT)
Barry Ritholtz and Josh Brown’s Stake Value: $9,219,000
Percentage of Barry Ritholtz and Josh Brown’s 13F Portfolio: 0.77%
Number of Hedge Fund Holders: 251
Microsoft Corporation (NASDAQ: MSFT) is a global tech giant specializing in developing, licensing, and software support services to companies and governments around the world.
Rosenblatt’s analyst John McPeake has rated the stock as “Buy” and has set a price target of $301. While in April, Wolfe Research rated it as “Outperform,” setting the price target at $290.
Polen Global Growth Fund, in its Q1 2021 investor letter, mentioned Microsoft Corporation (NASDAQ: MSFT). Here is what the fund said:
“We have written extensively about Microsoft in recent commentaries. It was our leading contributor last year and one of our largest weightings within the Portfolio. It continues to experience business momentum through several dominant, essential, and competitively advantaged businesses, like Office 365 and Azure. The markets it competes for are enormous, which gives the company the ability to compound at scale. In the past quarter alone, the company generated over $40 billion in revenue, representing a 17% growth rate. The inherent operating leverage in Microsoft Corporation (NASDAQ: MSFT)’s business model continues and led to 34% earnings growth this past quarter. Despite the broad rotation we saw in the first quarter and Microsoft’s robust performance in 2020, we think its business fundamentals continue to exhibit strength, and the stock continues to reflect the fundamentals.”
You can also take a peek at Eagle Capital’s Top 10 Stock Picks and Billionaire David Siegel’s Top 10 Stock Picks.
