In this article, we discuss the stocks that Warren Buffett has bought since the beginning of the AI Revolution.
Artificial intelligence has been the buzzword on Wall Street for the past several months, with investors tripping over themselves to get a piece of the pie as the new technology sweeps the business world. AI-powered trading systems now account for over 60% of total equity trading volume in the United States. Investors have been turning to AI for enhanced efficiency and faster decision-making speeds. These AI-based investing algorithms can analyze vast datasets and predict stock price movements with up to 80% accuracy. The potential of AI-driven investment funds can be understood better by comparing their performance against traditional peers, with the former outperforming the latter by 1-3% annually.
However, if there is one person who seems least bothered by this hullabaloo, it is Warren Buffett, an American business tycoon, entrepreneur, and investor presently serving as the chief of Berkshire Hathaway, one of the biggest hedge funds in the world. When Buffett speaks, the world listens. At the annual shareholder meeting of his organization in early May, Buffett tackled the subject of artificial intelligence, reinforcing cliches about his mistrust towards technology stocks but stopping short of denouncing it altogether. However, the Oracle of Omaha, as he is affectionately known, did compare the rise of AI to the invention of the nuclear weapons, describing both technologies as genies that could not be returned to the bottle.
Buffett, whose personal net worth is over $136 billion, manages a 13F portfolio at his hedge fund that was worth more than $331 billion at the end of the first quarter of 2024. In contrast to most other money managers on Wall Street, the strength of his portfolio is derived from value offerings that he has held onto for years and even decades, as opposed to the day trading habits of some of his more aggressive peers in the hedge fund universe. This investing acumen has earned Buffett a legendary status in the finance world and is partly the reason why tens of thousands of people lined up the streets of Omaha in May to listen to him speak about AI and whether he would be investing in the new technology.
In response to a question about AI, Buffett noted that even though he did not fully understand the new technology, he was wise enough to gather, from what he had seen already, that it held enormous potential. He clarified, however, that he did not yet know whether this potential would do more good than harm. Perhaps the most interesting statement from the investing guru at the annual shareholder meeting, and one that illustrates the difference between him and other money managers, was about the impact that AI would have on ordinary people and their ordinary workplaces. According to Buffett, AI could create more leisure time for people, but he was more interested in how they would spend that time than in how AI would bring that about.
“It can create an enormous amount of leisure time. Now what the world does with leisure time is another question. I know an awful lot of people think when they go to work at first what they want is leisure time – and what I like is actually having more problems to solve.”
Our Methodology
For this article, we scanned the stock portfolio of Berkshire Hathaway according to the 13F filings submitted at the end of the first quarter of 2024. We compared his Q1 2024 13F portfolio to his Q3 2022 13F portfolio, selecting the companies with the biggest percentage change in number of shares. The companies that feature in the Q1 2024 13F portfolio but did not feature in the Q3 2022 13F portfolio have also been included. Why are we interested in 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).
Stocks Warren Buffett Has Bought Since Beginning of AI Revolution
9. Citigroup Inc. (NYSE:C)
Number of Hedge Fund Holders: 94
Berkshire Hathaway’s Shares in Q1 2024: 55,244,797
Berkshire Hathaway’s Shares in Q3 2022: 55,155,797
Percentage Change: 0.16%
Citigroup Inc. (NYSE:C) is a financial services holding company that provides various financial products and services to consumers, corporations, governments, and institutions. Value investors like Buffett have long admired the firm that has attractive valuation metrics, strong financial health, and strategic initiatives aimed at enhancing profitability. The PE Ratio stands at approximately 9, which is significantly lower than the industry average of around 11. This suggests that the stock is undervalued compared to peers. Additionally, the price-to-book ratio is less than 1, indicating that the stock is trading below the book value, providing a margin of safety for value investors.
In 2023, Citigroup reported a net income of $19.8 billion, reflecting a 12% increase from the previous year, showcasing robust profitability. The revenue was $75.3 billion, representing a 5% year-over-year growth, driven by higher net interest income. The firm has featured in the Buffett portfolio since the first quarter of 2022 and presently represents 1.05% of the 13F portfolio.
In its Q1 2024 investor letter, Diamond Hill Capital, an asset management firm, highlighted a few stocks and Citigroup Inc. (NYSE:C) was one of them. Here is what the fund said:
“Other top Q1 contributors included Meta Platforms, Citigroup Inc. (NYSE:C) and Walt Disney. Banking and financial services company Citigroup’s restructuring efforts are ongoing, and it continues remediating regulatory issues and building capital in anticipation of increased requirements. The company expects to see expenses fall meaningfully in the second half of 2024, bolstering the outlook from here.”
8. Louisiana-Pacific Corporation (NYSE:LPX)
Number of Hedge Fund Holders: 48
Berkshire Hathaway’s Shares in Q1 2024: 6,597,947
Berkshire Hathaway’s Shares in Q3 2022: 5,795,906
Percentage Change: 14%
Louisiana-Pacific Corporation (NYSE:LPX) provides building solutions primarily for use in new home construction, repair and remodeling, and outdoor structure markets. Earlier this year, the company announced that it would be entering into a partnership with Lennar, a leading home building firm, in a nationwide supply agreement. This will help the former expand geographic reach and increase market share across the US, also contributing positively to revenue numbers in the coming months. The firm is also taking measures to improve cost structures and eliminate operational inefficiencies, auguring well for growth of margins as the building market shifts towards higher margin products.
In early May, Louisiana-Pacific Corporation (NYSE:LPX) posted earnings for the first quarter of 2024, reporting earnings per share of $1.53, beating market estimates by $0.40. The revenue over the period was $724 million, up nearly 24% compared to the revenue over the same period last year and beating analyst expectations by $37 million.
7. Occidental Petroleum Corporation (NYSE:OXY)
Number of Hedge Fund Holders: 61
Berkshire Hathaway’s Shares in Q1 2024: 248,018,128
Berkshire Hathaway’s Shares in Q3 2022: 194,351,650
Percentage Change: 28%
Occidental Petroleum Corporation (NYSE:OXY) operates as an energy firm and is based in Texas. The company has a significant competitive advantage over peers since it has an integrated business model and produces oil at a rate that is far lower than larger competitors. In the Permian Basin, where a large portion of the assets of the firm are located, the firm can dig horizontal wells that increase oil production efficiency, allowing for a $14 per barrel lowering of costs that ultimately helps the company compete with bigger oil giants. The company also owns midstream storage and transportation infrastructure, unlike other oil firms that rely on third parties.
Among the hedge funds being tracked by Insider Monkey, Omaha, New York-based firm Eagle Capital Management is a leading shareholder in Occidental Petroleum Corporation (NYSE:OXY) with 10.5 million shares worth more than $687 million. At the end of the first quarter of 2024, 61 hedge funds in the database of Insider Monkey held stakes worth $19.6 billion in Occidental Petroleum Corporation (NYSE:OXY), compared to 66 in the previous quarter worth $17.2 billion.
6. Atlanta Braves Holdings, Inc. (NASDAQ:BATRA)
Number of Hedge Fund Holders: 36
Berkshire Hathaway’s Shares in Q1 2024: 223,645
Atlanta Braves Holdings, Inc. (NASDAQ:BATRA) owns and operates the Atlanta Braves Major league baseball club. The firm split off from Liberty Media recently. Even though sports teams are notorious for being overvalued, this stock more than justifies its price. This is because it is one of the few sporting teams in the world that is both profitable and has significant real estate investment, mostly around the stadium in which it plays its games. The future for it also looks bright as it has a young team, with most of the players under long-term contracts. It is also home to one of the largest and fastest-growing markets in the US.
There is also an argument for Atlanta Braves Holdings, Inc. (NASDAQ:BATRA) stock being undervalued. Sports teams trade at revenue multiples, prime examples being Manchester United and Madison Square Garden Corp. If the 6x revenue multiple was applied to Atlanta, like it is to other teams, it would add nearly $1 billion to the present valuation of the stock.
In its Q4 2023 investor letter, Ave Maria, an asset management firm, highlighted a few stocks and Atlanta Braves Holdings, Inc. (NASDAQ:BATRA) was one of them. Here is what the fund said:
“Atlanta Braves Holdings, Inc. (NASDAQ:BATRA) owns the Atlanta Braves professional baseball team as well as the real estate development surrounding the team’s Truist Park stadium. Sports franchises are trophy assets whose growing asset values have produced fantastic long-term returns. As a premier team with one of the largest fan bases, we believe the private market value of The Braves and the associated real estate development far exceed the current market price of the stock.”
5. Diageo plc (NYSE:DEO)
Number of Hedge Fund Holders: 30
Berkshire Hathaway’s Shares in Q1 2024: 227,750
Diageo plc (NYSE:DEO) produces, markets, and sells alcoholic beverages. It owns some of the most famous brands in the world, including Johnnie Walker, Guinness, Smirnoff, and Baileys. It has a presence in over 180 countries globally, with production sites in nearly 150 of them. In the past decade or so, the company has ramped up mergers and acquisitions to expand a portfolio of scotch whiskey, rye whiskey, gin, rum, vodka and tequila. There are plenty of reasons to be bullish on the shares, one of them being the firm’s presence in the developing world, which contributes to nearly half of the overall revenue of the company and has the potential to add hundreds of millions of new customers.
Diageo plc. (NYSE:DEO) has a stellar dividend record with nearly 25 years of payout history in a sector where the median for this is only 14 years. The company can grow profits in the coming months as it has high quality brands, a strong market presence, a diversified spirits portfolio, a healthy balance sheet, and is relatively undervalued.
In its Q4 2023 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Diageo plc (NYSE:DEO) was one of them. Here is what the fund said:
“One of the areas that hasn’t participated in the year’s rally has been consumer staples. We identified two staples stocks that meet our three margin of safety criteria (attractive business economics, sound financial condition and attractive valuation), purchasing Diageo plc (NYSE:DEO) and Kerry Group.
Diageo is a global leader in alcoholic beverages with an impressive collection of brands across spirits and beers. The company’s portfolio of over 200 brands provides diversification and allows it to meet consumer trends. A key focus for growth has been premiumization, and today, Diageo’s portfolio is now more heavily weighted toward premium segments. Shares are trading at multiyear trough multiples on fears of growth normalizing after a COVID-induced bounce and premiumization headwinds as some markets are showing consumers trading down to value alternatives. In the near term, margin expansion will likely be constrained, but the company generates meaningful free cash flow and returns it to shareholders through dividends and share repurchases. Over the past five years, Diageo generated £12 billion FCF and returned £16 billion to shareholders. Although spirits are more cyclical than other staples, the company’s growth prospects are better long term, and we believe the current situation has provide us an attractive investment opportunity.”
4. Capital One Financial Corporation (NYSE:COF)
Number of Hedge Fund Holders: 54
Berkshire Hathaway’s Shares in Q1 2024: 12,471,030
Capital One Financial Corporation (NYSE:COF) operates as the financial services holding company for several financial institutions in the US. The stock is a typical Buffett pick, showing strong earnings and growth potential while trading at a reasonable valuation. The company has featured in the Buffett 13F portfolio since the first quarter of 2023. After adding 25% to the initial shares in the second quarter of 2023, there has been little activity around this stake. The value of this stake, at the end of the first quarter of 2024, was in excess of $1.8 billion. It represents 0.55% of the overall 13F portfolio.
An important indicator of the aggressive growth strategy of Capital One Financial Corporation (NYSE:COF) is the purchase of Discover Financial Services for $30 billion. Despite purchasing the firm for a 26% premium, the deal is expected to usher in synergies worth $2.7 billion and contribute to a more than 15% rise in earnings per share within the next three years for Capital One, according to analysts.
In its Q1 2024 investor letter, Ariel Investments, an asset management firm, highlighted a few stocks and Capital One Financial Corporation (NYSE:COF) was one of them. Here is what the fund said:
“We also added global financial services company, Capital One Financial Corporation (NYSE:COF). The company is the largest online consumer and commercial bank with a leading position in general purpose and small business credit cards. We view the company as competitively advantaged particularly due to their investment in technology. According to recent reports, COF is also rated as one of the leading banks within Artificial Intelligence (AI). Notably, the company recently announced an acquisition of Discover Financial Services (DFS) which we believe would produce significant long-term earnings accretion. COF will be able to leverage DFS’ proprietary payments network, enabling direct interaction with merchants and consumers. This closed loop dynamic should lead to higher volumes of credit card conversions presenting further upside for its shares. At current levels, we view the long-term outlook to be attractive, given favorable business trends, stabilizing delinquency rates within the credit card industry, synergies from the DFS acquisition and COF’s enhanced focus on technology.”
3. Chubb Limited (NYSE:CB)
Number of Hedge Fund Holders: 53
Berkshire Hathaway’s Shares in Q1 2024: 25,923,840
Chubb Limited (NYSE:CB) is a Switzerland-based insurance firm. The firm recently posted earnings for the second quarter of 2024, reporting adjusted earnings per share of $5.38, easily beating consensus estimates by $0.23. The revenue over the period was $12.3 billion, up more than 12% compared to the revenue over the same period last year. Operating earnings during the second quarter were up nearly 10%. These results showcase why the shares of the firm have jumped up over 30% in the past twelve months. Despite catastrophe losses, the stock has strong underlying profitability numbers.
Another important indicator of the health of Chubb Limited (NYSE:CB) stock is the climbing premiums. In the second quarter of 2023, the firm reported that property and casualty net premiums rose by over 10% to $11.8 billion. In North America, P&C premiums rose by 7.1% while overseas, the firm grew premiums by 15.6%. The firm also has room to grow net interest income in the next few months as it reinvests securities bought when interest rates were lower than they are at the present.
2. The Liberty SiriusXM Group (NASDAQ:LSXMA)
Number of Hedge Fund Holders: 38
Berkshire Hathaway’s Shares in Q1 2024: 65,486,288
The Liberty SiriusXM Group (NASDAQ:LSXMA) engages in the entertainment business in the United States, the United Kingdom, and internationally. The firm recently merged with Sirius XM, a company that provides satellite radio services. The merger aims to improve access to yield-seeking investments for the latter as it faces competition from the increase in mobile network coverage as well as the modernization of entertainment systems in cars that previously used satellite radios exclusively. Sirius XM has also been expanding digitally, purchasing Pandora in 2019 that allowed it to market original content on the internet through a streaming application that is showing signs of growth.
However, The Liberty SiriusXM Group (NASDAQ:LSXMA) will have to compete with tech giants in the streaming space over the next few years as it aims to attract subscribers through high-quality entertainment content. Since these technology companies have far greater resources than the media giant, it seems possible that this will happen with pricing caps in place. Live sports broadcasting rights might also be a key factor that will favor SiriusXM over other competitors in the audio domain.
1. Nu Holdings Ltd. (NYSE:NU)
Number of Hedge Fund Holders: 63
Berkshire Hathaway’s Shares in Q1 2024: 107,118,784
Nu Holdings Ltd. (NYSE:NU) owns and runs a digital banking platform in Brazil, Mexico, Colombia, Cayman Islands, Germany, Argentina, the United States, and Uruguay. The stock has been performing on several metrics over the past few months. The user base of the firm continues to expand, reaching 100 million customers at the end of the first quarter of 2024. Revenue is also improving, growing a whopping 66% year-over-year in the first three months of the year. The net income during this period was in excess of $440 million, comfortably beating analyst expectations across Wall Street.
Buffett typically invests in firms that have handsome margins. Nu Holdings Ltd. (NYSE:NU) is no exception. The first quarter results of the firm show that it has managed to increase the average monthly revenue per active user by 30% year-on-year, while maintaining the average monthly customer service costs below $1. The company has lots of room to grow as it is still only the fourth largest financial institution in Latin America. Nu Holdings Ltd. (NYSE:NU) is also a smart AI play by Buffett, as the company recently acquired Hyperplane, a Silicon Valley-based data intelligence company, to enhance artificial intelligence capabilities.
In its Q1 2024 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Nu Holdings Ltd. (NYSE:NU) was one of them. Here is what the fund said:
“Nu Holdings Ltd. (NYSE:NU) is a digital bank with operations in Brazil, Mexico, and Colombia. Shares appreciated during the quarter after the company reported strong balance sheet growth and improving margins. New product launches and expansion in newer countries are yielding favorable results. Nu also benefited from inclusion in the MSCI Brazil Index, which prompted buying from passively managed funds. We continue to own the stock because Nu is disrupting the financial services industry in Latin America with its digital distribution and intense focus on user experience. The company has grown to serve over 90 million customers in less than 10 years, largely through word-of-mouth referrals. We believe the company’s superior product offering will drive continued share gains in large and growing markets. “
While we acknowledge the potential of Nu Holdings Ltd. (NYSE:NU) as an investment, our conviction lies in the belief that some 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 Nu Holdings but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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