This article discusses the Buffett Stock Portfolio: Top 10 Stock Picks for 2024 and the billionaire’s ongoing share-selling spree.
Warren Buffet is one of the most accomplished investors in the history of Wall Street. According to Bloomberg’s Billionaire Index 2024, the Oracle of Omaha has a net worth of $143 billion, making him the ninth richest person in the world. His wealth would have been much more had he not decided to donate most of his vast fortune to charities. Since 2006, Buffet has donated over $55 billion to various charitable organizations, with a majority of the gifts going to the Bill & Melinda Gates Foundation.
Buffet rose to prominence in 1965, after transitioning his investment firm into a conglomerate that held stakes in companies belonging to a broad range of industries. Between then and 2023, his firm earned average annual returns of 19.8%, outperforming most stock indices that delivered returns around the 10 percent mark during this period. However, this year, Buffet seems to be in a defensive mode and is currently in the news for his sell-off spree, significantly reducing his investments in several notable companies.
There have been mixed opinions about Buffet hunkering down on stocks. Edward Jones analyst, Jim Shanahan, said that the actions make him ‘concerned’ about Buffet’s outlook for the stock market and the American economy. In contrast, Daniel Ives, a Wedbush analyst, is less worried and believes that despite the selling spree, Berkshire still holds the top positions in those stocks by large margins, which should not be viewed as a ‘smoke signal for bad news ahead’.
So what will Warren Buffet do with all that cash? Andrew Bary, the associate editor at Barron’s, recently stated that the billionaire has been on the look for a major acquisition for some while now, which has so far proven elusive. He believes the Berkshire CEO may just hold the cash for some while, earn interest on Treasury Bills, and wait for potential opportunities to grab in the stock market.
Another factor that has likely contributed to Warren Buffet dumping stake in some of his top stocks is the speculation around the increase in capital gains tax. The debate on the tax rate has been on for some time now and has even become a talking point in the run-up to the presidential elections. Vice President, Kamala Harris, during a speech in New Hampshire this month, proposed to raise the long-term capital gains tax for wealthy individuals to 28%.
The current tax rate is 21% when a gain is realized. Massive gains over the long term result in a large tax. Warren Buffet invested in stocks he is currently selling a long time ago, and hence, is sitting on handsome gains. The rationale behind selling these stocks could be to capitalize on the gains as much as possible on the current low tax rate, instead of paying hefty taxes later if the rate were to be increased.
With that said, let’s now head over to the top picks from the Buffet stock portfolio.
Krista Kennell/Shutterstock.com
Methodology
We scanned Warren Buffet’s portfolio, as of June 30, 2024, and picked the top 10 stocks according to their stake value. The figures were sourced from the Insider Monkey Database.
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).
Buffett Stock Portfolio: Top 10 Stock Picks for 2024:
10. DaVita Inc. (NYSE:DVA)
Stake Value as of Q2 2024: $5,001,763,135
DaVita Inc. (NYSE:DVA) is an American healthcare company focused on transforming care services to improve the lives of patients in need. It is one of the largest kidney dialysis providers in the US, with 2,675 outpatient centers nationwide, resulting in a 35% market share in the dialysis market. DaVita also operates an additional 367 outpatient centers overseas in 11 other countries. It is among the top picks from the Buffet stock portfolio, with the billionaire having investments of over $5 billion in the company.
After establishing a stronghold in the American market, the company is now focused on expanding its global footprint through strategic acquisitions, especially in Latin America. In March this year, DaVita announced the signing of a deal worth $300 million, involving four separate acquisitions from Fresenius Medical Care, allowing the company to enter the Chilean and Ecuadorian markets, while expanding operations in Brazil and Colombia. This will make DaVita Inc. (NYSE:DVA) the largest dialysis service provider in Latin America, serving over 60,000 patients in more than 270 clinics.
This has led to a general bullish sentiment around the stock. Ariel Global Fund stated the following regarding DaVita Inc. (NYSE:DVA) in its first quarter 2024 investor letter:
Leading provider of dialysis services, DaVita Inc. (NYSE:DVA) outperformed during the period following a top-and-bottom-line earnings beat. DaVita is benefitting from cost-saving initiatives, early signs of normalization in patient growth trends on par with pre-pandemic levels, improved leverage, and an aggressive share buyback program. The company also recently announced an expansion of its international operations in Latin America, presenting an attractive long-term growth opportunity. Furthermore, management provided a 2024 financial outlook that is well above consensus and anticipates favorable growth. In our view, we believe the market misunderstands the long-term clinical impact of glucagon-like-peptide-1 (GLP-1s) on dialysis and as such, DaVita currently trades at a significant discount relative to our estimate of its intrinsic value.
The healthcare provider had a stellar Q2 as well, during which it generated an operating income of $506 million, on the back of continued strength in revenue per treatment (RPT), which enabled the company to post an EPS of $2.59, beating analysts’ expectations of $2.47 per share. CEO Javier Rodriguez attributed RPT growth to two factors: improvement in the company’s collection capabilities, and higher rate increases amid rising inflation. The company also ended the quarter with $654 million in free cash flow, reflecting its solid financial position.
Some areas of concern remain, however. The company continues to face high inflationary pressures and has not been able to fully recoup the impact of high inflation even after rate increases. DaVita’s Integrated Kidney Care (IKC) business has also made a $60 million loss, year-to-date, due to revenue recognition timings and higher mortality rates.
Despite that, DaVita Inc. (NYSE:DVA)’s overall outlook is positive, and the management remains confident it is on track for further growth. It has revised its 2024 guidance and anticipates operating income for the full year to be in the range of $1.91 billion to $2.01 billion, up from initial forecasts of $1.88 billion to $1.98 billion.
9. Chubb Limited (NYSE:CB)
Stake Value as of Q2 2024: $6,895,777,623
Chubb Limited (NYSE:CB) is a world leader in insurance products, headquartered in Zurich, Switzerland. It operates in 54 countries and territories, providing coverage for property and casualty, life insurance, reinsurance, and accident and health to a wide group of clients. It is one of the top picks from the Buffet stock portfolio, with the hedge fund having investments valued at around $6.9 billion in the company, as of Q2 2024.
Chubb’s diverse insurance offerings on both personal and commercial lines give it a competitive advantage by mitigating risk and providing the opportunity to grow across sectors. This was reflected in the company’s recent financial performance in Q2 FY24, during which it generated a core operating income of $2.2 billion, resulting in earnings per share of $5.38, representing a 9.3% increase. This also raised the company’s year-to-date operating income to $4.4 billion.
The strong show during the quarter was fueled by premium revenue growth across segments and regions, excellent underwriting results, and a 25% surge in investment income. Property and casualty (P&C) underwriting income stood at $1.4 billion for the quarter, with catastrophe losses totaling $580 million. Investment income reached a record $1.5 billion, up 26% year-over-year.
Chubb Limited (NYSE:CB)’s balance sheet position remains solid and has been strengthened by the company’s investment and underwriting results during the first half of the year, which brought in substantial capital and cash flow. Chubb’s book value reached $61 billion at the end of the second quarter, with operating cash flow for the year at a record $7.2 billion.
The company expects P&C revenue growth to continue driving operating incomes in the quarters ahead this fiscal year. Chubb’s share price has spiked 8% since the announcement of Q2 results in July. The overall sentiment around the stock remains bullish. Street analysts also have a consensus on the stock’s Buy rating.
8. Moody’s Corporation (NYSE:MCO)
Stake Value as of Q2 2024: $10,384,249,654
Moody’s Corporation (NYSE:MCO) is an American business and financial services company, headquartered in New York City, which specializes in providing data, intelligence, and analytical tools to mitigate risks and help financial experts make confident and informed decisions. It is the parent company of credit rating agency, Moody’s Ratings, which is considered among the three best credit rating agencies alongside S&P and Fitch.
Moody’s is among some of the oldest holdings in Warren Buffet’s portfolio and still generates substantial value through dividend gains and share price appreciation. As of June 30 this year, Berkshire Hathaway had investments worth $10.4 billion in the company, making it one of the top picks from the Buffet stock portfolio.
During Q2 2024, the company reported a revenue of $1.8 billion, representing a 22% increase year-over-year. Adjusting operating margins for the quarter were close to 50%. Net income stood at $600 million, with an EPS of $3.28, comfortably beating analysts’ expectations of $3.03 per share. The strong results were driven by a 36% increase in revenue in Moody’s Investor Services division and an 8% growth in the Analytics segment’s revenue.
Looking ahead in the year, Moody’s expects revenue growth to be in the low-teens percent range, with expenses expected to be around the high single-digit range. Adjusted operating margin is forecasted to be between 46-47%. The company has also raised its full-year EPS guidance and now anticipates earnings to be between $11 to $11.40, representing a 50-cent increase at the midpoint. The free cash flow guidance is now also expected to be $2.2 billion, instead of the initial guidance of $2 billion.
The company has also entered into strategic partnerships and collaborations with industry giants such as MSCI, Zillow, and Google, to enhance the insights available to its customers. Moreover, in September this year, Moody’s Corporation (NYSE:MCO) further bolstered its risk assessment strategy with the acquisition of Praedicat, a risk analytics company, with casualty and liability modeling capabilities. The terms of the deal were not made public.
Moody’s Corporation (NYSE:MCO) is one of the best stocks to buy now, with 59 hedge funds having a stake in the company, according to Insider Monkey’s database for Q2 2024. There is also a consensus on the stock’s Buy rating among Street analysts, who expect a 2% upside in its share price in the coming months.
7. The Kraft Heinz Company (NASDAQ:KHC)
Stake Value as of Q2 2024: $10,491,953,836
The Kraft Heinz Company (NASDAQ:KHC) is a global food and beverage leader, formed in 2015 after the merger of Kraft Foods and Heinz Company. It manufactures and markets a wide mix of products, including condiments, dairy food, meat, beverages, and other grocery items.
The company reported mixed results In Q2 2024, with net sales of $6.48 billion, down 3% year-over-year, and also short of expectations of $6.55 billion. However, earnings beat estimates, with KHC logging an EPS of $0.78 for the quarter against forecasts of $0.74. Operating income stood at approximately $500 million, declining 62.1% compared to the same period in 2023, due to noncash impairment losses of $854 million. In contrast, driven by higher pricing, improved gross savings, and lower commodity and logistics costs, operating income for the quarter grew 2% to reach a total of $1.4 billion.
The Kraft Heinz Company (NASDAQ:KHC) faces intense pressure in the UK from high inflation and increased competition with private labels gaining traction. During the Q2 earnings call, CFO Andre Maciel, also expressed concerns about demand softness and consumer fatigue in emerging markets, most notably in China and Brazil.
Despite the dip in sales during Q2, the management is optimistic of gradual improvement during the back half of the year. CEO Carlos Abrams-Rivera shared the following remarks in the company’s Q2 earnings call:
As we enter the second half of 2024, many drivers are giving us optimism for improved top-line trends. We are anticipating a continued ramp-up of both innovation and renovation, particularly in North American retail, and we are increasing our marketing investment to continue to drive brand superiority across our portfolio. In Away From Home and Emerging Markets, we expect to increase distribution through our go-to-market strategy and global activations. Finally, understanding that the consumer is looking for value, we will selectively increase investments in promotions.
The Kraft Heinz Company (NASDAQ:KHC) has significantly ramped up promotions to attract value-seeking customers, offering them with different price tiers. One of the company’s key strengths is its competitive pricing. During the earnings call, Abrams-Rivera credited the team for their relentless efforts in unlocking efficiencies to drive productivity and hold prices below high inflation levels.
Wall Street analysts expect KHC to overcome the challenges it faces, and have a consensus on the stock’s Buy rating. They also anticipate a 10% appreciation in its share price over the coming months. The Kraft Heinz Company (NASDAQ:KHC) continues to remain one of the top picks from the Buffet stock portfolio, with the hedge fund having a stake valued at nearly $10.5 billion in the company as of June 30, 2024.
6. Occidental Petroleum Corporation (NYSE:OXY)
Stake Value as of Q2 2024: $16,090,394,458
Occidental Petroleum Corporation (NYSE:OXY) is an American energy company engaged in hydrocarbon exploration in the United States and the Middle East. It also manufactures petrochemicals, with operations in the United States, Canada, and Chile. Warren Buffet first invested in the company in 2022 and continues to expand his shares. According to a recent report in Barron’s, the billionaire now holds a 28% stake in Occidental, representing 5.74% of his portfolio.
It is one of the top picks from the Buffet stock portfolio. Here is what the Berkshire Hathaway CEO wrote about the company in his 2023 letter to shareholders:
Under Vicki Hollub’s leadership, Occidental is doing the right things for both its country and its owners. No one knows what oil prices will do over the next month, year, or decade. But Vicki does know how to separate oil from rock, and that’s an uncommon talent, valuable to her shareholders and to her country.
During Q2 2024, the company reported its highest quarterly production in four years and generated $1.3 billion in cash flow. EPS for the quarter stood at $1.03, which comfortably surpassed analysts’ expectations of 77 cents per share. The strong results were driven by exceptional performance across the company’s business segments, most notably from the new wells in the Permian Basin, and a higher production uptime in the Gulf of Mexico.
The company appears to be headed in the right trajectory in terms of financial performance. Occidental exited the quarter with $1.8 billion in cash. Since the start of the year, it has also closed around $1 billion of Permian Basin divestitures, with the sale proceeds going into reducing the company’s debt. It plans to further reduce debt by $3 billion during Q3. The management is determined to strengthen the balance sheet through excess cash flow and divestitures until Occidental reaches its debt target of $15 billion or less.
On August 1 this year, the company completed a $12 billion acquisition of CrownRock, L.P., a Midland-based oil and gas producer. The move aims at expanding Occidental’s footprint in the Midland Basin. During the Q2 earnings call later that month, VP and CEO, Sunil Mathew, stated that following the acquisition, the company now expects daily production to increase from 1.25 million to 1.32 million BOE per day. Occidental is also currently involved in exploratory discoveries in Ocotillo and Tiberius, with final investment decisions awaited.
Occidental Petroleum Corporation (NYSE:OXY) is one of the best stocks to buy now, with 62 hedge funds having investments in the company, as of Q2 2024. Wall Street analysts are also bullish on the stock and expect a 25% upside in its share price.
5. Chevron Corporation (NYSE:CVX)
Stake Value as of Q2 2024: $18,553,059,728
Chevron Corporation (NYSE:CVX) is a leading American energy corporation, specializing in oil and gas exploration, production, and refining sectors. The company headquartered in San Ramon, California, is considered a heavyweight in the industry, with a market capitalization of around $300 billion. It is one of the top picks from the Buffet stock portfolio, with the hedge fund’s investments in Chevron valued at over $18.5 billion as of June 30 this year.
During Q2 2024, it missed earnings with an EPS of $2.55 against expectations of $2.93 per share. This was due to weak refining margins and significant downtime in its operations in Australia. Low margins and reduced capture rates also reduced total downstream earnings to $597 million from $1.5 billion last year. Since these results were announced in early August, Chevron’s share price has dropped 2%, reflecting investor concerns about the company’s short-term outlook.
Despite that, the company’s operations remain robust. It reported an 11% increase in production from last year, resulting in a record output in the Permian Basin. In April this year, Chevron announced that its 50% owned affiliate Tengizchevroil LLP (TCO) had commenced operations at the Tengiz oil field in Kazakhstan. Moreover, in October 2023, the company acquired Hess for $53 billion, with work expected to begin on a well in Guyana in 2025.
Strength in the US onshore operations coupled with expansion on overseas projects provide a foundation for Chevron for growth and recovery. It also offers the company the opportunity to untap new sources of revenue. Moreover, the energy demand is set to rise globally as economies continue to recover from the pandemic, which can lead to higher prices, and resultantly, a surge in revenue for Chevron.
Considering these factors, Wall Street analysts have a consensus on Chevron Corporation (NYSE:CVX)’s Buy rating with a share price upside potential of around 18%. Hedge fund sentiment around the stock is bullish as well. According to Insider Monkey’s database for Q2 2024, 64 hedge funds had investments in Chevron, up from 62 in the first quarter.
