In this article, we discuss Warren Buffett’s 4 new stock picks in 2022. If you want to read about some more Buffett stock picks, go directly to ‘Greedy When Others are Fearful’: Warren Buffett’s 8 New Stock Picks in 2022.
4. Celanese Corporation (NYSE:CE)
Number of Hedge Fund Holders: 35
Celanese Corporation (NYSE:CE) is a specialty materials firm. Berkshire Hathaway owned over 7.8 million shares of the company at the end of the first quarter of 2022 worth $1.1 billion, representing 0.3% of the portfolio. Celanese has an impressive dividend history stretching back sixteen years. Over the past twelve years, the payouts have consistently grown. On April 19, the company declared a quarterly dividend of $0.68 per share, in line with previous. The forward yield was 1.85%.
On April 8, JPMorgan analyst Jeffrey Zekauskas maintained an Overweight rating on Celanese Corporation (NYSE:CE) stock with a price target of $190, noting that the firm was benefiting from extended tightness in global acetyls markets.
At the end of the fourth quarter of 2021, 35 hedge funds in the database of Insider Monkey held stakes worth $1 billion in Celanese Corporation (NYSE:CE), up from 26 in the previous quarter worth $735 million.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Holocene Advisors is a leading shareholder in Celanese Corporation (NYSE:CE), with 1.5 million shares worth more than $223 million.
In its Q4 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Celanese Corporation (NYSE:CE) was one of them. Here is what the fund said:
“In Q4, the portfolio participated in the up market but trailed its benchmark. Relative performance during the period was held back by our comparative sector and industry exposures, as well as by underperformance among our health care holdings. Our sales activity in Q4 was focused on our successes. We fully exited Celanese Corporation (NYSE:CE), a chemicals and advanced materials producer, as shares have benefited from rising raw materials prices.”
3. McKesson Corporation (NYSE:MCK)
Number of Hedge Fund Holders: 57
McKesson Corporation (NYSE:MCK) provides healthcare services. In late March, authorities in Europe approved the sale of the European businesses of McKesson to Phoenix. The latter will take control of the former’s interests in Italy, Ireland, Portugal, Belgium, and Slovenia as part of the deal. The sale of the French business of McKesson is still under review as the company is the largest wholesaler in France. Berkshire owns more than 2.9 million shares in the firm worth $894 million, representing 0.24% of the portfolio.
On May 11, Credit Suisse analyst AJ Rice kept an Outperform rating on McKesson Corporation (NYSE:MCK) stock and raised the price target to $377 from $333, noting that the firm had posted quarterly results below expectations but announced affirmative initial guidance for 2023.
Among the hedge funds being tracked by Insider Monkey, New York-based firm Pzena Investment Management is a leading shareholder in McKesson Corporation (NYSE:MCK), with 2.7 million shares worth more than $827 million.
At the end of the fourth quarter of 2021, 57 hedge funds in the database of Insider Monkey held stakes worth $2.5 billion in McKesson Corporation (NYSE:MCK), up from 51 in the previous quarter worth $2.2 billion.
In its Q4 2021 investor letter, Broyhill Asset Management, an asset management firm, highlighted a few stocks and McKesson Corporation (NYSE:MCK) was one of them. Here is what the fund said:
“Shares of McKesson Corporation (NYSE:MCK) tacked on another 23% during the second half. Even after gaining 44% for the full year, the stock still trades at a 50% discount to the market. Like our Dollar Tree investment, investor sentiment around McKesson languished for years as deflating generic drug prices compressed operating margins and the uncertainty of opioid litigation capped valuation multiples. But pricing has stabilized, a global opioid settlement appears imminent, and prescription trends are rapidly recovering at the same time vaccine-related revenues are accelerating.
Since FY19, revenues have grown at 7% annually, driving earnings per share growth, which should shake out at 11% – 14% through FY22. Over this three-year period, McKesson Corporation (NYSE:MCK) has generated $15 billion in cumulative free cash flow (roughly two-thirds of its market capitalization at the beginning of the period), returning roughly half of that to shareholders through repurchases (shares outstanding have declined by 24% on $6B of buybacks) and dividends (which have increased 22% over this period), while reducing leverage from 2.8x to 1.6x.
Does that sound like a business that should change hands at half the market’s valuation? We don’t think so. Even assuming shares traded back to three-quarters of the market’s multiple (in line with the average of the past decade), shares could return 15% – 20% annually over the next few years.”
2. Markel Corporation (NYSE:MKL)
Number of Hedge Fund Holders: 37
Markel Corporation (NYSE:MKL) is a financial holding company. Latest data reveals that Berkshire Hathaway owned 420,293 shares in the company at the end of the first quarter of 2022 worth $620 million, representing 0.17% of the portfolio. The revenues of Markel have climbed four-fold in the past decade, with net income growing at a rate of over 20% during the period. The insurance business of the firm, generally a solid bet in times of inflation, has also shown pricing power.
On April 28, Truist analyst Mark Hughes maintained a Hold rating on Markel Corporation (NYSE:MKL) stock and raised the price target to $1,500 from $1,400, noting that the quarterly results of the firm had shown improved underwriting performance.
At the end of the fourth quarter of 2021, 37 hedge funds in the database of Insider Monkey held stakes worth $733 million in Markel Corporation (NYSE:MKL), compared to 25 in the preceding quarter worth $689 million.
Among the hedge funds being tracked by Insider Monkey, London-based firm Polar Capital is a leading shareholder in Markel Corporation (NYSE:MKL), with 98,750 shares worth more than $145 million.
In its Q3 2021 investor letter, Vltava Fund, an asset management firm, highlighted a few stocks and Markel Corporation (NYSE:MKL) was one of them. Here is what the fund said:
“It is interesting that although Berkshire Hathaway’s business model is fundamentally very simple, produces excellent results, and has been in the public eye for decades, almost no one has managed to replicate it. The implementation of this idea is seemingly very difficult. In fact, the sole company that has been largely successful in following Berkshire’s footsteps is Markel Corporation (NYSE:MKL). Its foundation is likewise a successful and highly profitable insurance business that produces free capital for further investments into both public and non-public shares in combination with exemplary asset allocation.
Much of the credit for this goes to its co-CEO, Tom Gayner. Markel Corporation (NYSE:MKL) was originally a family business founded in 1930 by the Markel family. Tom Gayner came onto the scene in 1990, when he took over the investment part of Markel, and since 2016 he has held the position of co-CEO alongside Richard White. Tom Gayner is first and foremost an excellent investor and asset allocator. At Markel, he is currently in charge of a USD 28 billion investment portfolio, as well as the part that invests in private companies and goes by the name Markel Ventures. He has been instrumental in driving the stock price from USD 10 to USD 1,200 during his tenure. That is about the same percentage increase that Berkshire’s shares had over the same period.” (Click here to read full text)
1. Ally Financial Inc. (NYSE:ALLY)
Number of Hedge Fund Holders: 48
Ally Financial Inc. (NYSE:ALLY) is a digital financial services firm. The company posted earnings for the first quarter of 2022 on April 14, reporting earnings per share of $2.03, beating expectations by $0.12. The revenue over the period was $2.1 billion, up over 10% year-on-year and beating expectations by $10 million. Buffett opened a new position in the stock during the first quarter of 2022. This stake comprises close to 9 million shares worth $389 million, representing 0.1% of the portfolio.
On April 18, Wells Fargo analyst Donald Fandetti maintained an Overweight rating on Ally Financial Inc. (NYSE:ALLY) stock and lowered the price target to $50 from $57, noting that the firm was poised to exceed high end of guidance numbers in the coming months.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Harris Associates is a leading shareholder in Ally Financial Inc. (NYSE:ALLY), with 26 million shares worth more than $1.1 billion.
At the end of the fourth quarter of 2021, 48 hedge funds in the database of Insider Monkey held stakes worth $2.3 billion in Ally Financial Inc. (NYSE:ALLY), compared to 57 in the preceding quarter worth $2.5 billion.
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