We recently published a list of Warren Buffett’s 10 New Stock Picks. In this article, we are going to take a look at where Heico Corporation (NYSE:HEI) stands against other Warren Buffett’s new stock picks.
Warren Buffett is one of the few investors that do not require an introduction as his success, wealth and philanthropy are widely known and admired. Earlier this year, Buffett made it clear that his fortune, estimated at around $140 billion will go into a charitable trust that will be administered by his three children. Moreover, the trust will only be able to disburse funds upon unanimous agreement from all three children. In a recently-released letter to shareholders, Buffett explained:
“That restriction enables an immediate and final reply to grant-seekers: “It’s not something that would ever receive my brother’s consent.” And that answer will improve the lives of my children.”
However, in the meantime, Buffett still appears to be at the helm and running the operations at Berkshire Hathaway Inc (NYSE:BRK.A), even though he has handed over most of the day-to-day managing duties to his lieutenants. In the latest financial report, it was revealed that Berkshire has amassed a huge position in cash, cash equivalents and short-term investments in US Treasuries. The cash pile, which stands at $277 billion, is the largest that the holding company has ever had. Moreover, Berkshire has slowed down its stock buybacks and hasn’t bought any of its own shares in the third quarter.
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This has prompted many to speculate that Buffett sees the market as over-valued and is likely anticipating a downturn. In this way, gathering cash will allow Berkshire to purchase shares at cheaper prices. Another explanation might come from Buffett’s comments made at the annual meeting of Berkshire shareholders, where he said that he expected that capital gain taxes to go up, so realizing profits now might be way to save money later.
Nevertheless, Berkshire still maintains a portfolio of 40 stocks. Many of the companies that the fund owns are long-term holdings and you can take a look at some of them in our analysis of Warren Buffett’s 10 longest-held stocks.
Our Methodology
In-line with Buffett’s legacy, Berkshire holds a diversified portfolio and does not make a lot of changes during a quarter. Nevertheless, every quarterly 13F filing reveals two or three new positions acquired during the reporting period. To compile the list of Warren Buffett’s new stock picks, we have scanned through Berkshire’s filings for the last couple of years and have identified 10 stocks that Berkshire has acquired and still holds according to the latest filing.
At Insider Monkey, we are obsessed with 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).
A fighter jet in formation, revealing the prowess of the companies defense arm.
Heico Corporation (NYSE:HEI)
Shares held by Berkshire Hathaway: 1.05 million
Stake Acquired: Q2 2024
During the second quarter of 2024, Berkshire added 1.05 million shares of Heico Corporation (NYSE:HEI) to its equity portfolio. Heico is an aerospace and defense company that provides aftermarket parts and repair solutions for aircraft both commercial and military, and also produces electronic products like infrared cameras, power converters, power supplies, memory modules, digital recorders and others.
Similar to other companies that we have covered in this list, Heico Corp (NYSE:HEI) ticks many boxes that Warren Buffett is looking for in an investment. The company has seen strong revenue growth in the past several years, with its top line surging from $1.87 billion in 2023 to $2.97 billion last year. Its bottom line also seen similar growth. For the latest quarter, Heico Corp (NYSE:HEI) reported EPS of $0.97, which was higher than the consensus estimate of $0.92, while its revenue of $992.25 million was slightly lower than expectations. In addition to growing earnings, Heico Corp (NYSE:HEI) has a debt-to-equity of 0.64 and a debt to EBITDA of 2.1.
Moreover, Heico Corp (NYSE:HEI) operates in an industry with high barriers to entry, which is also a plus, while its exposure to aerospace and defense implies that the company will benefit solid demand for years to come.
Overall, HEI ranks 4th on our list of Warren Buffett’s new stock picks. While we acknowledge the potential of HEI as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than HEI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
