In this article we’ll check out the Top 5 Stocks Warren Buffett Just Bought. For more background on the Oracle of Omaha and some of his other top stock picks, don’t miss the Top 10 Stocks Warren Buffett Just Bought.
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T-Mobile US Inc. (NASDAQ:TMUS)
One of the Top 10 Stocks New Mets Owner Steve Cohen Was Buying in Q3, T-Mobile US Inc. (NASDAQ:TMUS) was also one of the top stocks being bought during the quarter by billionaire investing legend Warren Buffett of Berkshire Hathaway. Berkshire’s new TMUS position held over 2.41 million shares valued at $276 million on September 30.
T-Mobile is on a roll, growing revenue by 74% year-over-year in the third quarter and appears poised to swamp rivals AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) in the race to 5G dominance. With over 1.4 million square miles of low-band 5G coverage, T-Mobile currently has 40% wider coverage than AT&T and Verizon combined.
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Snowflake Inc. (NYSE:SNOW)
Berkshire also jumped on the IPO of data storage and analytics company Snowflake Inc. (NYSE:SNOW) during Q3, buying 6.13 million shares to take a 2.21% ownership stake in the company. Snowflake was the most popular Q3 IPO among the select group of hedge funds tracked by Insider Monkey, being owned by 59 of them.
Many analysts and investors are beginning to question the market’s rationality after the blowout success of several of those recent IPOs, and Snowflake is probably the starkest example yet of a valuation ($83 billion) that doesn’t seem to line up with reasonable expectations that will play out any time soon. McLain Capital took aim at the stock’s valuation in its Q3 investor letter, stating:
“ […] with an $85bln fully diluted market capitalization on a mere $400mm in trailing twelve month sales, Snowflake is valued at an astronomical 212x revenue. Assuming Snowflake will, in 10 years, trade at a generous 30x earnings and earn 15% net margins, revenues would have to grow by a factor of 122x for investors to earn just a 10% annual rate of return. Notably, these assumptions would require that Snowflake grow revenues significantly faster than any non-biotech public company has in history – calling that a heroic assumption would be an understatement. We have no current position in Snowflake.”
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Bristol-Myers Squibb (NYSE:BMY)
Bristol-Myers Squibb (NYSE:BMY) is the first of three healthcare stocks that top the list of Warren Buffett’s biggest buys of Q3, all of which rank among the 10 Biggest Pharmaceutical Companies in the World in 2020. Berkshire bought 29.97 million BMY shares during Q3, valued at $1.81 billion on September 30.
BMY shares have fallen by over 7% over the last five years as the market grows increasingly concerned about the looming loss of exclusivity over some of Bristol-Myers’ most successful drugs like Revlimid. In its Q3 investor letter, Generation PCMA expressed confidence in BMY’s pipeline, including TYK-2, Opvido, Ozanimod, and Zeposia, and believes that future acquisitions can also help offset those losses. The fund believes BMY’s fair market value is $75, nearly 20% higher than its current share price.
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Merck & Co. Inc. (NYSE:MRK)
Berkshire also took a new position in Merck & Co. Inc. (NYSE:MRK) during Q3, buying 22.4 million shares valued at just under $1.86 billion at the end of the quarter. 80 of the hedge funds tracked by Insider Monkey were MRK shareholders at the end of September.
Merck shares have sunk by 13% in 2020, but the stock looks like a promising bounce back candidate in 2021. The majority of the company’s drugs need to be administered in person, which has heavily impacted results this year given that treatment of all but the most serious conditions is being deferred during the pandemic. Sales of cancer drug Keytruda, one of its most important assets, surged by 21% year-over-year in Q3, putting Merck in a good position once some of its other drugs can be deployed more frequently again by doctors.
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AbbVie Inc (NYSE:ABBV)
The hedge funds tracked by Insider Monkey soured on AbbVie Inc (NYSE:ABBV) quite a bit between 2015 and mid-2018, with close to 50% of shareholders selling off the stock during that time. They’ve since come roaring back into the stock in greater numbers than ever, with a 123% jump in ownership since then, including by the Oracle of Omaha himself in Q3. Berkshire opened a new position in AbbVie that contained 21.26 million shares worth over $1.86 billion on September 30.
AbbVie appears to be a strong long-term position, with current blockbuster drugs like Humira being supported by a growing stable of promising treatments like Rinvoq. AbbVie has also become a great option for dividend investors, with an annual yield that now tops 5.5%.
If you’re looking for stocks with tremendous growth potential in the years to come, be sure to check out the 10 Best Growth Stocks To Buy Now According To Ray Dalio.
Disclosure: None.
