In this piece, we will take a look at 10 stocks that Warren Buffett and hedge funds are crazy about.
Warren Buffett will go down in history as one of the most successful investors on Wall Street, a feat achieved through integrity, wisdom and wit. He is dubbed the Oracle of Omaha on his investment firm Berkshire Hathaway, delivering a compounded annual gain of 19.8% since 1958, more than double an increase of 9.9% for the S&P 500. Berkshire Hathaway stock has gained over 3,787,464% since 1965 compared to a 24,708% gain for the S&P 500, underlining Buffett’s stock-picking skills.
Buffett is one of the most accomplished investors in the history of Wall Street having amassed a wealth of $138 billion, as reported by Bloomberg’s Billionaire Index. His net worth could have been much more had he not made generous contributions to various charitable organizations. In contrast to many other billionaires who prefer lavish lifestyles in large homes and luxury vehicles, Buffett is often seen as one of the most humble billionaires globally.
The significant investment gains over the years stem from Buffett buying stocks in various sectors and holding them for years and even decades. Buffett’s secret to prosperity mainly lies in investing in well-established, reputable companies with clear competitive edges. Although this approach focuses heavily on undervalued stocks, it also occasionally includes investments in high-growth companies.
The investment strategy is often backed by the massive cash haul that Berkshire Hathaway holds on generating earnings per share on most of its investments and through dividend payments. Nevertheless, it is becoming increasingly clear that Warren Buffett and hedge funds are crazy about a particular clique of stocks.
High-growth companies and market leaders in respective fields are some of the factors that Buffett and most hedge funds closely watch while selecting stocks. Technology stocks which consist of some of the biggest companies account for 41% of Buffett’s 13F portfolio at the end of March, an edge that has always allowed him to outperform the overall market.
Diversification is another important factor in the top stocks that Warren Buffett and hedge funds are crazy about. While technology stocks account for the biggest share, the billionaire investor is also heavily invested in Financials at 21% and Basic Material at 10.7%. Diversifying aligns with the billionaire investor value investing principles that involve pursuing undervalued investments in various sectors.
Over the years, Buffett has always sought securities whose prices are undervalued relative to their intrinsic value. Rather than focusing on short-term gains in the market, the Berkshire Hathaway chief selects stocks based on their long-term potential. It was one of the reasons that Berkshire Hathaway shares ended 2023 with a 15.8% gain, representing an eighth straight year of advances. Its biggest increase of 29.6% came in 2021 at the height of the COVID-19 pandemic.
While Berkshire Hathaway had $189 billion in cash as of the end of the first quarter, the cash haul is expected to surge to $300 billion by the end of the third quarter. While most people might wonder why Buffett is not putting much of the cash to work, the billionaire investor is always cautious focusing on value investments rather than just investing for the sake.
The billionaire investor is always driven by the mantra: never invest in overvalued equities. Therefore he always takes time scanning for value investments trading at discounted valuations. Additionally, the sheer size of Berkshire Hathaway means it can only put its money into a select few companies that will significantly impact its returns. This is further compounded by the fact that investments in cash equivalents, such as short-term government bonds, are currently offering returns above 5% which is quite high at current levels. As a result, Warren Buffett and his firm are deliberately seeking the perfect investment at the perfect price, and this opportunity could arise at any moment.
In the recent past, Buffett has also gone against the wave amid a shift of focus from oil and gas investment plays amid the transition to clean energy. Buffett remains bullish about investment opportunities in the energy sector amid the carbon care initiatives even as the biggest players continue generating significant returns from the lucrative fossil fuel business. Buffett and hedge funds have also taken keen interest in stocks offering exposure to emerging technologies such as Artificial Intelligence that are driving valuations higher in the market.
With this context in mind, we will now talk about the 10 Stocks Warren Buffett and hedge funds are crazy about.
Our Methodology
In this article, we take a look at some of the top stocks in which Buffett and other hedge funds are heavily invested. Warren Buffett and hedge funds are crazy about these 10 stocks partly because of their growth metrics and long-term prospects. While some of the stocks are trading at a premium valuation, they are market leaders in their respective fields and, therefore, well-positioned to generate long-term value. We have ranked the stocks in Warren Buffett’s portfolio based on the number of hedge funds invested and selected the top 10.
Warren Buffett and Hedge Funds Are Crazy About These Stocks
10. American Express Company (NYSE:AXP)
Berkshire Hathaway’s Stake Value: $34.52 Billion
Number of Hedge Fund Investors: 66
American Express Company (NYSE:AXP) is one of the world’s largest credit card companies and payment networks and one of the top stocks that Warren Buffett and hedge funds are crazy about, owing to its impressive track record in dividend payments. In contrast to most credit card providers that handle credit card payments through external networks, American Express Company (NYSE:AXP) handles these transactions directly through its system.
With every credit card transaction, this setup enables American Express Company (NYSE:AXP) to achieve better financial returns than its competitors. The firm keeps a portion of this benefit through increased profit margins and uses the remaining portion to improve customer benefits and services.
Here is what Artisan Select Equity Fund said about American Express Company (NYSE:AXP), in its first quarter 2024 investor letter:
“American Express Company (NYSE:AXP) shares rose 22% this quarter. This is an interesting case study, given our earlier discussion about inflation. American Express operates one of the largest credit card networks in the world. Its revenue is primarily a function of a fee rate applied to the dollar value of goods and services that are transacted through its network. That dollar value is, of course, nominal. As inflation pushes up the value of those goods and services as it has for the past few years, American Express will capture that value through its fee structure. The past few years’ inflation has clearly been a benefit. Aside from its inherent inflation protection, the business is a very strong one. Payments continue to shift toward electronic forms, benefiting American Express. It also has a strong brand that attracts loyal and highly profitable customers that are the envy of the industry. Recent results have been strong with revenues moving nicely ahead of GDP.
While Berkshire owns $34.52 billion worth of stakes in American Express Company (NYSE:AXP), out of the more than 900 hedge funds tracked by Insider Monkey, 66 hedge funds reported owning stakes.”
9. T-Mobile US, Inc. (NASDAQ:TMUS)
Berkshire Hathaway’s Stake Value: $855.60 Million
Number of Hedge Fund Investors: 69
T-Mobile US, Inc. (NASDAQ:TMUS) is one of the top stocks Warren Buffett and hedge funds are crazy about for exposure in the communication services sector. The stock is already up by more than 10% for the year, adding to the 8% gain recorded in 2023. Following its merger with Sprint, T-Mobile US, Inc. (NASDAQ:TMUS) has become a dominant player in transitioning to 5G service.
With a bold growth strategy and a track record of success, T-Mobile US, Inc. (NASDAQ:TMUS) is poised to remain a leader in the US mobile market. This trend is favorable for T-Mobile. In contrast to its competitors, it focuses on capital growth. This approach has proven effective, with T-Mobile’s stock increasing by almost 150% in the past five years.
As of the end of the first quarter of 2024, 69 hedge funds out of the more than 900 analyzed at Insider Monkey held stakes in the wireless career company, down from 75 in the previous quarter.
8. Snowflake Inc (NYSE:SNOW)
Berkshire Hathaway’s Stake Value: $989.86 Million
Number of Hedge Fund Investors: 73
Warren Buffett and hedge funds are crazy about Snowflake Inc (NYSE:SNOW) as it offers exposure in the burgeoning cloud computing sector as a technology investment. The company provides a data cloud that enables customers to consolidate data into a single source. Snowflake Inc (NYSE:SNOW) has also emerged as an artificial intelligence investment play as it increasingly integrates technology to solve business problems.
In 2023, Snowflake Inc (NYSE:SNOW) gained more than 50% in market value, affirming its edge as one of hedge funds’ top investment plays in the tech sector. While the company’s revenue growth rate has slowed recently, it remains positive for free cash flow as it continues adding more customers to its portfolio. Its revenue retention rate also remains at a high of 130%.
Following an analysis of the over 900 hedge funds tracked by Insider Monkey, 73 held stakes in Snowflake Inc (NYSE:SNOW) as of the end of the first quarter of 2024.
In the investor letter for the first quarter of 2024, Alger Focus Equity Fund shared its insights on Snowflake Inc. (NYSE:SNOW), discussing the company’s recent activities and performance:
“Snowflake Inc. (NYSE:SNOW) is a cloud-based data warehousing company that allows organizations to store, analyze and share data in a secure. Scalable and cost-effective manner. This includes the Data Cloud. An ecosystem where Snowflake customers, partners. Data providers, and data consumers can break down data silos and derive value from rapidly growing data sets in a secure, governed, and compliant way. Its platform supports a range of use cases. Including data warehousing, data lakes, data engineering, data science, data application development, and data sharing. While the company reported an overall healthy fiscal fourth quarter. Shares detracted from performance after management lowered their fiscal 2025 forward revenue guidance below analyst estimates. Further, the company announced that CEO Frank Slootman would be retiring from the role immediately, succeeded by Sridhar Ramaswamy, the former SVP of Al who has demonstrated impressive speed in bringing new Al products and features to market.”
7. Lennar Corporation (NYSE:LEN)
Berkshire Hathaway’s Stake Value: $23.52 Million
Number of Hedge Fund Investors: 75
Lennar Corporation (NYSE:LEN) operates as a homebuilder company that engages in the construction and sales of single-family attached and detached homes. It has emerged as one of the top stocks Warren Buffett and hedge funds are crazy about for gaining exposure in the real estate sector.
While consumer cyclical stocks tend to be riskier than their defensive counterparts, Lennar Corporation (NYSE:LEN) has shown it has what it takes to navigate challenging economic conditions as the current one amid high interest rates.
“We are bullish on the long-term prospects for Lennar. We believe the company is exceptionally well run, favourably positioned to generate compelling long-term growth, and committed to unlocking shareholder value through several strategic initiatives,” analysts at Baron Funds said in an investor letter.
The number of hedge funds holding stakes in the company increased from 65 as of the end of 2023 to 75 as of the end of the first quarter of 2024, according to an analysis of more than 900 hedge funds in Insider Monkey.
6. Bank of America Corporation (NYSE:BAC)
Berkshire Hathaway’s Q1 Stake Value: $39.17 Billion
Number of Hedge Fund Investors: 82
Bank of America Corporation (NYSE:BAC) is Berkshire Hathaway’s largest holding in the financial services sector, with stakes worth $39.2 billion. It is also one of the top stocks that Warren Buffett and hedge funds are crazy about, having gained about 40% over the past 12 months.
An analysis of the Insider Monkey database indicates that 82 hedge funds held stakes in Bank of America Corporation (NYSE:BAC) as of the end of the first quarter, down from 96 in the previous quarter.
Analysts at ClearBridge Value Equity Strategy believe the pressures Bank of America Corporation (NYSE:BAC) faced last year have subsided, and it is well-positioned to deliver impressive results in 2024. Here is what ClearBridge Value Equity Strategy said about Bank of America Corporation (NYSE:BAC) in its first quarter 2024 investor letter:
“We added several new positions during the quarter. Our largest new addition was Bank of America Corporation (NYSE:BAC), one of the world’s leading financial institutions, serving some 66 million consumer and small business clients across the U.S. as well as large corporations, financial institutions and governments globally. We believe that the interest rate pressure that Bank of America faced in early 2023 has subsided, and risks surrounding deposit outflows have abated, which should allow the company to improve its book value and capital growth as well as benefit from a rebound of capital markets activity.”
5. Citigroup Inc. (NYSE:C)
Berkshire Hathaway’s Stake Value: $3.49 Billion
Number of Hedge Fund Investors: 94
Citigroup Inc. (NYSE:C) is one of the largest banks in the US and one of Buffett’s top investments in the financial service sector. Citigroup Inc. (NYSE:C) remains one of the top stocks that Warren Buffett and hedge funds are crazy about because it has been paying dividends consistently since 2011.
According to the latest regulatory filings, Berkshire Hathaway held 55.24 million shares of Citigroup Inc. (NYSE:C) as the first quarter of 2024 concluded. These shares were valued at $3.49 billion, accounting for 1.05% of their total investment portfolio. Insider Monkey’s database of hedge funds shows that 94 hedge funds held stakes in Citigroup Inc. (NYSE:C) as of the end of Q1 2024, an increase from 91 as of the end of 2023.
Here is what Diamond Hill Capital Long-Short Fund said about Citigroup Inc. (NYSE:C) in its first quarter 2024 investor letter:
“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.”
4. MasterCard Incorporated (NYSE:MA)
Berkshire Hathaway’s Stake Value: $1.92 Billion
Number of Hedge Fund Investors: 148
MasterCard Incorporated (NYSE:MA) has returned to life amid the artificial intelligence revolution. A move by the digital payment processing company to integrate artificial intelligence technology into its product offerings to enhance how retailers and consumers connect is increasingly paying off. For instance, MasterCard Incorporated (NYSE:MA) is using the technology to beef up its platform’s security and improve fraud detection.
The improvements have been the catalyst behind MasterCard Incorporated (NYSE:MA) delivering better-than-expected financial results characterized by 13% growth in revenues and 20% growth in EPS in the recent quarter. With management confident of double-digit revenue growth in 2024, MasterCard Incorporated (NYSE:MA) will remain one of the top stocks that Warren Buffett and hedge funds would be crazy about.
The number of hedge funds that held stakes in the digital payment processing company as of the first quarter stood at 148, an improvement from 141 as of the end of 2023, according to the Insider Monkey Database.
In the second quarter investor letter of 2024, L1 Capital International Fund shared its commentary on Mastercard Incorporated (NYSE:MA), detailing the company’s performance and strategic direction. Here is what the fund said:
“The share prices of Mastercard Incorporated (NYSE:MA) and Visa, both long term Fund investments, have both drifted down over recent months. There have been no dramatic developments, but there has been a general slight softening in the rate of growth of consumer spending in the U.S. and globally, a court decision rejecting Mastercard and Visa’s proposed settlement of a long-lasting dispute with U.S. merchants as well as other modest adverse regulatory developments. We continue to view Mastercard and Visa as two of the highest quality businesses in the world, and both are well placed to continue to deliver attractive, risk adjusted returns to shareholders over time.”
3. Apple Inc. (NASDAQ:AAPL)
Berkshire Hathaway’s Q1 Stake Value: $135.36 Billion
Number of Hedge Fund Investors: 150
Apple Inc. (NASDAQ:AAPL) is one of the most valuable companies in the world in terms of market capitalization and is one stock that Warren Buffett and hedge funds are crazy about. The company stands out owing to its leading iPhone product line, which has always been the key driver of revenues. Likewise, Apple Inc. (NASDAQ:AAPL) is increasingly reducing its reliance on hardware sales, focusing on services led by Apple Music, cloud computing and App Store.
Apple Inc. (NASDAQ:AAPL) confirmed that the integration of a slew of artificial intelligence features into its hardware is one factor expected to reinvigorate demand for its iPhones, which has slowed in the recent past. With AI expected to inject new life into Apple products, it remains one of the stocks worth paying attention to.
Apple Inc. (NASDAQ:AAPL) remains Buffett’s biggest holding, with stakes worth $135.36 billion despite trimming stakes by 13% in the first quarter. A total of 150 hedge funds held stakes in the company as of the end of the first quarter, an improvement from 131 as of the aid of 2023.
2. Visa Inc. (NYSE:V)
Berkshire Hathaway’s Stake Value: $2.32 Billion
Number of Hedge Fund Investors: 166
When it comes to financial services, Visa Inc. (NYSE:V) is one stock that Warren Buffett and hedge funds are crazy about. Its edge stems from the fact that it is one of the largest payment processors in the world, which has shown it has what it takes to navigate any challenging environment. In an era of digital revolution where most transactions are electronic, consumers and businesses rely on Visa Inc. (NYSE:V)’s array of payment services to complete transactions.
Visa Inc. (NYSE:V)’s earnings grew by 11% and payment volume by 8% in Q1, even as consumer purchasing power came under pressure amid the high interest rates, underlines the resiliency of the company’s products and core business.
Visa Inc. (NYSE:V)’s infrastructure and additional services generate sufficient economic worth for bank clients and merchants, ensuring that the potential market for payment transactions will persistently expand at a robust pace. Visa’s enhanced services can be broadened to less advanced, rising non-Visa networks, contributing to developing the comprehensive payment ecosystem that constitutes the extensive global market for payment transactions.
Visa Inc. (NYSE:V) gained about 22% in 2023, which explains why 166 hedge funds held stakes in the company as of the end of the first quarter, according to Insider Monkey Database.
1. Amazon.com, Inc. (NASDAQ:AMZN)
Berkshire Hathaway’s Stake Value: $1.80 Billion
Number of Hedge Fund Investors: 302
Amazon.com, Inc. (NASDAQ:AMZN) is the stock that Warren Buffett and hedge funds are crazy about, owing to its leading position in e-commerce and cloud computing. While Amazon.com, Inc. (NASDAQ:AMZN) made a name for itself in selling goods online, it is increasingly becoming a force to reckon with as it continues to leverage artificial intelligence to strengthen its edge on cloud computing.
Amazon Web Services, the company’s cloud unit, is already designing its chips and is increasingly integrating AI into its offerings to strengthen its competitive edge against Microsoft (MSFT). In addition, Amazon.com, Inc. (NASDAQ:AMZN) is already eyeing new growth opportunities through its satellite internet subsidiary, Kuiper.
As of the end of the first quarter, Warren Buffett and a total of 302 hedge funds held stakes in the tech giant, affirming why it is one of the top stocks.
In its investor letter from May 2024, Lakehouse Global Growth Fund provided an update on Amazon.com, Inc. (NASDAQ:AMZN), sharing their analysis and perspective on the company’s performance and future prospects:
“Amazon.com, Inc. (NASDAQ:AMZN) delivered an impressive quarterly result that also came in well ahead of analyst expectations. Net sales increased 13% year-on-year to $143.3 billion and operating profits increased 219% year-on-year to $15.3 billion (vs the high end of guidance at $12.0 billion). As has been the case for several quarters now, the highlight of the result was the significant improvement in profitability metrics, as management continues to drive cost efficiencies across its retail operations and Amazon Web Services (AWS). Amazon delivered to Prime members at its fastest speeds ever. In March, across the top 60 largest U.S. metro areas, nearly 60% of Prime member orders arrived the same or next day, and in London, Tokyo, and Toronto, 3 out of 4 items were delivered the same or next day. Bigger picture, we continue to believe that the market underestimates the length of the runway ahead in the core retail business (note that e-commerce sales in the U.S. still only make up 15% of total retail sales) and that there is still significant margin expansion ahead as scale and efficiency benefits continue to come through.”
While we acknowledge the potential of AMZN and Buffett’s other stock picks, 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 AMZN 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 was originally published at Insider Monkey.
