In this article we present the list of Warren Buffett Disciple Guy Spier’s 10 High Conviction Stock Picks.
Guy Spier’s Aquamarine Capital Management is a Zurich, Switzerland-based investment manager that employs the same long-term oriented, value investment approach as Warren Buffett, who Mr. Spier proudly considers himself a disciple of.
Spier earned a degree in philosophy, politics, and economics from Oxford University in 1988 and followed that up with an MBA from Harvard Business School. Foollowing that, he spent several years working as a researcher and investor on Wall Street, including stints at Braxton Associates and Buffett’s Berkshire Hathaway, the latter of which inspired him to launch his own value investing fund in 1997.
Spier is noteworthy in the investment world for his $650,100 lunch (alongside Mohnish Pabrai) with Warren Buffett in 2007, which was purchased through a charity auction. Spier took several important lessons from that meeting, including the necessity of saying no, and ultimately wrote a book about his takeaways from that lunch and his broader investment journey entitled ‘The Education of a Value Investor: My Transformative Quest for Wealth, Wisdom, and Enlightenment’.
Mr. Spier makes all of his firm’s investment decisions himself and is an even more ardent value investor than Buffett, holding on to many of his positions for several years without touching them. In the second quarter the fund added two small new positions to its 13F portfolio while otherwise leaving the rest of it untouched. Its 13F portfolio held $263 million worth of assets on June 30, 74% of which were invested in finance stocks.
Aquamarine’s total return stands at 874% since inception through the end of 2023, or 9% annually, outperforming the S&P 500’s 717% returns during that period. Spier’s fund hasn’t been as successful in recent years however. It returned 18.7% last year, which underperformed the market, the sixth-straight year it’s failed to top the market. 2000, 2002, and 2006 were three of the fund’s strongest years, as it beat the market by more than 20%.
In this article we’ll take a look at Guy Spier’s ten high conviction stock picks, all of which were left untouched during the second quarter of 2024.
Our Methodology
The following data is gathered from Aquamarine Capital Management’s latest 13F filing with the SEC for the reporting period of June 30, 2024.
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). That’s why you should pay close attention to this important indicator.
Note: All hedge fund data is based on the exclusive group of 900+ active funds tracked by Insider Monkey that filed 13Fs for the Q1 2024 reporting period.
Warren Buffett Disciple Guy Spier’s 10 High Conviction Stock Picks
10. Alphabet Inc. (NASDAQ:GOOGL)
Value of Aquamarine Capital Management’s 13F Position (6/30/2024): $2.91 million (GOOGL)
Number of Hedge Fund Shareholders (3/31/2024): 222 (GOOGL), 165 (GOOG)
Alphabet Inc. (NASDAQ:GOOGL) is first up among Guy Spier’s high conviction stock picks, with his fund owning an even 16,000 of the tech giant’s class A shares. Aquamarine Capital bought the majority of its Alphabet stake in the fourth quarter of 2022 and has left it alone ever since. Alphabet is the most popular stock among hedge funds as well as a popular pick for other value investors like Donald Yacktman, whose firm owns 3.53 million class C shares as of June 30.
Alphabet Inc. (NASDAQ:GOOGL)’s latest quarterly results were solid, with revenue growing by 14% year-over-year to $84.7 billion, nearly 60% of which was courtesy search advertising. Operating margin rose 300 basis points to 32%, driving increased profitability (EPS rose to $1.89 from $1.44) even as Alphabet’s capital expenditures nearly doubled to $13.2 billion during the quarter. The company is investing heavily in AI to try and stave off competitors like the AI-powered search engine SearchGPT, which threatens to jeopardize Google’s highly lucrative monopoly over the search engine space.
Patient Capital Opportunity Equity Strategy believes that Alphabet Inc. (NASDAQ:GOOGL)’s aforementioned investents in AI are being underappreciated by the market, as the fund shared in its Q2 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”
9. Alibaba Group Holding Limited (NYSE:BABA)
Value of Aquamarine Capital Management’s 13F Position (6/30/2024): $3.42 million
Number of Hedge Fund Shareholders (3/31/2024): 103
Aquamarine Capital has held the same 47,500-share position in Alibaba Group Holding Limited (NYSE:BABA) since the second quarter of 2021, when it first added BABA to its 13F portfolio. That stake was valued at $10.8 million at that time, which has since fallen to just $3.42 million, showcasing the stock’s extremely poor performance over the past three years. Other hedge funds have steadily bailed on Alibaba during that time, with smart money ownership of the Chinese e-commerce behemoth down by 33.5% since the middle of 2021.
Alibaba Group Holding Limited (NYSE:BABA) appears to have weathered the worst of the storm that resulted from the antitrust crackdown it faced in 2021, which contributed to revenue slumping to just 2% growth during the company’s fiscal 2023. That figure rebounded to 8% growth in fiscal 2024 with the same expected for fiscal 2025. Alibaba’s EPS is expected to surge by 34% year-over-year in fiscal 2025 thanks to the company’s steadily growing operating margin, which has topped 13% each of the last four quarters.
O’keefe Stevens Advisory laid out some of the risks facing facing Alibaba Group Holding Limited (NYSE:BABA) in its Q2 2024 investor letter, but believes the stock is very cheap despite them, saying:
“We initiated two new positions during the quarter: Alibaba Group Holding Limited (NYSE:BABA) and Perrigo (PRGO). Both have seen their stocks decline over 70%+ from their all-time highs.
Alibaba is the largest e-commerce player in China, with 40% gross merchandise volume (GMV) market share through its Taobao and T-mall businesses. While the cloud computing business is relatively small, its 37% market share in China positions it well to capitalize on the increasing demand for AI-related products. In the most recent quarter, AI-related cloud revenue recorded triple-digit growth y/y, with the expectation that total cloud revenue will accelerate to double-digit growth in 2H 2025.
It’s rare to find a dominant market share business with significant tailwinds trading for ~10x adj. EPS. After accounting for their ~$60B net cash balance sheet, the stock is trading at 6-7x, which, we believe, is far too cheap. We understand this business would not trade at this price if it were a U.S. business. However, the valuation gap at a high single-digit P/E is pricing in a combination of the following risks – 1. China invading Taiwan. 2. Cash can never leave mainland China (disproven). 3. Increasing competition from Pinduoduo and Shien resulting in market share loss 4. China’s geopolitical tensions worsen. 5. Economic slowdown stemming from the recent housing market downturn. 6. VIE structure creates doubt over the actual ownership of the business. All risks have merit, with cash distribution restrictions at the lower end due to the recently announced dividend and special dividend. Cash returned to shareholders totaled $16.5B in FY24, up from $13.4B in FY23…” (Click here to read the full text)
8. Daily Journal Corporation (NASDAQ:DJCO)
Value of Aquamarine Capital Management’s 13F Position (6/30/2024): $4.54 million
Number of Hedge Fund Shareholders (3/31/2024): 5
The esteem with which Guy Spier holds Warren Buffett and his long-time right hand man, the late Charlie Munger, is evident through his prominent investments in both Buffett’s Berkshire and Munger’s Daily Journal Corporation (NASDAQ:DJCO). The latter company’s stock was owned by just four other hedge funds as of March 31, only one of which had greater than 0% exposure to it (that being Touk Sinantha’s AltraVue Capital). Spier’s fund has 1.72% exposure to DJCO.
Munger, who passed away last year at the age of 99, bought the Daily Journal Corporation (NASDAQ:DJCO) in 1977, which we discussed in our look back at Charlie Munger’s Life History & Stock Portfolio: 4 Biggest Positions. In its first financial report since Munger’s passing, the newspaper publisher and software company pulled in $32.6 million in revenue, a 14% year-over-year increase, driven primarily by increased software licensing and maintenance fees.
Daily Journal Corporation (NASDAQ:DJCO) also boasts a noteworthy portfolio of close to $300 million in marketable securities as of March 31. That portfolio was largely overseen by Mr. Munger and it’s unclear what direction the company will now take with those assets. It sold off just over $40 million worth of securities during the six-month period ended March to pay down more than half its margin loan balance.
7. Moody’s Corporation (NYSE:MCO)
Value of Aquamarine Capital Management’s 13F Position (6/30/2024): $11.4 million
Number of Hedge Fund Shareholders (3/31/2024): 61
As with many of his fund’s holdings, Guy Spier hasn’t touched a single share of his Moody’s Corporation (NYSE:MCO) position for years, dating all the way back to the middle of 2020. He added 2,000 MCO shares to his position during Q2 of that year, lifting his ownership to 27,000, where it’s remained ever since. Overall hedge fund ownership of the credit ratings agency also hit an all-time high during that quarter, and remains close to those levels as of Q1 2024.
There’s another Buffett connection with Moody’s Corporation (NYSE:MCO), as the company has been a longtime holding of the Oracle of Omaha’s as well. It’s no surprise why Buffett and other value investors like the company so much. Its ratings business has very little competition and is growing at an impressive pace, hitting $987 million in revenue in Q1, a 35% year-over-year jump. Moody’s also offers analytics-based risk assessment and management services to clients, a business which grew revenue by 8% in Q1, its 65th straight quarterly revenue increase.
L1 Capital International Fund took advantage of Moody’s Corporation (NYSE:MCO)’s soaring stock price to divest its position last year, but continued to monitor the stock for a possible re-entry point, as relayed in the fund’s Q3 2023 investor letter:
“Portfolio adjustments during the September 2023 quarter were modest, diversified, but meaningful. In total around 10% of the Fund was divested and reinvested into opportunities we consider provide a superior risk-adjusted base case return.
We continued to trim our investment in high-quality technology businesses such as Intuit, mentioned previously. These adjustments were purely for valuation considerations, rather than any business concerns and some of these companies remain significant portfolio holdings.
The Fund’s remaining investment in Moody’s Corporation (NYSE:MCO)’s was fully divested during the September quarter. Moody’s is the world’s leading credit rating, risk assessment and analytics business. The core credit ratings business is largely a duopoly with S&P Global, with modest competition from Fitch Ratings and regional competitors – a great example of our preferred ‘Noah’s Ark’ industry structure.
The share price of Moody’s has been volatile over recent times, often reacting too greatly to changes in short-term capital markets conditions. During the quarter we took advantage of positive market sentiment to divest our holding at a share price we considered to be above fair value. Moody’s is very well managed and ‘ticks all our boxes’ for one of the world’s highest-quality businesses. The company has moved from our Portfolio to our Bench of potential investments. Having a Bench of ‘ready to go’ investment opportunities is a core aspect of our investment process. We continue to analyse Moody’s as if we owned it and are excited by the pull-back in the share price from recent highs.”
6. Ferrari N.V. (NYSE:RACE)
Value of Aquamarine Capital Management’s 13F Position (6/30/2024): $24.5 million
Number of Hedge Fund Shareholders (3/31/2024): 26
Hedge fund ownership of Ferrari N.V. (NYSE:RACE) dipped by 21% during the first quarter to sputter to a 3-year low. Aquamarine Capital also trimmed its Ferrari stake by 25% during Q1 to 60,000 shares, the only position it made a move on during that quarter. It maintained that position throughout Q2.
The luxury sports car maker grew revenue by 16% to €1.7 billion ($1.85 billion) in the second quarter, while a strong 39% margin contributed to impressive profitability metrics of €670 million ($731 million) in EBITDA and €413 million ($451 million) in net profit. CEO Benedetto Vigna noted the positive reception for Ferrari N.V. (NYSE:RACE)’s new sports car models during the company’s Q2 earnings call, and added that the company’s order book has strong visibility into 2026.
Ensemble Capital Management pointed out the positive impact Ferrari N.V. (NYSE:RACE)’s pricing power has had on the stock in recent quarters, as noted in its Q1 2024 investor letter:
“Ferrari N.V. (NYSE:RACE): With the company’s utility vehicle, the Purosangue, sold out despite being priced much more aggressively than many investors expected, investor attention has been turning to the company’s long term ability to raise prices. With the business’s earnings power being regularly revised higher by investors who watched the company navigate COVID and inflation easily, the stock has been on a tear.
Ferrari has had a very successful run since we first bought shares in the company in 2017. It has been one of our most successful investments since, with shares rising over five times, and understandably so given how phenomenal this business is and how well it has been managed.
Initially spun out of Fiat (now Stellantis) in 2015, it was a rare jewel within the parent company, where its value was hidden among more standard and premium cars sold under brands such as Fiat, Alpha Romeo, Maserati, Chrysler, Jeep, and others. Under the leadership of the astute business manager Sergio Marchionne, who had run Fiat since 2004, Ferrari came to be recognized as the undervalued and unique asset that it was within its parent…” (Click here to read the full text)
5. Micron Technology, Inc. (NASDAQ:MU)
Value of Aquamarine Capital Management’s 13F Position (6/30/2024): $26.3 million
Number of Hedge Fund Shareholders (3/31/2024): 115
Micron Technology, Inc. (NASDAQ:MU) is a hot commodity among smart money investors right now, with their ownership of the memory and storage products company jumping by 24% in the first quarter to hit a 10-year high. Guy Spier’s been on the Micron bandwagon much longer, holding a 200,000-share position in the stock since the final quarter of 2020 (it held 120,000 shares for a year prior to that). Spier’s stake has risen from $15 million in value at the end of 2020 to $26.3 million at the end of June 2024.
Micron Technology, Inc. (NASDAQ:MU) is ramping up its production of high bandwidth memory (HBM) storage solutions, which are poised to inject a shot of margin and income upside into the company’s balance sheet, given they’re DRAM and gross margin accretive. Micron began to ship HBM products in greater numbers during its fiscal Q3, with over $100 million in sales. That figure is expected to push into the billions in FY2025, with the company having already sold out of its HBM stock through the end of the 2025 calendar year.
ClearBridge Value Equity Strategy pointed out some of Micron Technology, Inc. (NASDAQ:MU)’s biggest market opportunities in its Q2 2024 investor letter:
“Stock selection in the IT sector proved to be the largest contributor to performance, particularly driven by the strong performance of Micron Technology, Inc. (NASDAQ:MU) The company, which designs, develops, manufactures and sells memory and storage products, continued its strong performance alongside other AI beneficiaries as the anticipated demand for new and additional storage essential for housing and training large language AI models continues to grow.”
4. Mastercard Incorporated (NYSE:MA)
Value of Aquamarine Capital Management’s 13F Position (6/30/2024): $29 million
Number of Hedge Fund Shareholders (3/31/2024): 149
Guy Spier follows closely in Warren Buffett’s footsteps when it comes to his conviction in finance stocks,which take up the top four spots in his 13F portfolio. Among them are three of Buffett’s own personal favorites, BAC, AXP and Mastercard Incorporated (NYSE:MA).
Spier has held the same 65,750-share stake in MA dating back to the fourth quarter of 2015, during which time it’s more than quadrupled in value. Buffett owned 3.99 million shares of Mastercard at the end of Q1, though that significant stake still only ranked as the 17th largest position in his $332 billion 13F portfolio.
Mastercard Incorporated (NYSE:MA) and other payment providers have enjoyed exceptional growth in recent years and that projects to continue through the rest of the decade, with the global payments market expected to nearly double in size to $5 trillion. Given its history of impressive return on invested capital over the last five years (47% on average, nearly twice as high as rival Visa Inc. (NYSE:V)’s), a lot of that projected future growth will filter down to the company’s bottom line, and from there, into investors’ pockets. Mastercard has bought back nearly a fifth of its shares over the past decade, while simultaneously raising its dividend every year throughout that period.
Manole Capital Management discussed a long-running regulatory concern for Mastercard Incorporated (NYSE:MA) and other payment providers in its Q2 2024 investor letter:
“We have invested in Mastercard Incorporated (NYSE:MA) and Visa since their IPO’s, in 2006 and 2008 respectively. When both payment companies initially listed, they identified potential legal liabilities stemming from merchant interchange lawsuits. During its IPO roadshow, Visa took a somewhat differentiated tact, by shielding new public shareholders from this liability and putting the risk onto the shoulders of its banking partners, card issuers, and earliest owners.
Over the last few decades, there have been numerous settlements, as well as legislation impacting payment industry. The Durbin Amendment, inside of Dodd-Frank legislation in 2010, altered debit fees. Also, a court ordered interchange settlement was approved over 15 years ago, but it was not fully embraced by the merchant community. Last year, Senator Durbin announced his intention to alter the payment environment again, with his CCCA (Credit Card Competition Act). This created a headwind for the networks, as it appeared that legislation from DC was on the horizon. We wrote numerous articles on this subject, highlighting our view that government interference in setting pricing isn’t ideal. All of our research notes can be read at www.manolecapital.com, under the “Research” tab. If you don’t believe us, since we clearly have a vested interest, there are additional thoughts about how the CCCA would negatively impact consumers…” (Click here to read the full text)
3. Bank of America Corporation (NYSE:BAC)
Value of Aquamarine Capital Management’s 13F Position (6/30/2024): $30.5 million
Number of Hedge Fund Shareholders (3/31/2024): 85
Warren Buffett’s second-favorite stock, Bank of America Corporation (NYSE:BAC), ranks as Guy Spier’s third-highest conviction equity. Mr. Spier’s firm has owned 767,845 BAC shares since the first quarter of2019, while Buffett’s holding company Berkshire Hathaway owned a staggering 1.03 billion shares as of March 31, but has been selling off BAC shares for several quarters. Other money managers aren’t nearly as bullish on the investment bank right now; their ownership of the company fell by 16% during Q1 to the second-lowest mark in the last decade.
Bank of America Corporation (NYSE:BAC) suffered an expected decline in net interest income during Q2, to $6.9 billion, but that was overcome by an increase in non-interest income. The company’s earnings were evenly split between its consumer and business divisions, which included strong growth in both its consumer banking division (net new checking accounts topped half a million for the first six months of 2024) and commercial segment (adding thousands of small businesses). Zelle adoption has been a major driver of growth for both segments, with Bank of America’s banking app now boasting more than 47 million active users.
ClearBridge Value Equity Strategy discussed why less interest rate pressure should improve Bank of America Corporation (NYSE:BAC)’s prospects going forward in the fund’s Q1 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.”
2. American Express Company (NYSE:AXP)
Value of Aquamarine Capital Management’s 13F Position (6/30/2024): $48.6 million
Number of Hedge Fund Shareholders (3/31/2024): 68
The second-largest stake in Guy Spier’s 13F portfolio is American Express Company (NYSE:AXP), which has several of the same tailwinds buffeting it as noted with Mastercard above. AXP is also the third-most popular stock in Warren Buffett’s 13F portfolio as of March 31, with the Oracle of Omaha owning nearly 152 million shares. American Express is otherwise less popular than its larger rivals among hedge funds, with their ownership of the company remaining flat during Q1.
American Express Company (NYSE:AXP) enjoyed a strong second quarter, growing organic earnings by 21% year-over-year and by 44% when factoring in its sale of digital fraud prevention company Accertify to a private equity firm. Revenue also hit a record quarterly high during Q2, having grown by close to 50% in the last three years, and is expected to increase by about 10% this year. Analysts project the company’s earnings to grow 15% annually in the years to come, which will continue to support its dividend, which was raised by 17% this year.
Artisan Select Equity Fund discussed how American Express Company (NYSE:AXP)’s fee structure has helped drive profit growth in its Q1 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 largely 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.”
1. Berkshire Hathaway Inc. (NYSE:BRK.A)
Value of Aquamarine Capital Management’s 13F Position (6/30/2024): $57.2 million (BRK.B), $18.4 million (BRK.A)
Number of Hedge Fund Shareholders (3/31/2024): 155
Topping the list of Guy Spier’s stock picks is his large investment in Warren Buffett’s holding company Berkshire Hathaway Inc. (NYSE:BRK.A). Aquamarine Capital has owned 140,600 shares of BRK.B dating back to late 2015 and the stock has ranked as its top pick throughout much of the intervening 8+ years. Berkshire Hathaway has consistently ranked as one of hedge funds’ favorite stocks, as fellow investors try to capture just a little bit of Warren Buffett’s magic.
Berkshire Hathaway Inc. (NYSE:BRK.A) ranks as the The Most Profitable Insurance Company in the World, generating $3.6 billion in underwriting earnings during its 2023 fiscal year. Geico is one of several insurance companies owned by Berkshire, which also owns a range of other businesses such as Duracell, Dairy Queen, BNSF, and Fruit of the Loom. The company’s fiscal Q1 earnings jumped by 41% to $5.19 per share, while operating profit soared 39% to $11.2 billion.
In addition to owning several high-profile companies, Berkshire Hathaway Inc. (NYSE:BRK.A) also holds Buffett’s gargantuan investment portfolio, which was valued at $332 billion on March 31. The company is also sitting on a record pile of cash totaling $189 billion as of March 31, giving it ample ammunition to make a major acquisition if its finds the right deal. In the meantime the company has been buying back more of its stock to put some of its cash to use, taking $2.6 billion worth of its shares out of circulation in Q1.
BRK.A/BRK.B ranks first among the 20 Most Profitable Insurance Companies in the World. You can visit our list of the 20 Most Profitable Insurance Companies in the World to see the other profitable insurance stocks that are on hedge funds’ radar. While we acknowledge the profit potential of insurance stocks including BRK-B, our conviction lies in the belief that 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 Berkshire Hathaway but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
