In this article, we discuss 10 financial stocks that Warren Buffett is buying in 2022. If you want to see more financial stock picks of the billionaire, click Warren Buffett is Buying and Holding These 5 Financial Stocks in 2022.
Warren Buffett follows the Benjamin Graham school of thought, picking value plays with prices that are quite low relative to their intrinsic worth. Buffett is one of the most revered Wall Street investors, and market candidates look up to him, aiming to replicate his stock picking strategies.
Buffett has always endorsed businesses that one can understand, and he has always suggested investing in sectors that have long-term stability prospects. For example, his Q1 portfolio is concentrated in the energy, finance, and consumer staples sectors — all of which are largely recession-proof and will continue to perform well during the current market backdrop. The growth plays in Buffett’s portfolio include tech giants like Apple and Amazon, which he has held despite the broader selloff in the sector.
In this rising rates environment, with fears of recession looming on the horizon, financial stocks are poised to perform well. Some of the biggest financial names in the Q1 2022 Berkshire Hathaway portfolio are Bank of America Corporation (NYSE:BAC), Visa Inc. (NYSE:V), and Mastercard Incorporated (NYSE:MA), among others.
Our Methodology
We used Warren Buffett’s Q1 2022 portfolio for this piece, picking the most prominent financial names that were held by the billionaire. We have mentioned the hedge fund sentiment around the holdings as of the fourth quarter of 2021, as per Insider Monkey’s database.
10. Citigroup Inc. (NYSE:C)
Number of Hedge Fund Holders: 97
Citigroup Inc. (NYSE:C) is a New York-based financial services holding company, operating through Global Consumer Banking and Institutional Clients Group segments. Citigroup Inc. (NYSE:C) serves consumers, enterprises, governments, and institutions in North America, Latin America, Asia, Europe, the Middle East, and Africa.
Securities filings for Q1 2022 reveal that Warren Buffett’s Berkshire Hathaway purchased over 55 million shares of Citigroup Inc. (NYSE:C), worth $2.94 billion, representing 0.81% of the total 13F holdings. Citigroup Inc. (NYSE:C) is one of the latest financial additions to the Berkshire portfolio and Warren Buffett owns about 2.5% of Citigroup Inc. (NYSE:C)’s outstanding shares.
On April 14, Citigroup Inc. (NYSE:C) reported earnings for the first fiscal quarter of 2022. The company posted an EPS of $2.02, exceeding market consensus estimates by $0.61. The $19.19 billion revenue outperformed analysts’ predictions by $1.07 billion. The company declared on April 1 a $0.51 per share quarterly dividend. The dividend is distributable on May 27, to shareholders of the company as of May 2. Citigroup Inc. (NYSE:C)’s dividend yield on May 19 stood at 4.14%.
Oppenheimer analyst Chris Kotowski on May 3 maintained an Outperform rating on Citigroup Inc. (NYSE:C) and lowered the price target on the stock to $93 from $100. Loan growth and soaring interest rates are beneficial for the banks, and even if the economy slips into recession, the banking industry “would handle it better than any recession in history”, the analyst told investors in a research note.
According to Insider Monkey’s database, 97 hedge funds were bullish on Citigroup Inc. (NYSE:C) at the end of Q4 2021, compared to 79 funds in the last quarter. Harris Associates is a significant shareholder of the company as of Q1 2022, with 26.8 million shares $1.4 billion.
In addition to Bank of America Corporation (NYSE:BAC), Visa Inc. (NYSE:V), and Mastercard Incorporated (NYSE:MA), Citigroup Inc. (NYSE:C) is on the radar of institutional investors.
Here is what Artisan Value Fund has to say about Citigroup Inc. (NYSE:C) in their Q4 2020 investor letter:
“We fully exited the position in Citigroup. Global financial services company Citigroup made a $900 million clerical error and received a public reprimand from federal regulators. This, after a decade focused on process control, information technology and risk systems, makes the error substantially more costly than just the $900 million mistake. Regulators believe the company’s risk management improvements have fallen short of expectations. To rectify the situation, a process and technology spending surge could negatively affect 2021-2022 profits by 10% to 20%. Trust and confidence are important in large financial institutions, and this incident combined with the CEO’s sudden retirement shook ours.”
9. Markel Corporation (NYSE:MKL)
Number of Hedge Fund Holders: 37
Markel Corporation (NYSE:MKL) is an American diverse financial holding company, offering specialty insurance products in the United States, Bermuda, the United Kingdom, Europe, Canada, the Asia Pacific, and the Middle East. Markel Corporation (NYSE:MKL) was a new arrival in Berkshire Hathaway’s Q1 portfolio, with the hedge fund buying 420,293 shares worth $620 million.
Markel Corporation (NYSE:MKL) on April 26 reported its financial results for Q1 2022, announcing earnings per share of $11.34, below Street consensus by $5.66. Revenue for the quarter also dropped 10.14% year-over-year to $2.61 billion, missing analysts’ predictions by $169.83 million.
On April 28, Truist analyst Mark Hughes raised the price target on Markel Corporation (NYSE:MKL) to $1,500 from $1,400 and kept a Hold rating on the shares. The company’s Q1 results reflected better underwriting performance, although its improved accident results largely offset more conservative assumptions about reserve development, the analyst told investors. He added that Markel Corporation (NYSE:MKL) shares look “fairly valued”.
In Q1 2022, Brian Ashford-Russell and Tim Woolley’s Polar Capital held a prominent stake in Markel Corporation (NYSE:MKL), with 98,750 shares worth $145.6 million. Overall, in the fourth quarter of 2021, 37 hedge funds were bullish on the stock, up from 25 funds in the prior quarter.
Here is what Vltava Fund has to say about Markel Corporation (NYSE:MKL) in its Q3 2021 investor letter:
“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. 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 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.
Tom Gayner, and indeed Markel as a whole, is a fine example of the fact that you do not need to invent something new, to come up with some innovation, or to try and disrupt something in order to succeed in the world of finance. To succeed, it is enough to apply things and practices that have been proven over the years. But it certainly is not easy. Markel has one undeniable advantage over Berkshire, and that is its much smaller size. The long-term potential of the company in the hands of Tom Gayner and his colleagues remains enormous.”
8. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 84
Bank of America Corporation (NYSE:BAC) offers banking and financial products and services to consumers, small and middle-market businesses, institutional investors, and governments worldwide. Warren Buffett has been a long-term shareholder of Bank of America Corporation (NYSE:BAC), first investing in the company back in Q3 2017. As of Q1 2022, Berkshire Hathaway owns more than 1 billion shares of Bank of America Corporation (NYSE:BAC), worth $41.6 billion, representing 11.45% of the total 13F securities.
On April 18, Bank of America Corporation (NYSE:BAC) posted earnings for Q1, reporting an EPS of $0.80, beating market estimates by $0.06. The $23.23 billion revenue surpassed analysts’ estimates by $135.77 million. The company reported 13% higher credit and debit card spending in April compared to a year ago.
Bank of America Corporation (NYSE:BAC) declared on April 27 a $0.21 per share quarterly dividend, in line with previous. The dividend is distributable on June 24, to shareholders of the company as of June 3. Bank of America Corporation (NYSE:BAC) is one of the top dividend contributors in the Berkshire portfolio.
Oppenheimer analyst Chris Kotowski on May 3 reiterated an Outperform rating on Bank of America Corporation (NYSE:BAC) but lowered the firm’s price target on the stock to $50 from $52. According to the analyst, the rising rates environment is beneficial for banks, and the sector is positioned to survive recession. He also noted that banks are likely to remain “solidly profitable with their dividends intact” and investors should take advantage of the recent share weakness.
In the first fiscal quarter of 2022, Harris Associates disclosed a prominent Bank of America Corporation (NYSE:BAC) stake, with more than 44 million shares worth $1.8 billion. In Q4 2021, 84 hedge funds were long Bank of America Corporation (NYSE:BAC), up from 72 funds in the earlier quarter.
Here is what ClearBridge Investments has to say about Bank of America Corporation (NYSE:BAC) in its Q1 2021 investor letter:
“Higher long-term interest rates supported financials such as Bank of America, which has shown both defensive and offensive characteristics in the past year. We believe it continues to be the least risky large bank from a credit standpoint, with conservative underwriting and controlled risk taking, a leading consumer deposit franchise, scale and technology. It is also a leader in its commitments to sustainability, or as it terms it, responsible growth. Disclosure and reporting at all levels form a large part of this commitment, including gender diversity and equality, environmental commitments and support of communities in which it operates. In the first quarter Bank of America announced it is setting a goal of net-zero greenhouse gas (GHG) emissions in its supply chain and operations, and notably also in its financing activities, before 2050.”
7. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 64
American Express Company (NYSE:AXP) is a New York-based financial services company providing credit card payment products and travel-related services worldwide. Berkshire Hathaway has been a position holder in American Express Company (NYSE:AXP) since the last quarter of 2010. The hedge fund has been largely consistent with its stake over the years, with minor exceptions. In Q1 2022, Warren Buffett disclosed a $28.35 billion stake in American Express Company (NYSE:AXP).
On May 4, American Express Company (NYSE:AXP) declared a quarterly dividend of $0.52 per share, in line with previous. The dividend is payable on August 10, to shareholders of the company as of July 1.
American Express Company (NYSE:AXP) reported its Q1 results on April 22, posting earnings per share of $2.73, beating analysts’ predictions by $0.26. The revenue grew 29.47% year-over-year to $11.74 billion, outperforming market consensus by $76.01 million.
Wolfe Research analyst Bill Carcache on May 12 downgraded American Express Company (NYSE:AXP) to Peer Perform from Outperform with a $146 price target. The analyst downgraded the credit card issuers group to Underweight from Market Weight given the looming recession fears.
According to Insider Monkey’s Q4 data, 64 hedge funds were bullish on American Express Company (NYSE:AXP), up from 57 funds in the earlier quarter. Ken Fisher’s Fisher Asset Management revealed a $2.9 billion position in the company in the 13F filings for Q1 2022.
Here is what ClearBridge Investments has to say about American Express Company (NYSE:AXP) in its Q2 2021 investor letter:
“In financials, American Express has done an excellent job demonstrating the resiliency of its franchise in the midst of a global pandemic that drove a 60% decline in its core travel and entertainment business. The company’s spend-centric model has been helped by fiscal stimulus ensuring a flush consumer, while management continues to execute well by adding millions of new consumer and small and medium business accounts, which should benefit the franchise over the medium to long term. We remain optimistic regarding the company’s prospects as travel and entertainment activity rebounds, adding to our position in the quarter.”
6. The Bank of New York Mellon Corporation (NYSE:BK)
Number of Hedge Fund Holders: 49
The Bank of New York Mellon Corporation (NYSE:BK) was founded in 1784 and is headquartered in New York. The bank offers a range of financial products and services, operating via Securities Services, Market and Wealth Services, Investment and Wealth Management, and Other segments.
Berkshire Hathaway has been mostly consistent with its The Bank of New York Mellon Corporation (NYSE:BK) stake over the years, except for a few breaks in 2012 and 2013. Buffett’s fund first invested in the company in Q4 2010. In the regulatory filings for Q1 2022, Berkshire Hathaway disclosed a $3.5 billion position in The Bank of New York Mellon Corporation (NYSE:BK).
The Bank of New York Mellon Corporation (NYSE:BK) reported its Q1 results on April 18, announcing earnings per share of $0.94, beating analysts’ estimates by $0.08. Revenue for the quarter stood at $3.93 billion, falling short of Street forecasts by $12.30 million. The company also declared a $0.34 per share quarterly dividend, in line with previous. The dividend was paid to shareholders on May 11.
On May 19, Deutsche Bank analyst Brian Bedell downgraded The Bank of New York Mellon Corporation (NYSE:BK) to Hold from Buy, slashing the price target to $45 from $54. The analyst downgraded the stock as part of his mid-Q2 outlook for brokers, asset managers, and exchanges.
In Q1 2022, Jean-Marie Eveillard’s First Eagle Investment Management reported owning a prominent stake in The Bank of New York Mellon Corporation (NYSE:BK), with 15.80 million shares worth over $784 million. Overall, 49 hedge funds were bullish on the stock at the conclusion of Q4 2021.
Like Bank of America Corporation (NYSE:BAC), Visa Inc. (NYSE:V), and Mastercard Incorporated (NYSE:MA), The Bank of New York Mellon Corporation (NYSE:BK) is a notable finance pick of Warren Buffett in 2022.
Here is what Ariel Investments has to say about The Bank of New York Mellon Corporation (NYSE:BK) in its Q4 2021 investor letter:
“Rising interest rates, after a surprisingly long period of low absolute rates and negative “real” rates, will create a headwind. While there has been much debate about the cause of these low rates, we believe the most important factor has been the $120 billion in monthly federal reserve open market bond purchases and the accumulation of an $8 trillion balance sheet. The former will end, and the latter will shrink. It is not just the Fed that has aggressively purchased bonds, bidding up prices and lowering yields. Bond traders and hedge fund managers have added to positions, confident that being on the same side as the Fed was the wise place to be. Now as the Fed is about to become a seller of bonds rather than a buyer, Wall Street’s “smart money” is likely to follow suit. Against this backdrop, fixed income securities and bond substitutes such as high dividend paying utilities and absolute return hedge funds are substantially overpriced and are not likely to produce attractive returns going forward.
This expectation of a reversion to the mean for interest rates helped 2021 performance, though not as much as we had hoped. The yield on the U.S. 10-year Treasury did indeed increase from +0.92% at the beginning of the year to +1.52% at year-end. An underreported story was the poor performance of bonds last year. The Barclays Aggregate Index declined -1.67% for the year ending December compared to a return of +28.71% for equities as measured by the S&P 500. Interest rates have continued to climb in 2022 with the 10-year Treasury at +1.79% as we go to print. This move higher in rates has contributed to our good, early start to 2022. Smaller positions in The Bank of New York Mellon Corporation (BK) also benefited from higher rates, principally with their ability to invest customer cash.”
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Disclosure: None. Warren Buffett is Buying and Holding These 10 Financial Stocks in 2022 is originally published on Insider Monkey.
