In this article, we discuss the stocks Warren Buffett trusts despite suffering losses. If you want to read about more top stock picks in Buffett’s portfolio, go directly to Warren Buffett Trusts in These 5 Stocks Despite Losses.
2022 has been a trying year for both Wall Street professionals and average investors alike. Since the beginning of the year, the S&P 500 has declined by as much as 24% from its all-time closing high, while the tech-heavy Nasdaq Composite has taken an even worse beating, with a peak-to-trough drop since its record-closing high in November of 34%. While such an environment would deter most investors from dipping into the market, there are those like Berkshire Hathaway’s Warren Buffett that see it as an opportunity for success. Despite an incredible amount of volatility, the Oracle of Omaha has not lost faith in the U.S. equity market, going on a buying spree and doubling down on his bets on a number of large-cap stocks.
The billionaire investor’s $300 billion 13F investment portfolio consists of 47 companies as of June 30, two stocks less than the previous quarter. Although he invested more money into his stock portfolio, Buffett’s hedge fund’s value fell from $364 billion at the end of the first quarter, a consequence of the slowing economy, high inflation, tighter labor markets, and rising rates in Q2 2022. While the market weakness boosted Buffett’s purchasing power, it also led to a $53 billion investment loss for Berkshire Hathaway. However, according to a recent CNBC interview, the billionaire investor considers the loss as meaningless, stating that:
“The amount of investment gains/losses in any given quarter is usually meaningless and delivers figures for net earnings per share that can be extremely misleading to investors who have little or no knowledge of accounting rules.”
Some of the most prominent stocks that Warren Buffett trusts despite suffering losses include Amazon.com, Inc. (NASDAQ:AMZN), Snowflake Inc. (NYSE:SNOW), and U.S. Bancorp (NYSE:USB), among others listed below.
Our Methodology
We used the Q2 2022 13F portfolio of Warren Buffett’s Berkshire Hathaway for this analysis, selecting the stocks with the highest year-to-date decline in their share prices. We have arranged the list according to the hedge fund sentiment around the securities as of Q2 2022, which was gauged from Insider Monkey’s database of 900+ elite hedge funds.
Warren Buffett Trusts in These 10 Stocks Despite Losses
10. STORE Capital Corporation (NYSE:STOR)
Berkshire Hathaway’s Stake Value: $180.69 million
YTD Percentage Decline in Share Price as of August 21: 20.55%
Number of Hedge Fund Holders: 22
STORE Capital Corporation (NYSE:STOR) is a publicly traded American real estate investment trust (REIT) headquartered in Scottsdale, Arizona. The company provides financial solutions to customers in a wide variety of industries across the service, retail, and manufacturing sectors, with a focus on investing in profit-center real estate. Warren Buffett, as of Q2 2022, owned more than 6.92 million shares worth approximately $181 million.
In June, Jefferies analyst Linda Tsai lowered the price target on Store Capital Corporation (NYSE:STOR) to $27 from $29 and maintained a ‘Hold’ rating on STOR shares. The analyst noted that REITs underperforming during a period of recession was by no means a guarantee, and stated that real estate has demonstrated “robust returns” during past stagflation periods. The analyst recommends that investors look into property types with rent inflation potential to offset occupancy pressures, such as Industrial, Storage, and Residential properties.
According to Insider Monkey’s Q2 data, 22 hedge funds were bullish on STORE Capital Corporation (NYSE:STOR) on June 30, compared to 24 funds in the prior quarter. As of Q2 2022, Millennium Management’s Israel Englander was a notable stakeholder of the company, with 3.06 million shares worth $79.8 million.
Similar to Amazon.com, Inc. (NASDAQ:AMZN), Snowflake Inc. (NYSE:SNOW), and U.S. Bancorp (NYSE:USB), Warren Buffett maintained his faith in STORE Capital Corporation (NYSE:STOR) during Q2.
9. Liberty Latin America Ltd. (NASDAQ:LILA)
Berkshire Hathaway’s Stake Value: $20.5 million
YTD Percentage Decline in Share Price as of August 21: 41.37%
Number of Hedge Fund Holders: 29
Liberty Latin America Ltd. (NASDAQ:LILA) is a Bermuda-based company that operates as a telecommunications company, offering video, broadband Internet, telephony, and mobile services. Warren Buffett added Liberty Latin America Ltd. (NASDAQ:LILA) to his portfolio in Q1 2018, and in Q2 2022, the billionaire owned 2.6 million shares of the company worth $20.5 million.
On August 3, Liberty Latin America Ltd. (NASDAQ:LILA) posted Q2 revenue of $1.22 billion, up 4.3% year-over-year, and beating the market consensus by $20 million.
According to Insider Monkey’s database, Liberty Latin America Ltd. (NASDAQ:LILA) was part of 29 hedge funds’ portfolios at the end of June 2022, compared to 36 funds in the preceding quarter. Ashe Capital is the leading stakeholder of the company, with roughly 12.4 million shares worth $96.5 million.
Here is what Steel City Capital had to say about Liberty Latin America Ltd. (NASDAQ:LILA) in its Q1 2022 investor letter:
“Liberty Latin America (Nasdaq: LILA): LILA is the Rodney Dangerfield of the John Malone empire – it don’t get no respect. The company is a leading telecommunications provider (broadband, television, wireless) operating in over 20 countries across Latin America and the Caribbean. Shares have had a tough go since spinning out from Liberty Global in 2018. At separation, the valuation was rich, but a lot of so-called value investors rushed in anyways because they thought any investment opportunity that checked the boxes of “spin-off” and “John Malone” had to be a money-maker. Wrong. Add to this some pretty ugly financial performance brought about by Hurricane Maria in Puerto Rico and a cumbersome (but not all the complicated) capital structure, and it’s easy to see why shares have performed so poorly. But as you’ve no doubt read in prior quarters’ letters, I’m a big believer in the notion that past performance is not indicative of future results. Today’s market cap is ~$2.1 billion (and shrinking via an ongoing buyback program) and I can very easily underwrite free cash flow north of $400 million in 2024. This reflects a P/FCF multiple of 5.25x / a free cash flow yield of nearly 20%. This is exceptionally cheap for a company with recurring cash flow streams and a very long opportunity to grow via penetration in the years to come.”
8. Floor & Decor Holdings, Inc. (NYSE:FND)
Berkshire Hathaway’s Stake Value: $301 million
YTD Percentage Decline in Share Price as of August 21: 31.97%
Number of Hedge Fund Holders: 29
Headquartered in Smyrna, Georgia, Floor & Decor Holdings, Inc. (NYSE:FND) is a multi-channel American specialty retailer of hard surface flooring and related accessories. Warren Buffett’s hedge fund held 4.78 million Floor & Decor Holdings, Inc. (NYSE:FND) shares in Q2 2022, worth about $301 million.
On July 27, Wells Fargo analyst Zachary Fadem lowered the price target on Floor & Decor Holdings, Inc. (NYSE:FND) to $85 from $95 and maintained an ‘Overweight’ rating on the shares. While shares are down 45% year-to-date, suggesting recessionary scenarios, the analyst believes that the “numbers still need to come down.”
According to Insider Monkey’s data, 29 hedge funds were bullish on Floor & Decor Holdings, Inc. (NYSE:FND) at the end of June 2022, compared to 30 funds in the prior quarter. Colin Moran’s Abdiel Capital Advisors is one of the leading position holders in the company, with 4.3 million shares worth $274 million.
Here is what Argosy Investors had to say about Floor & Decor Holdings, Inc. (NYSE:FND) in its Q1 2022 investor letter:
“Floor & Decor Holdings, Inc. (NYSE:FND), was “cyclical” risk sales in the sense that the stock has benefitted from some pandemic-related boosts in sales and/or they are more exposed to economic downturns. Floor & Décor is a terrific business that we would love to own more of at a better price. Given the significant amount of home renovations that have occurred during the pandemic, we thought better of our continued ownership in this stock until we were at a more favorable point in the economic cycle.”
7. StoneCo Ltd. (NASDAQ:STNE)
Berkshire Hathaway’s Stake Value: $82.55 million
YTD Percentage Decline in Share Price as of August 21: 55.28%
Number of Hedge Fund Holders: 30
StoneCo Ltd. (NASDAQ:STNE) is a financial technology and software solutions company that provides an end-to-end, cloud-based technology platform for merchants to conduct electronic commerce using in-store, online, and mobile channels. Although the stock has experienced a sharp drop of close to 55% year-to-date, Warren Buffett’s Berkshire Hathaway held on to its 10.7 million shares of the company as of the end of Q2, which were worth approximately $82.5 million on June 30.
Susquehanna analyst James Friedman lowered his price target on StoneCo Ltd. (NASDAQ:STNE) to $20 from $28 and kept a ‘Positive’ rating on the shares on July 11. According to the analyst, the company is sequentially improving its profitability despite continued interest rate headwinds. Although Friedman was encouraged by StoneCo Ltd. (NASDAQ:STNE)’s conviction, he stated that his target was reduced on lower estimates and peer group compression.
According to Insider Monkey’s Q2 data, 30 hedge funds were long StoneCo Ltd. (NASDAQ:STNE), down from 43 funds in the previous quarter. Nitin Saigal and Dan Jacobs’ Kora Management was a prominent stakeholder of the company, with 4.6 million shares worth roughly $35.8 million.
Here is what Nordstern Capital had to say about StoneCo Ltd. (NASDAQ:STNE) in its Q2 2022 investor letter:
“‘To grow its customer base, X.com had been giving out lines of credit to prospective customers, part of its plan for a full suite of financial services products. But with X.com expanding as fast as it had, appropriate underwriting had taken a back seat.’ – Jimmy Soni, in ‘The Founders’
StoneCo Ltd. (Stone) today is seen as a payment provider with lower margins than its peers in a structurally difficult environment in Brazil: strong competition, declining take rates, increasing funding costs. The last two quarterly updates indicated improvement in all business lines for Stone and management did forecast further margin increases throughout all of 2022. In contrast to the other payment providers, Stone also has a sizable software business. In addition, Stone is working towards becoming a full-fledged financial services provider. Both endeavors add costs to the P&L, but do not yet add meaningful profits, which is about to change. Particularly the lending business could become bigger and more profitable than the current bread-and-butter payments business. However, the lending business was suspended last year after experiencing issues that resemble those of the early PayPal from more than two decades ago (“X.com” was renamed “PayPal” in 2001)…” (Click here to see the full text)
6. VeriSign, Inc. (NASDAQ:VRSN)
Berkshire Hathaway’s Stake Value: $2.14 billion
YTD Percentage Decline in Share Price as of August 21: 21.89%
Number of Hedge Fund Holders: 35
Verisign, Inc. (NASDAQ:VRSN), an American company based in Reston, Virginia, is a global provider of domain name registry services and internet infrastructure. At the end of Q2 2022, Warren Buffett’s hedge fund still held 12.8 million shares of VeriSign, Inc. (NASDAQ:VRSN), worth about $2.14 billion.
For the first quarter of 2022, Verisign, Inc. (NASDAQ:VRSN) reported GAAP EPS of $1.54, beating market estimates by $0.02. The company’s quarterly revenues came in at $352 million, above consensus estimates by $3.13 million.
Of the hedge funds tracked by Insider Monkey’s database, 35 reported having ownership of stakes in Verisign, Inc. (NASDAQ:VRSN) as of the end of the second quarter of 2022. Of these, Jim Simons’ Renaissance Technologies was one of the most significant shareholders of VeriSign, Inc. (NASDAQ:VRSN) with 3.59 million shares worth more than $662 million.
In addition to Amazon.com, Inc. (NASDAQ:AMZN), Snowflake Inc. (NYSE:SNOW), and U.S. Bancorp (NYSE:USB), Warren Buffett remains bullish on VeriSign, Inc. (NASDAQ:VRSN).
Here is what investment firm Baron Funds had to say about the prospects of Verisign, Inc. (NASDAQ:VRSN) in its Q4 2021 investor letter:
“Verisign, Inc. provides internet infrastructure services worldwide and is best known for its exclusive role managing the .com and .net domains, for which it receives annual fees from all those domain owners. Shares of Verisign gained after reporting strong revenue growth and operating margins that exceeded Wall Street forecasts. We continue to be positive on Verisign’s business, based on its strong competitive position, capacity for global growth in domain names, and its ongoing ability to generate substantial free cash flow.”
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Disclosure: None. Warren Buffett Trusts in These 10 Stocks Despite Losses is originally published on Insider Monkey.
