In this article, we are going to take a look at Warren Buffett’s 10 New Stock Picks.
Warren Buffett is one of the few investors that do not require an introduction as his success, wealth and philanthropy are widely known and admired. Earlier this year, Buffett made it clear that his fortune, estimated at around $140 billion will go into a charitable trust that will be administered by his three children. Moreover, the trust will only be able to disburse funds upon unanimous agreement from all three children. In a recently-released letter to shareholders, Buffett explained:
“That restriction enables an immediate and final reply to grant-seekers: “It’s not something that would ever receive my brother’s consent.” And that answer will improve the lives of my children.”
However, in the meantime, Buffett still appears to be at the helm and running the operations at Berkshire Hathaway Inc (NYSE:BRK.A), even though he has handed over most of the day-to-day managing duties to his lieutenants. In the latest financial report, it was revealed that Berkshire has amassed a huge position in cash, cash equivalents and short-term investments in US Treasuries. The cash pile, which stands at $277 billion, is the largest that the holding company has ever had. Moreover, Berkshire has slowed down its stock buybacks and hasn’t bought any of its own shares in the third quarter.
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This has prompted many to speculate that Buffett sees the market as over-valued and is likely anticipating a downturn. In this way, gathering cash will allow Berkshire to purchase shares at cheaper prices. Another explanation might come from Buffett’s comments made at the annual meeting of Berkshire shareholders, where he said that he expected that capital gain taxes to go up, so realizing profits now might be way to save money later.
Nevertheless, Berkshire still maintains a portfolio of 40 stocks. Many of the companies that the fund owns are long-term holdings and you can take a look at some of them in our analysis of Warren Buffett’s 10 longest-held stocks.
Our Methodology
In-line with Buffett’s legacy, Berkshire holds a diversified portfolio and does not make a lot of changes during a quarter. Nevertheless, every quarterly 13F filing reveals two or three new positions acquired during the reporting period. To compile the list of Warren Buffett’s new stock picks, we have scanned through Berkshire’s filings for the last couple of years and have identified 10 stocks that Berkshire has acquired and still holds according to the latest filing.
At Insider Monkey, we are obsessed with 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).
10. Louisiana-Pacific Corp (NYSE:LPX)
Shares held by Berkshire Hathaway: 5.96 million
Stake Acquired: Q3 2022
During the third quarter of 2022, Berkshire Hathaway initiated a stake in building materials manufacturer Louisiana-Pacific Corporation (NYSE:LPX). It’s likely that Buffett saw an opportunity in the residential housing market, which was facing a shortage. The bet has proven fruitful so far, as Louisiana-Pacific Corp’s shares more than doubled since June 2022.
Louisiana-Pacific Corporation is one of the top manufacturers of oriented strand board (OSB) in North America. As a key material used in residential construction, demand for OSB is expected to be high as residential construction market in the US continues to grow. In 2023, the company saw some challenges due to weak demand, with its revenue dropping by more than 30% to $2.58 billion.
Going forward, the US residential housing market is expected to grow by at least a small margin as demand continues to stay high. If the mortgage rates decline from the current average of 6% range due to more stimulus from the Fed, this will likely drive the demand higher and stimulate the residential construction industry. As the leading OSB manufacturer in the US, Louisiana-Pacific Corp (NYSE:LPX) stands to benefit from these trends. Moreover, since LP has a strong manufacturing base in the US, it will likely face fewer headwinds from the potential tariffs that the upcoming Trump administration has promised to impose compared to its peers.
9. Diageo plc (NYSE:DEO)
Shares held by Berkshire Hathaway: 227,750
Stake Acquired: Q1 2023
It’s no secret that Warren Buffett likes consumer staples, his longest-term holdings including The Coca-Cola Co (NYSE:KO) and Kraft Heinz Co (NASDAQ:KHC). In 2023, Buffett also added global alcoholic beverages manufacturer Diageo plc (NYSE:DEO). Berkshire acquired the shares as Diageo pl (NYSE:DEO) stock was below the $200+ highs reached in 2022 and so far the investment most likely has lost money as the stock has been trending down for quite some time as the company has been facing lower volumes due to high inflation and weaker consumer spending and the leadership expects tough times to continue in the near future.
Nevertheless, Diageo plc (NYSE:DEO) is one of the leading alcoholic beverages companies in the world with a solid portfolio of brands that includes well-known names such as Johnnie Walker and Guinness.
The company enjoys a robust financial position with more than $20 billion in revenues for the past couple of years. Diageo also has $2.60 billion in free cash flow as of the end of 2024 and has been consistently growing its dividend for more than three decades. It does have quite a lot of debt at $22.11 billion, but for cash cow companies such as Diageo plc (NYSE:DEO) this is rarely an issue.
8. Capital One Financial Corp. (NYSE:COF)
Shares held by Berkshire Hathaway: 9.10 million
Stake Acquired: Q1 2023
Many of us remember the first quarter of 2023 as a rather tumultuous period for the US banking sector, as Silicon Valley Bank and Signature Bank collapsed, which sent shockwaves through the entire sector. However, Buffett likely saw this an opportunity to get a solid bank stock at a discount and acquired a stake in Capital One Financial Corp. (NYSE:COF).
Capital One Financial Corp. (NYSE:COF)’s shares appreciated by more than 42% in the past year as the company has delivered solid results. One big catalyst for this growth has been the pending acquisition of Discover Financial Services. The $35 billion all-stock deal is expected to close in 2025 and is expected to substantially expand Capital One’s customer base with the addition of several dozen million new customers. Moreover, having access to Discover’s payment network will allow Capital One Financial Corp. (NYSE:COF) to potentially compete with the likes of Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA). Nevertheless, the completion is still subject to shareholder and regulatory approvals.
7. NVR Inc (NYSE:NVR)
Shares held by Berkshire Hathaway: 11,112 shares
Stake Acquired: Q2 2023
Another one of Warren Buffett’s bets on the US housing market that proved fruitful is NVR Inc (NYSE:NVR), in which the Oracle of Omaha acquired a position in the second quarter of last year. NVR Inc (NYSE:NVR) operates in two segments: homebuilding and mortgage services.
NVR Inc (NYSE:NVR) is already benefiting from the housing shortage as it saw a 13% growth in new orders and a 12% increase in backlog (houses sold but not yet settled with customers) last year. For the latest quarter, NVR reported a 19% increase in new orders and a 9% increase in backlog. Nevertheless, NVR Inc (NYSE:NVR) missed analysts’ expectations with both EPS of $130.50 and revenue of $2.68 billion coming in slightly lower than projected.
Going forward, if mortgage rates continue to decline, NVR Inc (NYSE:NVR) stands to benefit from more sales, while its mortgage business can see a higher volume of loans. On the other hand, analysts are currently cautious about the stock’s short-term performance, with most maintaining a Hold or Neutral rating on the stock.
6. Sirius XM Holdings Inc (NASDAQ:SIRI)
Shares held by Berkshire Hathaway: 112.50 million
Stake Acquired: Q3 2023
Another cash cow that Buffett is fond of is Sirius XM Holdings Inc (NASDAQ:SIRI). At the end of September, Berkshire held around 105 million shares and in a recent Form 4 filing disclosed increasing the position to 112.50 million shares. Berkshire is the largest shareholder of Sirius, with ownership of more than 30% of the company.
Sirius XM Holdings Inc (NASDAQ:SIRI) is a robust business that generates steady revenue from its fairly large subscription base of around 40 million people. So far this year, the company’s shares lost nearly 60% as investors are concerned about the company’s lackluster growth.
Recently, Sirius XM Holdings Inc (NASDAQ:SIRI)’s management announced some updates to their strategic direction, highlighting plans to focus on the core automotive subscriber segment. With most subscribers using the service in their cars and Sirius trial being offered as a default option in vehicles. Sirius XM intends to focus on retention of users in this segment.
Moreover, Sirius XM Holdings Inc (NASDAQ:SIRI) plans to retire a portion of its debt and to buy back stock. It also pays a dividend of $0.27 per share, which gives its stock a forward yield of 4.8%.
5. Chubb Ltd (NYSE:CB)
Shares held by Berkshire Hathaway: 27.03 million
Stake Acquired: Q1 2024
Earlier this year, Berkshire initiated a position in Chubb Ltd (NYSE:CB), which was worth more than $6.7 billion as reported in the first-quarter 13F filing. Berkshire further added 1.1 million shares in the second quarter currently holding more than 27 million shares of the insurance company.
It’s no secret that Warren Buffett likes insurance companies, with Berkshire owning a number of them in its portfolio, including GEICO, Berkshire Hathaway Reinsurance Group, Berkshire Hathaway Specialty Insurance, among others. Buffett appreciates insurance businesses’ capital structure, which allows investing the premiums to accumulate more capital. Chubb Ltd (NYSE:CB) is a robust insurance company with a large presence, ranking among the top 20 global insurers. According to Insurance Information Institute, Chubb has a market share of 5.5% as of the end of 2023.
For the first nine months of 2024, the company reported a net Income of $6.70 billion, representing an increase of 14% over the year. The company also recorded a combined ratio (the difference between claims and expenses, and premiums earned) of 87.7% for the third quarter, which shows underwriting profitability. Moreover, Chubb Ltd. (NYSE:CB) saw a 12% increase in net premiums written to $13.4 billion compared to the third quarter of 2023.
4. Heico Corp (NYSE:HEI)
Shares held by Berkshire Hathaway: 1.05 million
Stake Acquired: Q2 2024
During the second quarter of 2024, Berkshire added 1.05 million shares of Heico Corp (NYSE:HEI) to its equity portfolio. Heico is an aerospace and defense company that provides aftermarket parts and repair solutions for aircraft both commercial and military, and also produces electronic products like infrared cameras, power converters, power supplies, memory modules, digital recorders and others.
Similar to other companies that we have covered in this list, Heico Corp (NYSE:HEI) ticks many boxes that Warren Buffett is looking for in an investment. The company has seen strong revenue growth in the past several years, with its top line surging from $1.87 billion in 2023 to $2.97 billion last year. Its bottom line also seen similar growth. For the latest quarter, Heico Corp (NYSE:HEI) reported EPS of $0.97, which was higher than the consensus estimate of $0.92, while its revenue of $992.25 million was slightly lower than expectations. In addition to growing earnings, Heico Corp (NYSE:HEI) has a debt-to-equity of 0.64 and a debt to EBITDA of 2.1.
Moreover, Heico Corp (NYSE:HEI) operates in an industry with high barriers to entry, which is also a plus, while its exposure to aerospace and defense implies that the company will benefit solid demand for years to come.
3. Ulta Beauty Inc (NASDAQ:ULTA)
Shares held by Berkshire Hathaway: 24,203
Stake Acquired: Q2 2024
Also in the second quarter of this year, Berkshire Hathaway added beauty retailer Ulta Beauty Inc (NASDAQ:ULTA) to its portfolio. However, in the following three months, the fund disposed of almost the entire position by selling 665,903 shares.
Berkshire initiated a stake after the stock dipped after the company provided lower than expected guidance for the current year in March and later in April at an investor conference, the company’s management projected that the first quarter results would be at the lower end of the guidance due to slower sales.
For the latest quarter, ended November 2, Ulta Beauty Inc (NASDAQ:ULTA) reported EPS of $5.14 and revenue of $2.53 billion, both topping the expectations by $90.61 and $32.51 million, respectively. Moreover, the retailer inched higher its full-year guidance and now expects between $11.1 billion and $11.2 billion in sales and EPS between $23.20 and $23.75. The company saw a comparable sales growth of 0.6% on the year, which was substantially lower from 4.5% growth seen in the same period of last year. The company has also been investing in expanding its business with 57 new stores opened in the first nine months of its fiscal 2024.
Trading at almost 19 times its forward earnings, Ulta Beauty Inc (NASDAQ:ULTA) is no longer trading at the discount seen earlier this year. Analysts are split between Hold and Buy ratings. For example, following the earnings release, UBS maintained a Buy rating and hiked the price target to $490, while Citigroup raised the price target to $450 and maintained a Neutral rating.
2. Pool Corp (NASDAQ:POOL)
Shares held by Berkshire Hathaway: 404,057
Stake Acquired: Q3 2024
The next two stocks that we will cover in the list of Warren Buffett’s 10 new stock picks represent positions opened during the third quarter of 2024 and disclosed in Berkshire’s latest 13F filing. One of them is Pool Corp (NASDAQ:POOL), in which Berkshire acquired some 404,000 shares worth $152.25 million.
Pool Corp is the leading global distributor of swimming pool equipment, parts, and supplies. The company operates more than 400 sales centers in North America, Europe, and Australia. It has faced some headwinds this year, with sales falling on the back of weaker consumer spending. With higher interest rates and challenging housing market, homeowners are less inclined to spend a lot of money on luxury items like swimming pools. Nevertheless, Pool Corp (NASDAQ:POOL) managed to narrowly beat EPS estimates for the last three quarters and reported low single-digit revenue declines.
Buffett and other investors have many reasons to be bullish on Pool Corp (NASDAQ:POOL). The company is a global industry leader and has a large distribution network, which gives it a competitive edge. Moreover, besides selling swimming pool equipment, the company also sells supplies that are required for pool maintenance, which result in a steady revenue stream. Pool Corp (NASDAQ:POOL) is also run by a seasoned team and its management and board of directors is committed to return capital to shareholders through dividends and buybacks.
On the other hand, trading at 2.6 times its sales and 29.7 times its forward earnings, puts Pool Corp (NASDAQ:POOL) at the higher end of valuation. The Street seems to share the same view, as the stock has a consensus Hold rating and a price target of $369, which implies little upside.
1. Domino’s Pizza Inc (NYSE:DPZ)
Shares held by Berkshire Hathaway: 1.28 million
Stake Acquired: Q3 2024
Last but not least, Berkshire also disclosed a new stake in Domino’s Pizza Inc (NYSE:DPZ) valued at $549.40 million in its latest 13F filing. Domino’s is one of the largest pizza delivery companies in the world with a presence in 90 countries. It is also one of the most recognized pizza brands in the world. The company mainly operates through a franchise model with most locations owned by franchisees. Domino’s Pizza Inc (NYSE:DPZ) has been quickly adapting to the changing environment by adopting digital solutions to streamline ordering and delivery processes.
As a large company, Domino’s Pizza Inc (NYSE:DPZ) is delivering steady revenue and profitability, while its scale allows it to negotiate with suppliers and invest in technology that allows it to expand its margins. The company has generated nearly $500 million in free cash flow for the trailing 12 months. Moreover, the company has been steadily growing its dividends for nearly two decades and is currently paying a quarterly dividend of $1.51 per share, which translates into a dividend yield of 1.35%.
However, all the positives that make Domino’s Pizza Inc (NYSE:DPZ) a solid investment come at a premium. The stock is trading at 25 times its forward earnings, which is substantially higher than some of its competitors. For example Papa John’s International (NASDAQ:PZZA) is trading at 17 times forward earnings. In addition, even though it has a solid cash position, Domino’s Pizza Inc (NYSE:DPZ) has quite a big debt pile of more than $5 billion against $165 million in cash. For a cash generating business this much debt is probably not a concern at this point, but in a high interest rate environment this could result in higher interest expenses.
While we acknowledge the potential of DPZ as an investment, 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 DPZ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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