In this article, we discuss the top 5 stock picks from Warren Buffett’s latest portfolio. If you want to read our discussion on Buffett’s recent investment decisions, go directly to Warren Buffett’s 2023 Portfolio: Top 15 Stock Picks.
5. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 57
Warren Buffett’s Berkshire Hathaway’s Holdings: $21,603,623,200
Percentage of Warren Buffett’s Berkshire Hathaway’s Portfolio: 6.64%
On April 28, Chevron Corporation (NYSE:CVX) announced that it intends to buy back $4.38 billion worth of stock during Q2 2023. The announcement was made during the Q1 2023 results. The company distributed $6.6 billion to shareholders through dividends and share buybacks in Q1 2023. Furthermore, Chevron Corporation (NYSE:CVX) increased its annual share buyback target by 6% to $17.5 billion for 2023. Warren Buffett is expected to receive $1 billion in dividends from his investment in the oil major as Chevron Corporation (NYSE:CVX) plans to increase its dividend for the 36th consecutive year.
Here’s what Madison Funds said about Chevron Corporation (NYSE:CVX) in its Q4 2022 investor letter:
“This quarter we are highlighting Chevron Corporation (NYSE:CVX) as a relative yield example in the Energy sector. CVX is a leading integrated oil company with exploration, production, and refining operations. It is the second largest oil company in the United States with more than 70% of production volumes from oil and liquid-linked natural gas. We believe it has a sustainable competitive advantage due to its scale and low-cost position. It has a large acreage position in the Permian Basin, which is a high-quality oil field. CVX was an early mover in the Permian and did not overpay to enter the oilfield; 75% of its position has a no or low royalty rate, which gives it a cost advantage over competitors.
Our thesis is that free cash flow growth per share is expected to accelerate due to disciplined capital spending, rising Permian production volumes, and stock repurchases. The company has also made important investments in low-carbon areas like greenhouse gas reduction, carbon capture, hydrogen, and renewable fuels which we believe will pay off later in the decade as the world transitions more to renewable energy sources…” (Click here to read the full text)
4. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 58
Warren Buffett’s Berkshire Hathaway’s Holdings: $24,812,000,000
Percentage of Warren Buffett’s Berkshire Hathaway’s Portfolio: 7.63%
On April 26, Barclays increased the price target on The Coca-Cola Company (NYSE:KO) from $72 to $73 and assigned the stock an Overweight rating. The development took place after the company reported better-than-expected Q1 2023 results. Analysts saw the result as a strong start for the company for 2023. The Coca-Cola Company (NYSE:KO) has been able to gain market share in various product categories across numerous regions. Barclays analysts expect the company to have a favourable setup for the next one to two years as inflation has started to cool down.
The Coca-Cola Company (NYSE:KO) was discussed in the Q4 2022 investor letter of Rowan Street Capital. Here’s what the firm said:
“Let’s take The Coca-Cola Company (NYSE:KO) for example. Its dividend yield is 2.8%, earnings are estimated to grow at only 3.6% rate per year over next 4 years, and its earnings multiple is currently at 24x (based on next years forecasted earnings). KO has an anemic growth, so we can argue that paying 24x earnings is not very attractive. Let’s assume that the multiple will stay constant over the next 3-5 years, thus our expected annual returns will be 2.8%+3.6% = 6.4% (that is below the current reported inflation rate and only slightly above the risk-free rate of 4%).”
3. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 71
Warren Buffett’s Berkshire Hathaway’s Holdings: $25,008,184,965
Percentage of Warren Buffett’s Berkshire Hathaway’s Portfolio: 7.69%
Warren Buffett’s Berkshire Hathaway holds over 151.6 million shares in American Express Company (NYSE:AXP) as of Q1 2023. The hedge fund initiated a stake in the company in Q4 2010 at an average quarterly share price of $42.19.
In April, American Express Company (NYSE:AXP) reported a stable consumer credit card delinquency rate of around 1.1%. The figure has not changed since February 2023 and is still below the delinquency rate of 1.4% during the COVID-19 pandemic. The Buffalo, New York-based payment cards company saw its total loans increase from $71.9 billion on March 31 to $73.8 on April 30. It must be noted that American Express Company (NYSE:AXP) and Coca-Cola have been two of the mainstays of Warren Buffett’s portfolio for a long period, and Buffett thinks that they will remain a part of his portfolio permanently.
2. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 100
Warren Buffett’s Berkshire Hathaway’s Holdings: $29,539,567,372
Percentage of Warren Buffett’s Berkshire Hathaway’s Portfolio: 9.08%
On May 12, Glenn Schorr at Evercore ISI assigned Bank of America Corporation (NYSE:BAC) stock a target price of $35, along with an Outperform rating. The rating came after the state-operated Federal Deposit Insurance Corporation (FDIC) shared the details of replenishing deposit insurance funds following the recent failures of US banks. Warren Buffett built his stake in the company by exercising $5 billion worth of warrants with an exercise price of $7.14. The warrants were exercised against a 6% preferred share held by Berkshire Hathaway back in June 2017.
Here’s what Oakmark Funds said about Bank of America Corporation (NYSE:BAC) in its Q1 2023 investor letter:
“The Oakmark Equity and Income Fund has 29% of its equity portfolio in financials. This made the March sell-off painful, but we do not believe that this has meaningfully changed the value of most of our financial equity holdings. In fact, we were adding to financial positions throughout March. We believe that one way to analyze our financial holdings is to look at them in different buckets given their various business models and risk profiles. Almost 30% of our financial exposure is in insurance companies and insurance brokers. Insurance companies have very stable liability profiles, so the main risk is a change in asset values. We are comfortable with their investment portfolios and think these stocks are quite attractive. Around 5% of our financials are asset managers. This leaves a little over 40% of the financials exposure in a varied group of banks and lenders. About 5% of that portfolio is in Bank of America Corporation (NYSE:BAC) and State Street. These two banks are designated as Systematically Important Financial Institutions and are held to higher regulatory standards. Our largest single financials holding is Bank of America, which has grown deposits during March, and we believe it is one of the best managed companies in the sector.”
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 135
Warren Buffett’s Berkshire Hathaway’s Holdings: $150,975,906,991
Percentage of Warren Buffett’s Berkshire Hathaway’s Portfolio: 46.43%
Apple Inc. (NASDAQ:AAPL) was termed a “better business” by Warren Buffett compared to other components of his portfolio on May 7. Buffett built a significant stake in Apple Inc. (NASDAQ:AAPL) between Q1 2016 and Q1 2018 at an average share price of approximately $35. Currently, the stock price of the Cupertino, California-based technology giant is hovering around $172. This reflects a return of over 390% during the five years. Buffett shared that he perceives Apple Inc. (NASDAQ:AAPL) not just as a technology company but primarily as a consumer products company centred around its flagship product, the iPhone.
Madison Investments shared its outlook on Apple Inc. (NASDAQ:AAPL) in its Q1 2023 investor letter. Here’s what the firm said:
“Our underweight to Apple Inc. (NASDAQ:AAPL) was a headwind to performance during the first quarter. Apple performed well in the first quarter along with the other large cap technology stocks following a weak 2022. Despite recent supply constraints and macro-economic uncertainty, demand for Apple products remains solid. First quarter iPhone sales would have been flat if not for the supply chain issues.”
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