In this article, we discuss Warren Buffett’s 5 worst performing stock picks from 2021. If you want to skip our detailed analysis of Buffett’s history, investment philosophy, and hedge fund performance, go directly to Warren Buffett’s 3 Worst Performing Stock Picks From 2021.
Legendary investor Warren Buffett is recognized for leading Berkshire Hathaway Inc. (NYSE:BRK-A), an American conglomerate company valued at over $700 billion, and managing investments at his hedge fund, Berkshire Hathaway, with a portfolio worth $293.4 billion as of Q3 2021.
Warren Buffett’s investment strategies are closely followed by the stock market traders, both retail and seasoned investors look forward to the billionaire’s market predictions, and many investors try to imitate Buffett’s philosophy when it comes to trading. He has reportedly bemoaned the stock market frenzy, stating that retail investors are treating stock trading very much like a casino. The stock market’s unrealistic surge will only fuel inflation and lower the real returns of the market in the coming years, according to Buffett. The billionaire, whose investment philosophy revolves around value stocks, has stated that it was difficult to find securities at a bargain in 2021, which is why he has stockpiled cash and invested mainly in share buybacks at Berkshire Hathaway Inc. (NYSE:BRK-A).
Buffett’s largest holding in the third quarter of 2021 was Apple Inc. (NASDAQ:AAPL), with his hedge fund owning over 887 million shares of the company, worth $125.5 billion. Berkshire Hathaway owns 5% of Apple Inc. (NASDAQ:AAPL) as of 2018, which initially cost the fund $36 billion, and the position is now worth $160 billion as the tech giant is reaching a $3 trillion valuation. The Apple Inc. (NASDAQ:AAPL) stake is undoubtedly Buffett’s biggest bet from 2021, which successfully paid off.
Although Warren Buffett’s Apple Inc. (NASDAQ:AAPL) bet paying off stole the limelight in 2021, two of his core holdings, The Coca-Cola Company (NYSE:KO) and Bank of America Corporation (NYSE:BAC), also racked up significant gains in 2021. Buffett acquired his The Coca-Cola Company (NYSE:KO) stake for $1.3 billion in late 1980s, and as of December 2021, his position is worth $24.2 billion, which is a gain of approximately 19-fold.
Buffett’s dividend income from The Coca-Cola Company (NYSE:KO)’s has also increased from $88 million in 1995 to $672 million in 2021. Similarly, Buffett purchased Bank of America Corporation (NYSE:BAC) shares in 2011, and his cost base for the stock in 2021 totaled $14.6 billion. The Bank of America Corporation (NYSE:BAC) stock inflated in value to approximately $50.5 billion, which means it has tripled its worth on paper.
The investor does not give in to market hype when it comes to making investment decisions, for example, the electric vehicle boom is driving the stock market crazy, with investors seeking shares of Tesla, Inc. (NASDAQ:TSLA) and Rivian Automotive, Inc. (NASDAQ:RIVN) frantically. Buffett, on the other hand, invested in the Chinese EV manufacturer, BYD Company, back in 2008, buying 225 million shares of BYD for US$232 million. Assuming Berkshire Hathaway Inc. (NYSE:BRK-A) did not sell any shares, its BYD position would have resulted in a $1.48 billion gain in 2021.
Where Buffett has made billions of dollars in his investment tenure over the years, some of his business decisions have resulted in missed opportunities and losses as well. For example, Buffett reduced his stake in Wells Fargo & Company (NYSE:WFC) in 2020 and 2021, due to his publicly critical view of the company’s management. As a result, he missed out on almost $10 billion in gains by dumping a majority of his Wells Fargo & Company (NYSE:WFC) position.
Buffett’s Q3 portfolio held stocks that had varying performances in 2021, and the best performing companies included Apple Inc. (NASDAQ:AAPL), Bank of America Corporation (NYSE:BAC), and American Express Company (NYSE:AXP).
Our Methodology
The companies were selected from the Q3 portfolio of Warren Buffett’s Berkshire Hathaway. We picked stocks that delivered losses in Buffett’s portfolio, and were held by the billionaire in the first, second, and third quarter of 2021.
These stocks lost some value in 2021, and we have mentioned percentage decline in the year for each stock.
Warren Buffett’s Worst Performing Stock Picks From 2021
5. DaVita Inc. (NYSE:DVA)
Berkshire Hathaway’s Stake Value: $4,196,471,000
Percentage of Berkshire Hathaway’s 13F Portfolio: 1.43%
Number of Hedge Fund Holders: 39
Loss in 2021: 2.76%
DaVita Inc. (NYSE:DVA) is a healthcare company that specializes in treatments for kidney disease and dialysis support, offering its services across the United States and nine other countries.
Billionaire Warren Buffett owns over 36 million DaVita Inc. (NYSE:DVA) shares according to his Q3 13F filings, worth $4.1 billion, representing 1.43% of his total investments for the third quarter of 2021. Berkshire Hathaway’s position in DaVita Inc. (NYSE:DVA) has remained unchanged since Q3 2020. The stock delivered a loss of 2.76% in 2021, making it one of the worst performing stock picks of Warren Buffett in the third quarter.
After a virtual Capital Markets Day on November 16, DaVita Inc. (NYSE:DVA) stock reached an eight-month low, dipping 4.6%. The company’s management announced that it expects adjusted earnings to reach 8%-14% of the 2021-2025 CAGR, assuming the mid-point of the estimates. The stock also fell on October 28 when the Q3 2021 earnings were published, in response to updated guidance that lagged the consensus.
On January 5, Truist analyst David MacDonald raised the price target on DaVita Inc. (NYSE:DVA) to $125 from $114 and kept a Hold rating on the shares as part of a broader research note on the healthcare services sector. He remains positive on several industry names, and sees valuation and risk-reward in the group as “attractive”.
Among the hedge funds tracked by Insider Monkey in Q3 2021, 39 funds reported owning stakes worth $4.8 billion in DaVita Inc. (NYSE:DVA). Gates Capital Management is one of the leading stakeholders of the company, with a $174.1 million position.
4. Verizon Communications Inc. (NYSE:VZ)
Berkshire Hathaway’s Stake Value: $8,578,115,000
Percentage of Berkshire Hathaway’s 13F Portfolio: 2.92%
Number of Hedge Fund Holders: 57
Loss in 2021: 11.21%
Berkshire Hathaway purchased a stake in Verizon Communications Inc. (NYSE:VZ), an American multinational telecommunications conglomerate, in the first quarter of 2014. Buffett regards Verizon Communications Inc. (NYSE:VZ) as a value stock, and the mature company offers a stable stream of dividend income. However, Verizon Communications Inc. (NYSE:VZ) returned an 11.21% loss in 2021, making it one of the worst performing companies in Buffett’s Q3 portfolio.
In Q3 2021, Buffett’s stake in Verizon Communications Inc. (NYSE:VZ) remained unchanged, with the billionaire holding 158.8 million shares worth $8.5 billion, representing 2.92% of his total investments for the period.
On December 2, Verizon Communications Inc. (NYSE:VZ) declared a quarterly per share dividend of $0.64, in line with previous. The dividend is payable on February 1, to shareholders of record on January 10.
Goldman Sachs analyst Brett Feldman removed Verizon Communications Inc. (NYSE:VZ) from the firm’s Conviction List but kept a Buy rating on the shares with an unchanged price target of $63. The analyst sees a potential slowdown in Verizon Communications Inc. (NYSE:VZ)’s postpaid phone net ads in 2022, following a record year in 2021.
Of the 57 hedge funds that were long Verizon Communications Inc. (NYSE:VZ) in the third quarter of 2021, Jaime Sterne’s Skye Global Management is one of the leading stakeholders of the company, owning 5.2 million shares worth $282.3 million.
Here is what Miller/Howard Investments has to say about Verizon Communications Inc. (NYSE:VZ) in its Q1 2021 investor letter:
“We sold Verizon (VZ) based on concerns over how much they might spend in ongoing spectrum auctions. Management may legitimately view spending billions of dollars to expand their spectrum holdings as necessary, but we believe the payoff will be slow and will make it challenging to grow the dividend at a good pace.”
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Disclosure: None. Warren Buffett’s 5 Worst Performing Stock Picks From 2021 is originally published on Insider Monkey.
