In this article, we discuss Warren Buffett’s four giants, latest investor letter, and top 10 stock picks. You can skip our comprehensive analysis of Warren Buffett’s history, investment philosophy, and hedge fund performance, and go directly to Warren Buffett’s Top 5 Stock Picks.
Legendary investor Warren Buffett recently wrote his much-awaited 2021 letter to investors, in which the 91-year-old billionaire shared his thoughts on the current market situation and his outlook on the economy. Buffett bemoaned that there is a “lack of good deals” in the market even as his company’s cash soared to $146.7 billion. Buffett reiterated the importance of steering clear of the temporary market moves and focusing on the long-term growth prospects of businesses during investing.
“Please note particularly that we own stocks based upon our expectations about their long-term business performance and not because we view them as vehicles for timely market moves. That point is crucial: Charlie and I are not stock-pickers; we are business-pickers,” said Buffett.
The Oracle of Omaha also mentioned the “four giants” of his company which contribute heavily to the conglomerate’s profits. Topping the list of these “Big Four” is Berkshire’s insurance business, which Buffett said will never go “obsolete.” The billionaire thinks that the sales volume of this business will generally increase along with both economic growth and inflation.
Berkshire’s second giant is Apple Inc. (NASDAQ:AAPL), in which the hedge fund has been an investor for several years. Buffett said that Apple Inc. (NASDAQ:AAPL) is a “different sort of holding.” The investor said that Berkshire was able to amass a whopping $785 million just in dividends from Apple Inc. (NASDAQ:AAPL). Warren Buffett also applauded Apple’s CEO Tim Cook in the following words:
“Tim Cook, Apple’s brilliant CEO, quite properly regards users of Apple products as his first love, but all of his other constituencies benefit from Tim’s managerial touch as well.”
As of the end of 2021, Berkshire Hathaway had a $157.53 billion stake in Apple Inc. (NASDAQ:AAPL) with over 887 million shares.
Berkshire’s third giant is BNSF Railway Company, one of the largest freight railroads in North America. According to Buffett, the railroad business had record earnings of $6 billion in 2021.
“BNSF trains traveled 143 million miles last year and carried 535 million tons of cargo. Both accomplishments far exceed those of any other American carrier. You can be proud of your railroad.”
Berkshire Hathaway Energy, or BHE, is the fourth giant Warren Buffett talked about. The business earned a record $4 billion in 2021. The billionaire said that the company has become a “utility powerhouse” under David Sokol’s and Greg Abel’s leadership and it is now a “leading force” in wind, solar, and transmission throughout the country.
Warren Buffett then went on to list down his biggest stock picks. Some of these include Bank of America Corporation (NYSE:BAC), The Coca-Cola Company (NYSE:KO) and The Kraft Heinz Company (NASDAQ:KHC). Let’s take a look at these stocks and see the details of Berkshire’s positions in these companies.
Warren Buffett’s Four Giants, Latest Investor Letter and Top 10 Stock Picks
10. The Bank of New York Mellon Corporation (NYSE:BK)
Number of Hedge Fund Holders: 49
Warren Buffett’s fund first invested in The Bank of New York Mellon Corporation (NYSE:BK) in the last quarter of 2010. The fund has bought, increased, and held on to its stakes in The Bank of New York Mellon Corporation (NYSE:BK) over the years. As of the end of the fourth quarter, Warren Buffett has a $4.2 billion stake in the bank. The Bank of New York Mellon Corporation (NYSE:BK) is a strong dividend payer. The company in January declared a monthly dividend of $0.05 per share, in line with previous. Bank of New York is a top stock pick of Warren Buffett, in addition to Apple Inc. (NASDAQ:AAPL), Bank of America Corporation (NYSE:BAC), The Coca-Cola Company (NYSE:KO) and The Kraft Heinz Company (NASDAQ:KHC).
As of the end of the fourth quarter of 2021, 49 hedge funds out of 924 tracked by Insider Monkey had stakes in The Bank of New York Mellon Corporation (NYSE:BK), compared to 46 funds in the previous quarter.
9. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 53
Oil giant Chevron Corporation (NYSE:CVX) is a notable name in Berkshire’s portfolio as Warren Buffett has been a longtime investor in the company. The fund upped its stakes in Chevron Corporation (NYSE:CVX) by 34% in the fourth quarter, entering 2022 with 38.25 million shares of the company which had a net worth of about $4.5 billion. Chevron Corporation (NYSE:CVX) recently hit a new 52-week high after the company said it will raise its stock buyback program to $5 billion – $10 billion per year, up from previous plans for $3 billion – $5 billion. Chevron Corporation (NYSE:CVX) also said it is targeting a 12% return on capital employed by 2026 at $60/bbl Brent crude.
A total of 53 hedge funds tracked by Insider Monkey had long positions in Chevron Corporation (NYSE:CVX) at the end of the fourth quarter. In addition to Berkshire, Ken Fisher’s Fisher Asset Management is a leading shareholder in the company, with a $774 million stake.
Goehring & Rozencwajg Associates, an investment management firm, published its “Natural Resource Market Commentary” third-quarter 2021 investor letter and mentioned Chevron Corporation (NYSE:CVX). Here‘s what the fund said:
“After successfully replacing 25% of Exxon’s board of directors despite owning just 0.02% of the outstanding equity, Engine No. 1, the climate-focused activist hedge fund, met with Chevron’s management late last summer. In discussions that were later described as “cordial,” Chevron Corporation (NYSE:CVX) executives shared their plan to reduce carbon emissions. Subsequently, Chevron Corporation (NYSE:CVX) announced new plans to further reduce carbon output, along with their intention to appoint a new director with “environmental expertise.” Although it remains unclear exactly what Engine No. 1 is planning, rumors suggest the fund has contacted other investors, strongly suggesting they intend to launch a second campaign in the not-too-distant future.
What should Chevron Corporation (NYSE:CVX) expect?
It was recently reported by The Wall Street Journal that Exxon was considering abandoning two massive natural gas projects: the 75 trillion cubic foot (tcf ) Rovuma LNG project (capital cost $30 bn) and the 5 tcf Ca Voi Xanh offshore-Vietnam gas project (capital cost $10 bn). Exxon board members (most likely including the three supported by Engine No. 1) have publically expressed concerns about both projects. According to internal reports, these projects are among the highest CO2 producers in Exxon’s pipeline; it is no surprise these projects have been called into question. However, we find the plight of both fields to be perplexing since production would almost certainly be used to displace coal in electricity generation, cutting CO2 emissions by nearly 50%. This fact seems to be lost on the new Exxon board members.”
8. U.S. Bancorp (NYSE:USB)
Number of Hedge Fund Holders: 46
With a $7.1 billion stake, Warren Buffett is the biggest stakeholder in the Minnesota-based U.S. Bancorp (NYSE:USB). U.S. Bancorp (NYSE:USB) stock is up about 6% over the last 12 months. But it dipped recently after the company missed fourth-quarter earnings estimates. U.S. Bancorp (NYSE:USB)’s earnings fell due to lower net interest income, lower loan fees related to the SBA Paycheck Protection Program, lower payments and capital markets revenue, and lower mortgage banking revenue.
Hedge fund sentiment ticked up for U.S. Bancorp (NYSE:USB) in the fourth quarter as Insider Monkey’s database of 924 funds show that 46 funds had stakes in U.S. Bancorp (NYSE:USB) in the last quarter of 2021, as compared to 42 funds in the previous quarter.
7. Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 63
Warren Buffett’s hedge fund first invested in Verizon Communications Inc. (NYSE:VZ) in 2014 but eventually sold its stake after two years. The fund again bought a substantial stake in the media and telecom giant in the third quarter of 2020 and has since increased and held on to its position in the company. At the end of the fourth quarter, Berkshire Hathaway had an $8.25 billion stake in Verizon Communications Inc. (NYSE:VZ). In January, Verizon Communications Inc. (NYSE:VZ) slipped after J.P. Morgan downgraded the stock, citing declining growth in the phone sector.
Nonetheless, Verizon Communications Inc. (NYSE:VZ) remains a strong dividend-paying company. Recently, Verizon Communications Inc. (NYSE:VZ) declared a $0.64 per share quarterly dividend, in line with previous. Forward dividend yield based on this payout comes in at 4.73%.
Weitz Investment Management, an investment management firm, published its “Hickory Fund” fourth quarter 2021 investor letter and mentioned Verizon Communications Inc. (NYSE:VZ). Here‘s what the fund said:
“After several quarters of pandemic-induced outsized growth, new broadband connection growth has slowed for U.S. cable operators. This slower growth has coincided with a renewed push by competitors like Verizon and AT&T to offer high-speed data (either via wireless connects or by building new fiber-optic networks).”
6. Moody’s Corporation (NYSE:MCO)
Number of Hedge Fund Holders: 58
Credit ratings and data company Moody’s is an interesting stock pick of Warren Buffett. Berkshire owns over 24.7 million shares of Moody’s (NYSE:MCO), worth $9.64 billion. Moody’s (NYSE:MCO) recently increased its quarterly dividend by 12.9%. Warren Buffett has been an investor in Moody’s (NYSE:MCO) for the last 12 years. In addition to Moody’s, hedge funds are also bullish on Apple Inc. (NASDAQ:AAPL), Bank of America Corporation (NYSE:BAC), The Coca-Cola Company (NYSE:KO) and The Kraft Heinz Company (NASDAQ:KHC).
For the fourth quarter of 2021, Moody’s (NYSE:MCO) posted adjusted EPS of $2.33, missing the Wall Street estimates by $0.06. Revenue for the quarter jumped 20% to $1.54 billion, beating estimates by $30 million. For full-year 2022 the company expects its EPS to come in the range of $11.50 to $12.00.
To see rest of the stocks in this list click to read Warren Buffett’s Top 5 Stock Picks.
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Disclosure: None. Warren Buffett’s Four Giants, Latest Investor Letter and Top 10 Stock Picks is originally published at Insider Monkey.
