Warren Buffett, the chief of Nebraska-based Berkshire Hathaway, is one of the most successful investors in the history of the stock market. His investment firm now has a portfolio value of $293 billion with holdings concentrated in the consumer goods and finance sectors. In recent years, Buffett has stockpiled more than $100 billion in cash at his firm, mostly for share buybacks. His investing strategy, which has largely ignored the explosive growth offered by tech companies, is often criticized in the finance world as he nears the end of his stellar career.
In May, at a shareholder meeting, Buffett addressed some of his critics by sharing a list of the most valuable companies in the world in 1989, when Buffett was still only at the beginning of his long career in value investing. The interesting thing about the list, according to Buffett, was that none of them are at the top today. The quip was aimed at tech giants that have reached over $1 or $2 trillion in market caps and have loads of cash to spend but have hit regulatory roadblocks in growth investing due to antitrust legislation and questionable decision-making at the helm.
Despite claims to the contrary, Buffett has made handsome returns on some of his tech-related investments in recent years. For more than a decade, he has backed BYD, the oldest China-based firm in the automotive and electric battery business. The company has seen share price soar 259% in the first seven months of this year. It now has a market capitalization of more than $112 billion, almost twice the size of Wall Street favorite Nio, another Chinese firm operating in the electric vehicle sector.
Some of the top stocks in the investment portfolio of Berkshire Hathaway at the end of the second quarter of 2021 were Apple Inc. (NASDAQ: AAPL), Bank of America Corporation (NYSE: BAC), and American Express Company (NYSE: AXP), among others discussed in detail below. The top five holdings comprise more than 75% of the entire portfolio. The success of Buffett through his value investing strategy, averaging more than 20% in annual returns for almost fifty years, has been an exception in the finance world, especially in recent years.
The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 115 percentage points. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Best Stocks to Buy According to Warren Buffett
10. Charter Communications, Inc. (NASDAQ: CHTR)
Number of Hedge Fund Holders: 75
Charter Communications, Inc. (NASDAQ: CHTR) is placed tenth on our list of 10 best stocks to buy according to Warren Buffett. The firm is based in Connecticut and markets broadband and cable services. Latest filings reveal that Berkshire Hathaway owned 5.2 million shares in the company at the end of June that are worth $3.7 billion. This represents 1.28% of the investment portfolio of the Buffett-led company.
On August 11, investment advisory Argus maintained a Buy rating on Charter Communications, Inc. (NASDAQ: CHTR) stock and raised the price target to $900 from $775, noting the firm was gaining high-speed internet and wireless subscribers after having upgraded the network.
At the end of the second quarter of 2021, 75 hedge funds in the database of Insider Monkey held stakes worth $19 billion in Charter Communications, Inc. (NASDAQ: CHTR), up from 74 the preceding quarter worth $16 billion.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Charter Communications, Inc. (NASDAQ: CHTR) was one of them. Here is what the fund said:
“The portfolio’s quality bias and valuation discipline have generated compelling returns over time with typically strong relative results in more challenging environments as it did through the first three quarters of 2020. However, that same quality bias tends to create a more challenging relative performance environment for the Strategy during periods of sharp economic acceleration, which tend to benefit stocks that are more commodity linked or of lower quality. This has been the case during the vaccine- and stimulus-driven rally experienced late last year and during the most recent quarter. Sectors that lagged in the quarter included communication services, where Charter trailed after generating robust returns earlier in the recovery.”
9. DaVita Inc. (NYSE: DVA)
Number of Hedge Fund Holders: 39
DaVita Inc. (NYSE: DVA) is ranked ninth on our list of 10 best stocks to buy according to Warren Buffett. The firm operates from Colorado and provides kidney dialysis services. According to the latest data, Berkshire Hathaway owns 36 million shares in the company that are worth more than $4.3 billion. This represents 1.48% of the portfolio of the investment firm of Warren Buffett at the end of June 2021.
On July 19, investment advisory Deutsche Bank reiterated a Buy rating on DaVita Inc. (NYSE: DVA) stock and raised the price target to $207 from $150, underlining significant upside in the daily core business of the firm.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Gates Capital Management is a leading shareholder in DaVita Inc. (NYSE: DVA) with 1.4 million shares worth more than $172 million.
8. U.S. Bancorp (NYSE: USB)
Number of Hedge Fund Holders: 41
U.S. Bancorp (NYSE: USB) is a Minnesota-based financial services holding company. It is placed eighth on our list of 10 best stocks to buy according to Warren Buffett. Regulatory filings show that Berkshire Hathaway owned more than 128 million shares of the finance firm at the end of June 2021 that are worth $7.3 billion. This represents 2.5% of the entire investment portfolio of the investment firm. Buffett has trimmed stake in the firm by 1% compared to the previous quarter.
On July 16, investment advisory Oppenheimer kept an Outperform rating on U.S. Bancorp (NYSE: USB) stock and raised the price target to $73 from $70, noting that the ongoing loan growth would help drive net interest income and revenue for the company.
At the end of the second quarter of 2021, 41 hedge funds in the database of Insider Monkey held stakes worth $8.30 billion in U.S. Bancorp (NYSE: USB), down from 43 the preceding quarter worth $8.33 billion.
In its Q4 2020 investor letter, Mairs & Power, an asset management firm, highlighted a few stocks and U.S. Bancorp (NYSE: USB) was one of them. Here is what the fund said:
“On the negative side, one of the Fund’s biggest detractor in 2020 was U.S. Bancorp (USB). Like all banks, U.S. Bank was hurt by the difficult interest rate environment and credit cycle concerns. We believe banks are strong enough to survive the current sector doldrums, and they remain some of the market’s most attractive opportunities.”
7. Verizon Communications Inc. (NYSE: VZ)
Number of Hedge Fund Holders: 63
Verizon Communications Inc. (NYSE: VZ) is a New York-based communications and technology company. It is ranked seventh on our list of 10 best stocks to buy according to Warren Buffett. Buffett owned over 158 million shares in the company through Berkshire Hathaway at the end of June 2021. These are worth $8.8 billion and comprise over 3% of the portfolio of the investment firm.
On July 22, investment advisory Cowen maintained an Outperform rating on Verizon Communications Inc. (NYSE: VZ) stock and raised the price target to $68 from $66, underlining that the company was one of the best defensive value names on the market.
At the end of the second quarter of 2021, 63 hedge funds in the database of Insider Monkey held stakes worth $10 billion in Verizon Communications Inc. (NYSE: VZ), down from 69 in the previous quarter worth $11 billion.
In its Q1 2021 investor letter, Miller/Howard Investments, an asset management firm, highlighted a few stocks and Verizon Communications Inc. (NYSE: VZ) was one of them. Here is what the fund said:
“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.”
6. Moody's Corporation (NYSE: MCO)
Number of Hedge Fund Holders: 44
Moody's Corporation (NYSE: MCO) is placed sixth on our list of 10 best stocks to buy according to Warren Buffett. The company operates as a risk assessment provider and is headquartered in New York. Government filings reveal that Berkshire Hathaway owned 24.6 million shares in the firm at the end of the second quarter of 2021. These were worth $8.9 billion and represented 3.05% of the investment portfolio of the firm.
On July 29, investment advisory BMO Capital maintained an Outperform rating on Moody's Corporation (NYSE: MCO) stock and raised the price target to $415 from $406, noting that the analytics business of the firm was outperforming with strong recurring revenue.
At the end of the second quarter of 2021, 44 hedge funds in the database of Insider Monkey held stakes worth $16 billion in Moody's Corporation (NYSE: MCO), down from 55 in the previous quarter worth $13 billion.
In its Q4 2020 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Moody's Corporation (NYSE: MCO) was one of them. Here is what the fund said:
“Moody’s Corporation provides credit ratings, financial intelligence, and analytical tools to assist businesses in making decisions. Moody’s reported excellent financial results due to continued growth in rated debt issuance. However, the stock detracted on investor expectations that issuance trends will moderate into 2021.The announced retirement of long-time CEO Ray McDaniel may have also weighed on sentiment. We continue to own the stock due to our views of the company’s long runway for growth and strong competitive advantages.”
5. The Kraft Heinz Company (NASDAQ: KHC)
Number of Hedge Fund Holders: 33
The Kraft Heinz Company (NASDAQ: KHC) is ranked fifth on our list of 10 best stocks to buy according to Warren Buffett. The firm makes and sells food products and beverages. It is run from Pennsylvania. According to the latest data, Berkshire Hathaway owns 325 million shares in the company that are worth $13.2 billion, representing 4.53% of the entire portfolio of the Nebraska-based firm.
In earnings results for the second quarter, posted on August 4, The Kraft Heinz Company (NASDAQ: KHC) reported earnings per share of $0.78, beating market predictions by $0.06. The revenue over the period was $6.6 billion, beating estimates by $70 million.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm First Eagle Investment Management is a leading shareholder in The Kraft Heinz Company (NASDAQ: KHC) with 6.7 million shares worth more than $275 million.
In its Q4 2020 investor letter, Berkshire Hathaway highlighted a few stocks and The Kraft Heinz Company (NASDAQ: KHC) was one of them. Here is what the firm said:
“We exclude our Kraft Heinz holding — 325,442,152 shares — (In the list of 15 common stock investments that at yearend were our largest in market value) because Berkshire is part of a control group and therefore must account for that investment using the “equity” method. On its balance sheet, Berkshire carries the Kraft Heinz holding at a GAAP figure of $13.3 billion, an amount that represents Berkshire’s share of the audited net worth of Kraft Heinz on December 31, 2020.
Berkshire and its subsidiaries hold investments in certain businesses that are accounted for pursuant to the equity method. Currently, the most significant of these is our investment in the common stock of The Kraft Heinz Company (“Kraft Heinz”). Kraft Heinz is one of the world’s largest manufacturers and marketers of food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee and other grocery products. Berkshire currently owns 325,442,152 shares of Kraft Heinz common stock representing 26.6% of the outstanding shares.
We recorded equity method earnings from our investment in Kraft Heinz of $95 million in 2020, $493 million in 2019 and losses of approximately $2.7 billion in 2018. Equity method earnings (losses) included the effects of goodwill and identifiable intangible asset impairment charges recorded by Kraft Heinz. Our share of such charges was approximately $850 million in 2020, $450 million in 2019 and $3.7 billion in 2018. We received dividends from Kraft Heinz of $521 million in each of 2020 and 2019 and $814 million in 2018, which we recorded as reductions in our carrying value.
Shares of Kraft Heinz common stock are publicly-traded and the fair value of our investment was approximately $11.3 billion at December 31, 2020 and $10.5 billion at December 31, 2019. The carrying value of our investment was approximately $13.3 billion at December 31, 2020 and $13.8 billion at December 31, 2019. As of December 31, 2020, the carrying value of our investment exceeded the fair value based on the quoted market price by $2.0 billion (15% of carrying value). In light of this fact, we evaluated our investment in Kraft Heinz for impairment. We utilize no bright-line tests in such evaluations. Based on the available facts and information regarding the operating results of Kraft Heinz, our ability and intent to hold the investment until recovery, the relative amount of the decline and the length of time that fair value was less than carrying value, we concluded that recognition of an impairment loss in earnings was not required. However, we will continue to monitor this investment and it is possible that an impairment loss will be recorded in earnings in a future period based on changes in facts and circumstances or intentions.”
4. The Coca-Cola Company (NYSE: KO)
Number of hedge fund holders: 62
The Coca-Cola Company (NYSE: KO) is a Georgia-based beverage company. It is placed fourth on our list of 10 best stocks to buy according to Warren Buffett. Latest data shows that Berkshire Hathaway owned 400 million shares in the beverage maker at the end of June 2021. These are worth $21.6 billion and represent 7.38% of the investment portfolio of the Buffett-led company.
On July 22, investment advisory Citi kept a Neutral rating on The Coca-Cola Company (NYSE: KO) stock but raised the price target to $60 from $57, noting that the earnings beat of the firm in the second quarter was driven by stronger net sales growth.
Out of the hedge funds being tracked by Insider Monkey, New York-based firm DE Shaw is a leading shareholder in The Coca-Cola Company (NYSE: KO) with 8.8 million shares worth more than $481 million.
3. American Express Company (NYSE: AXP)
Number of Hedge Fund Holders: 52
American Express Company (NYSE: AXP) is a New York-based firm that provides financial and travel-related services. It is ranked third on our list of 10 best stocks to buy according to Warren Buffett. Regulatory filings show that at the end of June 2021, Berkshire Hathaway owned more than 151 million shares in the finance firm that were worth over $25 billion, representing 8.5% of the investment portfolio.
On July 26, investment advisory RBC Capital maintained a Sector Perform rating on American Express Company (NYSE: AXP) stock and raised the price target to $185 from $174, noting that the revenue trends at the firm were improving.
Out of the hedge funds being tracked by Insider Monkey, Washington-based firm Fisher Asset Management is a leading shareholder in American Express Company (NYSE: AXP) with 15.3 million shares worth more than $2.5 billion.
In its Q2 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and American Express Company (NYSE: AXP) was one of them. Here is what the fund said:
“In financials, American Express has done an excellent job demonstrating the resiliency of its franchise in the midst of a global pandemic that drove a 60% decline in its core travel and entertainment business. The company’s spend-centric model has been helped by fiscal stimulus ensuring a flush consumer, while management continues to execute well by adding millions of new consumer and small and medium business accounts, which should benefit the franchise over the medium to long term. We remain optimistic regarding the company’s prospects as travel and entertainment activity rebounds, adding to our position in the quarter.”
2. Bank of America Corporation (NYSE: BAC)
Number of Hedge Fund Holders: 87
Bank of America Corporation (NYSE: BAC) is placed second on our list of 10 best stocks to buy according to Warren Buffett. The company markets banking and other financial services and is headquartered in North Carolina. SEC filings reveal that Berkshire Hathaway owned more than 1 billion shares in the bank at the end of the second quarter of 2021 that were worth more than $41 billion, representing 14.2% of the investment portfolio.
On June 2, investment advisory Truist initiated coverage of Bank of America Corporation (NYSE: BAC) stock with a Buy rating and a price target of $48. Gregg Gilbert, an analyst at the firm, issued the ratings update.
At the end of the second quarter of 2021, 87 hedge funds in the database of Insider Monkey held stakes worth $46 billion in Bank of America Corporation (NYSE: BAC), down from 97 in the previous quarter worth $45 billion.
1. Apple Inc. (NASDAQ: AAPL)
Number of Hedge Fund Holders: 138
Apple Inc. (NASDAQ: AAPL) is ranked first on our list of 10 best stocks to buy according to Warren Buffett. The firm operates as a technology company and is based in California. Buffett owns more than 887 million shares in the technology company through Berkshire Hathaway that are worth more than $121 billion, representing 41.46% of the investment portfolio.
On July 28, investment advisory Loop Capital reiterated a Buy rating on Apple Inc. (NASDAQ: AAPL) stock and raised the price target to $165 from $150, noting that the firm was positioned for a stronger than expected second half of the year.
At the end of the second quarter of 2021, 138 hedge funds in the database of Insider Monkey held stakes worth $145 billion in Apple Inc. (NASDAQ: AAPL), up from 127 in the preceding quarter worth $130 billion.
In its Q1 2021 investor letter, Distillate Capital, an asset management firm, highlighted a few stocks and Apple Inc. (NASDAQ: AAPL) was one of them. Here is what the fund said:
“Apple is an even more notable situation and one that highlights our free cash valuation methodology and bears further discussion given its Q3 ‘20 sale from our strategy. For an extended period, Apple was extraordinarily inexpensive on a free cash flow basis and was the largest position in our strategy, exceeding 5% of the portfolio.”
