Warren Buffett and his hedge fund, Berkshire Hathaway, were one of the best performers in 2021 and look set to have an even better 2022 as the Federal Reserve prepares to raise interest rates. Buffett is already one of the most successful investors of the modern era, having delivered a compound annual growth rate of around 20% to investors between 1964 and 2020. To put this achievement into perspective, the returns of the benchmark S&P 500 during the period, including dividend payouts, clock in at just over 10%.
Most of the stocks in the Berkshire Hathaway portfolio in 2021 registered double-digits returns. Some of the best performing stocks in the Berkshire Hathaway portfolio in 2021 included Apple Inc. (NASDAQ:AAPL), Wells Fargo & Company (NYSE:WFC), Bank of America Corporation (NYSE:BAC), and The Bank of New York Mellon Corporation (NYSE:BK), among others discussed in detail below. The portfolio value of Berkshire Hathaway at the end of September 2021 was more than $293 billion with the top ten holdings comprising 88% of the portfolio.
Reports suggest that the Fed could raise interest rates three times in 2022 to keep pace with rising inflation. This would suggest that a broad correction in growth stocks is on the way. The rise in interest rates would also favor bank and finance stocks, increasing their earnings by hundreds of millions overnight. In the first few weeks of 2022, the market valuation of Berkshire Hathaway, the holding company that Buffett owns, has already climbed to over $700 billion, putting it on track to reach the $1 trillion milestone.
Warren Buffett's Performance in 2021: Best Stock Picks
10. U.S. Bancorp (NYSE:USB)
Number of Hedge Fund Holders: 42
Gain in 2021: 21%
U.S. Bancorp (NYSE:USB) is another long-term holding in the Buffett portfolio. According to data available with Insider Monkey, Berkshire first bought a sizeable stake in U.S. Bancorp (NYSE:USB) during the fourth quarter of 2010. The fund has added to that stake in years since, most prominently in the second and third quarter of 2018. The stake was worth more than $7.5 billion at the end of September 2021.
Hedge funds have been bullish on the U.S. Bancorp (NYSE:USB) as a new fiscal year begins. At the end of the third quarter of 2021, 42 hedge funds in the database of Insider Monkey held stakes worth $8.39 billion in U.S. Bancorp (NYSE:USB), up from 41 the preceding quarter worth $8.30 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.”
9. Moody's Corporation (NYSE:MCO)
Number of Hedge Fund Holders: 58
Gain in 2021: 33%
Moody's Corporation (NYSE:MCO) is an integrated risk assessment firm. It has been one of the favorite stocks among hedge funds for many years. At the end of the third quarter of 2021, 58 hedge funds in the database of Insider Monkey held stakes worth $15 billion in Moody's Corporation (NYSE:MCO), up from 44 in the previous quarter worth $16 billion.
Moody's Corporation (NYSE:MCO) comprises close to 3% of the Berkshire Hathaway portfolio. The company has featured in the Buffett portfolio since the fourth quarter of 2010. The last activity of Berkshire around the stake, worth over $8.7 billion at the end of the third quarter of 2021, was registered in the fourth quarter of 2013.
Just like Apple Inc. (NASDAQ:AAPL), Wells Fargo & Company (NYSE:WFC), Bank of America Corporation (NYSE:BAC), and The Bank of New York Mellon Corporation (NYSE:BK), Moody's Corporation (NYSE:MCO) is one of the stocks attracting the attention of elite investors.
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.”
8. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 120
Gain in 2021: 37%
Buffett, who generally likes to invest in value stocks with long-term growth potential, made headlines when he bought a small stake in Apple Inc. (NASDAQ:AAPL) through Berkshire Hathaway in the first quarter of 2016. The fund then added heavily to the stake in the coming two years, adding as much as 276% and 125% in late 2016 and early 2017. Buffett has largely held onto that stake and Apple Inc. (NASDAQ:AAPL) is now the largest Berkshire holding worth more than $125 billion.
Apple Inc. (NASDAQ:AAPL), the largest tech firm in the world, is also one of the most popular stocks among hedge funds. At the end of the third quarter of 2021, 120 hedge funds in the database of Insider Monkey held stakes worth $146 billion in Apple Inc. (NASDAQ:AAPL).
Apple, like Wells Fargo & Company (NYSE:WFC), Bank of America Corporation (NYSE:BAC), and The Bank of New York Mellon Corporation (NYSE:BK), remains one of the most famous stocks in Buffett's portfolio.
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.”
7. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 57
Gain in 2021: 38%
American Express Company (NYSE:AXP) has attracted the attention of hedge fund titans as inflation rises and finance stocks make a strong comeback at the market. Among 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 15.6 million shares worth more than $2.6 billion.
Buffett invested in American Express Company (NYSE:AXP) in late 2010, just around the time that finance stocks had been battered by the 2009 crisis and were trading at a discounted price. The legendary investor held onto that stake for a couple years before selling all of it and then rebuying in late 2013. American Express Company (NYSE:AXP) is now the third largest holding in the Berkshire portfolio worth over $25 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.”
6. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 51
Gain in 2021: 38%
Energy stocks like Chevron Corporation (NYSE:CVX) have seen a lot of hedge fund investment in the past few months as energy prices take off. At the end of the third quarter of 2021, 51 hedge funds in the database of Insider Monkey held stakes worth $4.4 billion in Chevron Corporation (NYSE:CVX), up from 50 in the preceding quarter worth $4.2 billion.
Buffett, well-known for his long-term bets, only invested in Chevron Corporation (NYSE:CVX) in the third quarter of 2020, buying a stake worth 44 million shares in the energy giant at an average price of $84.1 per share. The fund then reduced that stake by almost half in early 2021 before adding to it in the third quarter of 2021. The holding is presently worth close to $3 billion.
In addition to Apple Inc. (NASDAQ:AAPL), Wells Fargo & Company (NYSE:WFC), Bank of America Corporation (NYSE:BAC), and The Bank of New York Mellon Corporation (NYSE:BK), Chevron Corporation (NYSE:CVX) is one of the stocks that hedge funds are buying.
In its Q1 2021 investor letter, ClearBridge Investments highlighted a few stocks and Chevron Corporation (NYSE:CVX) was one of them. Here is what the fund said:
“While reducing in health care and consumer staples, we increased our exposure to high-quality names in economically sensitive areas of the market. We added to low-cost, high-quality energy names, (including) Chevron. We are positive on the company’s strong balance sheets, competitive positions and exposure to an economic recovery.”
5. The Bank of New York Mellon Corporation (NYSE:BK)
Number of Hedge Fund Holders: 46 Gain in 2021: 39%
The Bank of New York Mellon Corporation (NYSE:BK) is one of many finance stocks in the Berkshire Hathaway portfolio. Like other big banks in his portfolio, Buffett invested in The Bank of New York Mellon Corporation (NYSE:BK) in late 2010, before selling off that stake in 2012. He then re-invested in the bank in the third quarter of 2013, adding to it significantly in 2017. The holding is now worth $3.7 billion and the fund last registered new activity around the stock more than a year ago.
The Bank of New York Mellon Corporation (NYSE:BK) is also high on the hedge fund radar as inflation rises. At the end of the third quarter of 2021, 46 hedge funds in the database of Insider Monkey held stakes worth $4.6 billion in The Bank of New York Mellon Corporation (NYSE:BK).
4. The Kroger Co. (NYSE:KR)
Number of Hedge Fund Holders: 39
Gain in 2021: 40%
The Kroger Co. (NYSE:KR) is a food and drug retailer. The stock is a relatively new addition to the Berkshire Hathaway portfolio, considering the long-term investment strategy of Buffett. The fund first bought a stake in The Kroger Co. (NYSE:KR) in late 2019 worth close to 19 million shares at an average price of $26.5 per share. Since then, the fund has handsomely added to that position. At the end of September 2021, this holding represented 0.85% of the Berkshire portfolio and was worth close to $2.5 billion.
There is lots of hedge fund interest in The Kroger Co. (NYSE:KR) as well. At the end of the third quarter of 2021, 39 hedge funds in the database of Insider Monkey held stakes worth $3.9 billion in The Kroger Co. (NYSE:KR), the same as in the preceding quarter worth $3.5 billion.
3. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 72
Gain in 2021: 48%
Bank of America Corporation (NYSE:BAC) is perhaps one of the best investments of Warren Buffett. The legendary investor first bought a stake in the bank in the third quarter of 2017 and has since added to it significantly.
The holding has grown in value to around $42 billion and represents over 14% of the Berkshire Portfolio. It is the second largest holding in the portfolio behind tech giant Apple and ahead of American Express.
Bank of America Corporation (NYSE:BAC) is one of the largest banks in the US and naturally attracts lots of hedge fund interest. At the end of the third quarter of 2021, 72 hedge funds in the database of Insider Monkey held stakes worth $46.4 billion in Bank of America Corporation (NYSE:BAC), compared to 87 in the previous quarter worth $46.5 billion.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Bank of America Corporation (NYSE:BAC) was one of them. Here is what the fund said:
“Higher long-term interest rates supported financials such as Bank of America, which has shown both defensive and offensive characteristics in the past year. We believe it continues to be the least risky large bank from a credit standpoint, with conservative underwriting and controlled risk taking, a leading consumer deposit franchise, scale and technology. It is also a leader in its commitments to sustainability, or as it terms it, responsible growth. Disclosure and reporting at all levels form a large part of this commitment, including gender diversity and equality, environmental commitments and support of communities in which it operates. In the first quarter Bank of America announced it is setting a goal of net-zero greenhouse gas (GHG) emissions in its supply chain and operations, and notably also in its financing activities, before 2050.”
2. Marsh & McLennan Companies, Inc. (NYSE:MMC)
Number of Hedge Fund Holders: 42
Gain in 2021: 53%
Marsh & McLennan Companies, Inc. (NYSE:MMC) operates as a professional services firm. It is the leader in the industry with a market cap of over $81 billion. At the end of the third quarter of 2021, 42 hedge funds in the database of Insider Monkey held stakes worth $1.9 billion in Marsh & McLennan Companies, Inc. (NYSE:MMC), up from 41 in the preceding quarter worth $2.5 billion.
1. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Holders: 88
Gain in 2021: 62%
Wells Fargo & Company (NYSE:WFC) was once one of the largest holdings in the Berkshire Hathaway portfolio. Buffett has, over the past few months, steadily reduced the holding, selling off as much as 90% of it in 2020.
the end of September, Berkshire Hathaway held less than a million shares in Wells Fargo & Company (NYSE:WFC). At the peak of his bull calls on the bank, Buffett had held close to $479 million shares of Wells Fargo & Company (NYSE:WFC).
Hedge funds are largely bullish on Wells Fargo & Company (NYSE:WFC) as a new year begins. At the end of the third quarter of 2021, 88 hedge funds in the database of Insider Monkey held stakes worth $6 billion in Wells Fargo & Company (NYSE:WFC).
In its Q4 2020 investor letter, Davis Funds, an asset management firm, highlighted a few stocks and Wells Fargo & Company (NYSE:WFC) was one of them. Here is what the fund said:
“Detractors to performance relative to the index include financial services holdings such as Wells Fargo. While banks in general have suffered due to the recession and experienced credit losses, Wells Fargo also suffered from operational missteps. It is our expectation, however, that our bank holdings in general will benefit from stronger economic growth as the pandemic recedes; and we believe Wells Fargo in particular, will, over time, lower their costs and successfully grow their businesses.”
