On Wednesday, Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) CEO Warren Buffett (Trades, Portfolio)’s favorite market indicator stood at 133.9%, down from the Feb. 2 level of 139.5%. Additionally, the insurance conglomerate’s top holdings are less overvalued based on GuruFocus’ exclusive valuation method, the GF Value.
US markets rebound as investors continue monitoring geopolitical turmoil
The Dow Jones Industrial Average traded around 33,964.41 on Wednesday, up 669.46 points from Tuesday’s close of 33,294.95 and 71.81 points from Monday’s close of 33,892.60.
Stocks rebounded as investors continued monitoring increased conflicts between Russia, Ukraine and other countries. According to the Aggregated Statistics chart, a Premium feature of GuruFocus, the mean day’s change for the Standard & Poor’s 500 index stocks is 2.49% with a median of 2.42%.
Despite the surge, the U.S. market is coming off losses during the month of February. The mean one-month total return for the S&P 500 stocks is -3.60% with a median of -4.27%.
Crude oil prices climb near multi-year highs
While Brent crude oil traded around $113.58 per barrel, close to a seven-year high, the West Texas Intermediate crude oil prices hit $112.51 per barrel, its highest since May 2011.
For the S&P 500 energy stocks, the mean one-month total return is 4.97% with a median of 3.77%.
Buffett’s market indicator cools down from all-time high
Buffett once said that the ratio of total market cap to gross domestic product is “probably the best single measure of where valuations stand at any given moment." As of Wednesday, the ratio of total market cap to the sum of gross domestic product and total Federal Reserve assets stands at 133.9% for the U.S.
Based on the current market valuation level, the estimated market return per year is approximately 0.7% assuming valuations revert to the 20-year median level of 109.44%.
Several of Berkshire’s top holdings are also less overvalued based on the GF Value measure, including Apple Inc. (AAPL, Financial), Bank of America Corp. (BAC, Financial), American Express Co. (AXP, Financial) and Coca-Cola Co. (KO, Financial).
Apple
Berkshire owns 887,135,554 shares of Apple (AAPL, Financial), giving the position a 47.60% weight in its $330.95 billion 13F equity portfolio. As a reminder, the 13F filing is only required to include U.S. common stock positions, and investment firms often have other assets that are not reported on the 13F filing, including international stocks, short positions or other types of investments.
Buffett said in his 2021 shareholder letter that Apple is one of the insurance conglomerate’s “Four Giants.” The “Oracle of Omaha” said that Buffett’s ownership increased from 5.39% in 2020 to 5.51% primarily through Apple’s share repurchases.
Shares of the Cupertino, California-based consumer electronics giant traded around $166.29, showing that the stock is fairly valued based on Wednesday’s price-to-GF-Value ratio of 1.10. During the fourth quarter of 2021, shares traded between 20% and 30% above GF Value.
Other gurus with holdings in Apple include Ken Fisher (Trades, Portfolio)’s Fisher Investments and Spiros Segalas (Trades, Portfolio)’ Harbor Capital Appreciation Fund.
Bank of America
Berkshire owns 1,010,100,606 shares of Bank of America (BAC, Financial), giving the position a 13.58% weight in its 13F equity portfolio.
Shares of the Charlotte, North Carolina-based bank traded around $43.21, showing that the stock is modestly overvalued based on Wednesday’s price-to-GF-Value ratio of 1.24. During the fourth quarter of 2021, shares traded over 30% above the GF Value line.
Other gurus with holdings in Bank of America include Dodge & Cox and PRIMECAP Management (Trades, Portfolio).
American Express
Berkshire owns 151,610,700 shares of American Express (AXP, Financial), allocating 7.49% of its 13F equity portfolio to the position.
Shares of American Express traded around $181.18, showing that the stock is modestly overvalued based on Wednesday’s price-to-GF-Value ratio of 1.27. During the fourth quarter of 2021, shares traded more than 40% above the GF Value line.
Coca-Cola
Berkshire owns 400 million shares of Coca-Cola (KO, Financial), dedicating 7.16% of its 13F equity portfolio to the holding.
Shares of Coca-Cola traded around $62.77, showing that the stock is fairly valued based on Wednesday’s price-to-GF-Value ratio of 1.08.
