Warren Buffett (Trades, Portfolio) and David Tepper (Trades, Portfolio), two investing titans that have outperformed the markets since inception, think alike on three companies: United Continental Holdings Inc. (UAL, Financial), Bank of America Corp. (BAC, Financial) and Wells Fargo & Co. (WFC, Financial).
Buffett and Tepper rank among the top six investing gurus
According to the Scoreboard of Gurus, the Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) CEO returned 18.5% from 1980 to 2017, the sixth-best return among gurus. Tepper ranks second with a 26.7% return from 1993 to 2014.
United Airlines
Buffett’s 27,705,963 shares of United represent 1.02% of the portfolio, while Tepper’s 525,289 shares add 0.38% to the combined weight.
United CEO Oscar Munoz said on Tuesday that second-quarter operating results reflected strong evidence that “strategic growth plans are working.”
The Chicago-based airline reported adjusted earnings of $3.23 per share, outperforming analyst estimates by approximately 16 cents. Even though costs per available seat mile increased 7.1% year over year primarily due to higher fuel costs, passenger revenue per available seat mile and total revenue per available seat mile increased 3% year over year and 2.8% year over year.
Munoz said the strong results suggest the company’s strategic plans offer continued momentum for the balance of the year. Consolidated passenger revenues per available seat mile increased 3% year over year, driven by strong performance across domestic and international markets. Passenger revenues per available seat miles increased 7.9% year over year in the Atlantic and 3.4% year over year in the Pacific due to strong premium cabin growth and recovery in China.
Munoz and President Scott Kirby also underscored the importance of customer satisfaction and top-tier operational performance during the earnings call. Kirby mentioned that United had a 70% on-time departure rate, outperforming top competitors including Delta Air Lines Inc. (DAL, Financial) and American Airlines Group Inc. (AAL, Financial). Munoz also observed good customer satisfaction from the world-class lounges that were opened in San Francisco, Newark, New Jersey and Houston.
United’s share price rose approximately 8% at market open on Wednesday as the company increased its earnings guidance: the company expects full-year earnings between $7.25 and $8.75 per share, up 25 cents from the prior quarter’s guidance.
Bank of America
Buffett and Tepper have a combined weighting of 14.20% in Charlotte, North Carolina-based Bank of America. Tepper owns 10,965,513 shares, while Buffett owns 679 million shares.
Chief Financial Officer Paul Donofrio said on Monday that Bank of America had positive operating leverage for 14 consecutive quarters, which contributed to a 33% year-over-year increase in net income. Second-quarter net interest incomes of $11.7 million reflected a 6% year-over-year increase, primarily driven by higher interest rates and loan growth.
Wells Fargo
Buffett and Tepper have a combined weighting of 14.26% in San Francisco-based Wells Fargo. Tepper owns 159,360 shares, while Buffett owns 456,513,244 shares.
Wells Fargo reported $1.08 in adjusted earnings per share, underperforming the consensus estimate by 4 cents. The bank’s earnings reflect a 10-cent charge in discrete tax expenses.
See also
GuruFocus’ “Most Broadly Held” portfolio returned 189.40% since its Dec. 30, 2005 inception, outperforming the Standard & Poor’s 500 index benchmark by approximately 67.17%. Apple (AAPL), the second top performer, gained 231.16% since the model portfolio invested in 84 shares for $57.86 on Jan. 1, 2012. According to the website, the “Aggregated Portfolio of Gurus” investing strategy has outperformed the benchmark in nine out of the past 10 years.
Disclosure: No positions.
