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Rupert Hargreaves
Rupert Hargreaves
Articles (687)  | Author's Website |

Buffett's Most-Loved Stocks Are on Sale: Time to Load Up

Some of Berkshire Hathaway's largest positions have fallen to 52-week lowx

December 11, 2018 | About:

If you have ever wanted to copy Warren Buffett (Trades, Portfolio) in building your own portfolio with a similar makeup to that of Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B), now seems to be the best time in the past 12 months to do so.

Indeed, over the past four weeks, some of Berkshire Hathaway's and largest investments have declined in value to levels not seen for over 12 months. This includes holdings that Buffett has been active in buying in the past few quarters.

Time to buy?

A top-five position in the Berkshire Hathaway portfolio is Kraft Heinz (NASDAQ:KHC). This position dates back to 2015 when H.J. Heinz Co, backed by Buffett’s Berkshire Hathaway Inc. and Brazil’s private equity firm 3G Capital, acquired Kraft Foods Group, to create one of the world's largest food and beverage companies. With the 26.7% stake in the business, Berkshire Hathaway is the largest investor in the company. Warren Buffett has held a position on the company's board but stepped down in April to reduce travel commitments.

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Unfortunately, shares in this company have -- and there is no other way to put it -- tanked over the past 24 months. The stock is down 38.4% since the beginning of December 2017, underperforming the S&P 500 by around 37.5% over the same period excluding dividends. Over the past two years, the stock is down 44.2%, underperforming the S&P 500 by around 61%. Once again these figures are excluding dividend income.

There are several reasons behind Kraft's staggering underperformance since its merger in 2015. The primary reason why investors have deserted the company is that it is widely believed Kraft is being left behind by brands that have spent more money developing healthier alternatives. Aggressive budget cuts following the merger in 2015, investors believe, have put the business in a position that could be difficult to recover from. After recent declines, the stock is currently trading at the lowest level on record.

Underperformance

Kraft isn't the only Buffett stock that has been buffeted over the past 12 months. Wells Fargo (NYSE:WFC), the third-largest position in Berkshire Hathaway's public equity portfolio, accounting for 10.5% of assets under management, has underperformed the S&P 500 by around 18% over the past 12 months. It is unlikely that the Oracle of Omaha will be concerned by this short-term performance, but for investors looking to copy his trading patterns, now could be a good time to buy. Since the end of December 2017, the stock is off by 19.1%, excluding dividends.

Next up is Bank of America (BAC). At the end of the third quarter of 2018, just under 12% of Berkshire Hathaway's $221 billion equity portfolio was invested in this bank. Buffett upped his position by 29% in the quarter to 877 million shares. If the Oracle of Omaha was happy to pay between $27 and $31.50 for Bank of America in the third quarter, it is reasonable to suggest that he likes it, even more, today as the stock has fallen by nearly 20% over the past three months. Over the past 12 months, shares in Bank of America have declined by around 15%, excluding dividends.

Deep discount to Berkshire Hathaway's investment

Then there is Apple (NASDAQ:AAPL), which has become Berkshire Hathaway's most substantial public equity investment over the past 12 months. Today, it accounts for around 26% of the overall Berkshire Hathaway equity portfolio. As of Tuesday, shares in this consumer goods giant are changing hands for approximately $170 a share. That is slightly above the 52-week low of $150 share. According to Berkshire Hathaway's 13F filings, the firm's average buy price for Apple since it started acquiring shares at the beginning of 2016 is $225.74.

Disclosure: The author owns shares in Berkshire Hathaway.

About the author:

Rupert Hargreaves
Rupert is a committed value investor and regularly writes and invests following the principles set out by Benjamin Graham. He is the editor and co-owner of Hidden Value Stocks, a quarterly investment newsletter aimed at institutional investors.

Rupert holds qualifications from the Chartered Institute for Securities & Investment and the CFA Society of the UK. He covers everything value investing for ValueWalk and other sites on a freelance basis.

Visit Rupert Hargreaves's Website


Rating: 5.0/5 (7 votes)

Voters:

Comments

Watchdog
Watchdog premium member - 1 month ago

I think there is a mistake with regard to the average price Berkshire paid for Apple Shares. They started acquiring in 2016 so the average price paid must be lower than stated in the article. However, as far as I know, one of Berkshire's last buys of Apple stock was at a price above the current price.

bsamsel
Bsamsel premium member - 1 month ago

yep yep, i came down just to post this same thing. definitely incorrect info

Max7777
Max7777 premium member - 1 month ago

Good concept overall to try to load up on Buffett's favorite stocks now that they are priced much lower given Mr. Market's tantrums. But Buffett's average purchase price for Apple is $145.89/share as per GuruFocus and not $225.. and that makes a HUGE difference, today at 170 we are in fact still way higher than Buffett's average entry price. Still, I give you 5 stars since half of Buffett's Apple cost was at or about today's price of 170. So obviously the master feels this is still a great long-term entry price.

vgm
Vgm - 4 weeks ago    Report SPAM

You could add Goldman Sachs to the list. It's not one of Berkshire's largest positions, but Buffett increased his GS holding by 38% in Q3 between $220 and $240. On Friday it traded at $160.

Like Wells, Goldman has been tainted by a recent scandal. Both trade at levels they were at 5 years ago. Both are arguably likely to bounce back over time.

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