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Are Buffett & Berkshire's Top Holdings Actually Strong Value Stocks?

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Warren Buffett is one of the world’s most respected investors. He and Berkshire Hathaway have long favored companies that offer reasonable valuations, mixed with growth opportunities, which sounds simple enough. Here’s a look at some of Berkshire’s top holdings to see if they currently present investors solid value.

The last time Berkshire disclosed its holdings it boasted a massive $170 billion stock portfolio. The top five holdings represented roughly 68% of the aggregate fair value. The list featured Apple (AAPL - Free Report) at $40.7 billion, Wells Fargo (WFC - Free Report) at $25.2 billion, Bank of America (BAC) at $21.0 billion, Coca-Cola (KO - Free Report) at $17.4 billion, and American Express (AXP - Free Report) at $14.1 billion. The conglomerate’s other holdings included Kraft Heinz (KHC - Free Report) , Delta Air Lines (DAL - Free Report) , Southwest Airlines (LUV - Free Report) , and dozens of other stocks, which they owned much smaller amounts of.

So now that we have covered some of Berkshire’s top holdings, let’s take a look at what kind of value Buffett’s top three holdings currently present.

Apple Price - Performance/ Valuation

Apple is Berkshire’s biggest holding, a spot that is recently took over. In fact, at the end of the fourth quarter of 2017 the company owned $28.2 billion worth of Apple stock. Therefore, Berkshire bought roughly $12.5 billion worth of shares in a very short amount of time.

Shares of Apple have skyrocketed nearly 95% over the last two years, outpacing the S&P 500’s roughly 30% surge. Apple stock has also climbed over 14% since the start of the year, which helped it hit a brand new all-time high on Tuesday.

Coming into Wednesday, Apple stock was trading at 15.7X forward 12-month Zacks Consensus EPS estimates. Over the last year, Apple has traded as high as 17.2X, with a one-year median of 14.9X. Apple stock has also traded as low as 13.2X during this time period, yet investors should note that Apple stock is trading at a discount to the S&P 500’s 16.9X.

 

Over the last decade, Apple stock has traded as high as 30.8X. Therefore, it is not much of a stretch to say that Apple’s valuation is far from stretched at this time and remains attractive compared to the S&P while remaining relatively in line with its year-long median.

Wells Fargo - Price Performance/ Valuation

Shares of the embattled banking giant are up just 35% over the last five years, which is far worse the S&P 500’s 71% surge. WFC stock is up 6.6% over the last year but has sunk 8.4% since the start of the year. With that said, Wells Fargo stock currently presents solid value.

WFC is trading at 11.3X, marking the slightest of discounts compared to its industry’s 11.4X average—which includes Citigroup (C - Free Report) , JPMorgan Chase (JPM - Free Report) , and other banking powers.

Investors should note that Wells Fargo has traded as high as 15.6X over the last year, with a one-year median of 12.4X. Therefore, WFC’s current valuation appears more than fair at the moment.

Bank of America - Price Performance/ Valuation

Bank of America has seen its stock price climb nearly 124% over the last five years, which tops the S&P 500’s 71% surge while also beating its industry’s 67% charge. Narrowing the focus a bit more, BAC stock is up over 32% during the last year, nearly doubling its industry’s gains.

One might think that these gains would make BAC’s valuation look a little stretch at the moment, but that hardly seems to be the case. Bank of America stock is currently trading at 10.9X, which is just a hair above its year-long low and also represents a discount compared to its year-long median of 12.4X.

Investors will note that Bank of America stock is presenting its best value since the fall of 2016. It is also worth pointing out that AAPL, WFC, and BAC are all currently Zacks Rank #3 (Hold).

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