Berkshire Hathaway Inc.’s (BRK.B - Free Report) CEO Warren Buffett is inarguably the greatest role model for an investor. After getting into the investment game pretty early, Buffett has successfully transformed his initial $10,000 of investments into almost $81 billion in around six decades.
Buffett’s primary investment style is quite simple as it entails searching for companies with long-term competitive advantages, which can be purchased and held for extended period of time. A solid business model and the ability to record significant growth are the basic criteria for any company to come under the ambit of Buffett’s investment style. In other words, these companies have good earnings potential and are not concerned about the market recognizing its worth. These also generate plenty of cash and provide dividends, which are indicators of strong and sustainable business.
Such companies included the likes of railroad operator — BNSF, insurer — Geico, and fast-casual dining chain — Dairy Queen, which have really bolstered Berkshire’s bottom line for quite some time. In fact, some of Berkshire’s top holdings have seen their aggregate market value soar by billions so far this year. But, not all securities that Berkshire hold has done well this year. Let us, thus, have a look at the winners and losers from Oracle of Omaha’s favored companies.
Apple Inc. (AAPL - Free Report) is Berkshire’s largest holding. Apple has more than 5% stake in Berkshire and has helped the company realize a return of more than 30% or $12.44 billion since the beginning of this year.
Consistent dividend payment, steady cash flows and constant product innovation make the iPhone maker a favourite with Buffett. Even though the iPhone has witnessed a lacklustre performance this year, it still holds majority of share among cell phone manufacturers in the North American market. And if we add Apple’s growing streaming services, then it can be safely concluded that the stock will surely do even better in the near future.
Apple, currently, has a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its current year earnings improved 1.5% over the past 60 days. The company has already outperformed the broader Computer - Mini computers industry so far this year (+41.7% vs +40.1%).
Thanks to increase in consumer spending levels this year, American Express Company (AXP - Free Report) has been almost unstoppable this year. In the most recent quarter, the company saw spending increase by 7% in the U.S. market and 5% globally. Shares of the provider of credit payment card products, and travel-related services to consumers and businesses worldwide has jumped 23.8% on a year-to-date basis, more than the broader Financial - Miscellaneous Services industry’s rally of 20.7%.
What’s more, American Express, which is one of the major holdings of Berkshire, has helped the latter gain more than $3.5 billion in market share so far this year. American Express, currently, has a Zacks Rank 3. The Zacks Consensus Estimate for its current year earnings increased 0.2% over the past 60 days.
Buffett has been holding a huge stake in beverage and snack giant, The Coca-Cola Company (KO - Free Report) , for more than three decades. Coca-Cola has helped Berkshire realize gains of nearly $3.5 billion so far this year. The company has performed really well in recent times. In July, the company came out with a stunning second-quarter performance, with organic sales growth climbing 6% and adjusted operating income growth improving 14%, excluding currency fluctuations. Needless to say, that strong consumer demand for its products and improved product mix has helped Coca-Cola perform well this year.
Coca-Cola, currently, carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its current year earnings increased 0.5% over the past 60 days. The company has already outperformed the broader Beverages - Soft drinks industry so far this year (+15.7% vs +14.1%).
A handful of stocks have affected the Oracle of Omaha several billions of dollars so far this year. Notable among them are The Kraft Heinz Company (KHC - Free Report) and Teva Pharmaceutical Industries Limited (TEVA - Free Report) . Kraft Heinz, in particular, has been a nightmare for Berkshire. While the stock has tanked 32% so far this year, the broader Food - Miscellaneous industry has rallied 16.1%.
Reduction in inventory levels and rising costs marred Kraft Heinz’s performance this year. Moreover, adverse currency impacts have been weighing on the company’s performance. Kraft Heinz, currently, has a Zacks Rank #4 (Sell).
Teva Pharmaceutical has also been a terrible investment for Berkshire. Teva has been bearing the brunt of generic-drug price weakness in recent times, leading to a slash in profit and sales guidance. After all, its top-selling brand-name therapy (Copaxone) has been grappling with intense competition in recent times. The Zacks Rank 3 stock has nosedived 46.1% so far this year, while the broader Medical - Generic Drugs industry has declined 3.2%.
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