The Top 10 Stocks Helping Warren Buffett Beat the Market
- These Warren Buffett stocks are helping the Oracle of Omaha be a winner even in a down market.
- Occidental Petroleum (OXY): It was the best-performing stock in the S&P 500 in the first quarter.
- Chevron (CVX): Buffett added another 120 million shares of CVX stock to his portfolio.
- Bristol-Myers Squibb (BMY): Buffett has a comparatively “small” position of 5.2 million shares.
- Kraft Heinz (KHC): It’s been rough at times for KHC stock, but its finally a winner.
- Kroger (KR): The grocery store chain keeps the profits rolling in.
- Activision Blizzard (ATVI): Buffett is betting that the Microsoft (MSFT) acquisition will close as scheduled.
- AbbVie (ABBV): Humira brought in more than $20 billion in sales last year.
- Coca-Cola (KO): Buffett loves Coca-Cola, and he loves KO stock.
- Globe Life (GL): Formerly known as Torchmark, GL stock has been part of Buffett’s portfolio since 2006.
- American Express (AMX): Buffett owns 20% of American Express.
It’s been a rough time to invest so far in 2022. The Dow Jones Industrial Average is down nearly 10% on a year-to-date (YTD) basis. But if you’re holding some classic Warren Buffett stocks, your portfolio may not be in bad shape.
Buffett, the legendary Oracle of Omaha and head of the massive conglomerate Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B), is one of the best buy-and-hold investors that we’ve ever seen. Rather than diving into flashy and trendy picks — like meme stocks and cryptocurrencies — Buffett has more conventional approach to value investing.
He looks for well-run companies that are priced unusually low based on what he calculates as their intrinsic worth. He looks at mature companies that have been publicly traded for at least 10 years. And he has said he only invests in businesses that he fully understands.
Through Berkshire, Buffett currently holds nearly 50 stocks and exchange traded funds with a total value of $357.76 billion (as well as keeping more than $106 billion in cash, as of March 31). And while the stock market is down markedly so far this year, BRK.B stock is up more than 6%.
With stock prices down substantially and Berkshire hoarding cash, Buffett will likely be adding to some of these positions throughout the year. As of now, these Warren Buffett stocks have been among his best since the beginning of the year.
| OXY | Occidental Petroleum | $63.13 |
| CVX | Chevron | $167.12 |
| BMY | Bristol-Myers Squibb | $77.14 |
| KHC | Kraft Heinz | $44.00 |
| KR | Kroger | $55.52 |
| ATVI | Activision Blizzard | $78.05 |
| ABBV | AbbVie | $154.63 |
| KO | Coca-Cola | $65.12 |
| GL | Globe Life | $99.00 |
| AMX | American Express | $19.20 |
Occidental Petroleum (OXY)
Year-to-date (YTD) performance: +124%
Buffett shares: 142.26 million
Value: $9.23 billion
Percentage of portfolio: 2.6%
It’s surely no surprise that energy companies head the list of Warren Buffett stocks. With oil prices topping $100 per barrel in the wake of Russia’s invasion of Ukraine, Occidental Petroleum (NYSE:OXY) stock is up more than 120% so far this year. It was the best-performing stock in the S&P 500 for the first quarter.
Occidental is expected to report earnings for the first quarter after the closing bell May 10. Analysts were expecting earnings per share (EPS) of $1.97, which would be a massive improvement from a year ago when the company posted an EPS loss of 15 cents.
Buffett increased his stake in OXY stock this month by buying an additional 5.9 million shares, giving him a 15.9% stake in the energy company.
Susquehanna analyst Biju Perincheril raised his company’s price target on OXY stock from $58 to $71 while maintaining a positive rating.
Chevron (CVX)
YTD performance: +45.4%
Buffett shares: 174.45 million
Value: $29.77 billion
Percentage of portfolio: 8.3%
Buffett knows a good thing when he sees it, because fellow oil company Chevron (NYSE:CVX) was another outstanding performer so far this year. And Buffett also increased his stake in CVX stock during the first quarter, when he bought an additional 120 million shares.
Chevron announced in late April that its profits quadrupled during the first quarter of the year from higher oil and gas prices. Revenue jumped to $54.37 billion, versus $32.03 billion in the same quarter a year ago.
The company said that it earned $6.3 billion in earnings in the quarter, up from $1.37 billion in the first quarter of 2021.
Analysts have a consensus “buy” rating on CVX stock and give it an average price target of $171, which is close to its current price. This is a strong entry on the list of Warren Buffett stocks.
Bristol-Myers Squibb (BMY)
YTD performance: +22.9%
Buffett shares: 5.2 million
Value: $398.8 million
Percentage of portfolio: 0.1%
New York-based Bristol-Myers Squibb (NYSE:BMY) makes up a small portion of Buffett’s portfolio, with only 5.2 million shares. But it was a solid winner so far this year, which helped Buffett beat the market.
Bristol-Myers Squibb is best known for its rheumatoid arthritis medication Orencia, a hepatitis B medication called Baraclude, its HIV antiviral drug Reyataz and cancer drug Opdivo.
Earnings for the first quarter handily topped analysts expectations. Revenue was $11.65 billion, which beat analysts’ estimates by 3.48%. EPS was $1.96 per share, beating analysts’ estimates of $1.92 per share.
CEO Giovanni Caforio had this to say about the company’s solid progress:
Thanks to our team’s hard work and dedication, we achieved regulatory approvals of Opdualag and Camzyos, our new first-in-class medicines for patients living with metastatic melanoma and symptomatic obstructive hypertrophic cardiomyopathy, respectively
These milestone achievements, combined with our promising product pipeline and strong financial flexibility, provide a solid foundation that will enable us to deliver sustained growth and long-term benefits for our patients.
Truist (NYSE:TFC) analyst Robyn Karnauskas raised her company’s price target on BMY stock from $76 to $83, and said there is potential upside from product expansion opportunities in the company’s portfolio.
Kraft Heinz (KHC)
YTD performance: +21.4%
Buffett shares: 325.63 million
Value: $14.19 billion
Percentage of portfolio: 4%
Buffett is a major shareholder in Kraft Heinz (NYSE:KHC), holding 26.6% of the company. But it hasn’t always been a smooth ride.
In 2019, Buffett famously acknowledged that his investment in Kraft Heinz was an error. Berkshire had bought Heinz in 2013 and then helped finance the company’s merger with Kraft two years later.
“We try to buy good businesses at a decent price, and we made a mistake on the Kraft part of Kraft Heinz,” Buffett said in 2019. “We paid too much.”
But happily for Buffett and Berkshire shareholders, KHC stock has been a solid winner this year. With brands such as Kool-Aid, Smart Ones, Oscar Meyer and Velveeta, Kraft Heinz products are a staple in millions of kitchen pantries.
Earnings for the first quarter included revenue of $6.04 billion, beating analysts’ estimates for $5.79 billion.
Kroger (KR)
YTD performance: +19%
Buffett shares: 61.41 million
Value: $3.3 billion
Percentage of portfolio: 0.9%
Cincinnati-based Kroger (NYSE:KR) is one of the biggest grocery companies in the U.S. It has 2,750 grocery stores, more than 2,250 pharmacies and 1,585 fueling stations. And it’s also in the jewelry business.
In the fourth quarter, KR reported revenue of $33.05 billion, beating analysts’ expectations for $32.62 billion. EPS was 91 cents, which was better than the 74 cents that analysts predicted.
“As we look to 2022, we expect the momentum in our business to continue and have confidence in our ability to navigate a rapidly changing operating environment,” Chairman and CEO Rodney McMullen said.
Bank of America (NYSE:BAC) analyst Robert Ohmes upgraded KR stock from “neutral” to “buy” and increased his price target from $61 to $75.
Activision Blizzard (ATVI)
YTD performance: +17%
Buffett shares: 74.17 million
Value: $5.7 billion
Percentage of portfolio: 1.6%
I have a hard time imagining Buffett sitting around playing video games, but he’s a fan of Activision Blizzard (NASDAQ:ATVI) stock. But like all things with Buffett, it’s a very calculated play.
Buffett said recently that Berkshire has been increasing its stake in ATVI stock in a merger arbitrage bet that Microsoft (NASDAQ:MSFT) will successfully complete its acquisition of the video game company. Microsoft announced in January it was buying Activision Blizzard in a $68.7 billion deal that would make Microsoft the largest game company in the U.S.
The deal is expected to close by June 2023. Microsoft would pay $95 per share for ATVI stock. Buffett currently owns about 9.5% of Activision Blizzard shares, which are trading about $20 under the bid price.
“If the deal goes through, we make some money, and if the deal doesn’t go through, who knows what happens,” Buffett said at Berkshire’s annual meeting on April 30.
AbbVie (ABBV)
YTD performance: +12.8%
Buffett shares: 3.03 million
Value: $463 million
Percentage of portfolio: 0.1%
Chicago-based pharmaceutical company AbbVie (NYSE:ABBV) is best known for Humira, its drug commonly used to treat autoimmune diseases and inflammatory bowel diseases. In 2021, Humira was responsible for generating more than $20 billion in sales for AbbVie.
The company reported first quarter revenue of $13.54 billion, which was less than analysts’ expectations of $13.66 billion. Earnings per share of $3.16 beat Wall Street’s expectations for $3.14 EPS.
AbbVie doesn’t make up a large percentage of Buffett’s overall portfolio, but its performance was much better than the overall markets, helping give the Oracle a much-needed boost.
Coca-Cola (KO)
YTD performance: +9.3%
Buffett shares: 400 million
Value: $25.89 billion
Percentage of portfolio: 7.2%
Do you remember when we talked about how a true mark of Warren Buffett stocks is that Buffett completely understands the company? In the case of Coca-Cola (NYSE:KO), you could say Buffett is both an owner and a big, big fan.
How big? He drinks five cans of the stuff every day.
But you really can’t blame him. KO stock is Buffett’s oldest — and perhaps best — investment. Buffett began snapping up KO stock back in 1988. He bought 400 million shares for $1.3 billion and hasn’t touched it since. Now his position is valued at nearly $26 billion.
Earnings in the first quarter included revenue of $10.5 billion and earnings of 64 cents per share. Analysts expected revenue of $9.83 billion and EPS of 58 cents.
Globe Life (GL)
YTD performance: +6.7%
Buffett shares: 6.35 million
Value: $635 million
Percentage of portfolio: 0.2%
Berkshire Hathaway and Buffett are heavily involved in the insurance business, and not all of those investments have been winners so far in 2022. But Globe Life (NYSE:GL) is an exception to the rule, posting a gain of more than 6% so far this year.
Globe used to be known as Torchmark, so you may know it by that name. It handles life and supplemental health insurance. Buffett’s stake accounts for about 6% of the company.
Globe has been a solid winner for the Oracle, with the company providing a total annual return of 13% over the last 10 years. It’s not amazingly rapid growth, but it’s steady. And that’s exactly what Buffett is looking for.
Earnings in the first quarter included revenue of $1.31 billion, which met analysts’ estimates. Earnings per share was $1.70, versus the $1.72 EPS that analysts expected.
American Express (AXP)
YTD performance: +2.1%
Buffett shares: 151.6 million
Value: $25.3 billion
Percentage of portfolio: 7.1%
Bank stocks and credit card stocks are a big part of Warren Buffett’s portfolio. But most of them lost money so far this year. American Express (NYSE:AXP) was an exception to the rule.
American Express is different from other credit card companies like Mastercard (NYSE:MA) and Visa (NYSE:V) because it makes a whopping 82% of its money from discount fees, card fees, travel-related commissions, and other revenue. Interest payments only account for 18% of its revenue.
Buffett has owned AXP stock since 1993, and it makes up a big part of the Berkshire overall portfolio. Berkshire also owns about 20% of AXP stock, so Buffett is a major shareholder.
Earnings for the first quarter topped analysts’ expectations. AXP posted revenue of $11.7 billion and earnings of $2.73 per share. Analysts had expected revenue of $11.62 billion and earnings of $2.40 per share.
On the date of publication, Patrick Sanders did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
