When it comes to celebrity investors whose actions others watch like hawks, Warren Buffett is in a league of his own. Although one of the richest men in the world, the 94-year-old “Oracle of Omaha” is still the chief executive officer of Berkshire Hathaway. New York Stock Exchange: BRK.A. The company has many large businesses in the insurance, railroad and utility industries. He also maintains a large investment portfolio.
As of the third quarter of 2024, the portfolio was valued at approximately $266 billion. It is generally accepted that these assets are stocks chosen by Buffett himself. Below, I’ll detail the two best-performing and two worst-performing stocks from Berkshire Hathaway’s fourth-quarter 2019 13F filing. For the sake of simplicity, I will consider investments that represented 1% or more of the total portfolio at that time. All profitability figures are as of the close of trading on January 6.
The Bad: The disappointment of Southwest Airlines and Charter Communications
I’ll start by getting Buffett’s two worst picks out of the way. Over the past five years, Southwest Airlines New York Stock Exchange: LOVE and charter communications NASDAQ: CTR took last and penultimate places. They provided total returns of -30% and -34% respectively. The positive thing is that the negative effectiveness of these names is outstanding. No other holding that represented 1% or more of the portfolio at that time had negative total returns over the past five years. So what made this stock such a bad investment?
Southwest Airlines today
Southwest Airlines
As of 10:59 am ET
- 52 week range
- $23.58
▼
$36.12
- Dividend yield
- 2.18%
- Target price
- $32.55
Starting with Southwest, one obvious reason for its dismal performance is the COVID-19 pandemic. It doesn’t help that this analysis began shortly before the pandemic reached its full extent. Southwest is by no means unique in its poor performance in its industry. During that period, no U.S. passenger airline stock came close to returning to the broader market. Among nine mid-cap or larger U.S. airline stocks, the average return was -11% over this period. Overall, it’s hard to blame Buffett for this choice, given that it was the result of an event that no one expected. It’s probably a good thing that Buffett exited the position by the second quarter of 2020. The stock has barely recovered since then.
Charter communications today
Charter communications
As of 10:57 am ET
- 52 week range
- $236.08
▼
$415.27
- P/E ratio
- 10.94
- Target price
- $384.42
It’s easier to be critical of the other worst company, Charter Communications.
Berkshire continues to own the shares, although their distribution has been significantly reduced.
Streaming services have overtaken cable and traditional media stocks over the past five years as more people use them.
Buffett’s contrarian bet on cable instead of streaming through Charter Communications didn’t work out.
The Good: Apple and American Express Take the Pie
The best-performing stock in Berkshire Hathaway’s portfolio in the fourth quarter of 2019 was tech giant Apple. NASDAQ:AAPL and the American Express credit card company New York Stock Exchange: AXP. Apple’s five-year total return of 237% beats the S&P 500 by about 140% over that time. Fortunately for Berkshire, Apple has consistently remained its largest portfolio holding. Back in the second quarter of 2023, it reached more than 50% of total assets.
Apple today
As of 10:52 am ET
- 52 week range
- $164.07
▼
$260.10
- Dividend yield
- 0.41%
- P/E ratio
- 40.17
- Target price
- $237.64
Since fiscal 2019, Apple has grown its revenue by 50% and increased its adjusted earnings per share (EPS) by 127%. Adding to the company’s incredible growth in value is an increase in its forward price-to-earnings (P/E) ratio of approximately 45% since the start of 2020.
It’s reasonable to note that while Buffett didn’t have any investments in pure streaming companies, he did so implicitly. This is thanks to the Apple TV+ streaming service, which launched in November 2019. As of its most recent 13F filing, Berkshire maintains a 26% stake in Apple. Interestingly, it is currently the only “Magnificent Seven” stock with a 1% or greater shareholding. Amazon NASDAQ: AMZN is the only other Mag Seven name in the portfolio with a 0.7% stake.
Goldman Sachs Group New York Stock Exchange: GS was technically the second best performing portfolio for the fourth quarter of 2019 with a total return of 182%. Unfortunately, Berkshire liquidated the position in the second quarter of 2020.
American Express today
American Express
As of 10:58 am ET
- 52 week range
- $177.81
▼
$307.82
- Dividend yield
- 0.93%
- P/E ratio
- 22.16
- Target price
- $272.64
The next biggest winner still in the portfolio is American Express. Its five-year total return is 160%. It is currently Berkshire’s second-largest holding with a 15% stake.
Using consensus earnings estimates for the fourth quarter of 2024, the company will increase adjusted earnings per share by 66% from fiscal 2019. Total US credit card debt is now about 26% higher than at the end of 2019, which significant tailwind for the company over the period. Additionally, American Express has one of the lowest 30-day late rates in the industry.
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