Buffett is no stranger to billion dollar bets. Despite how the market has been this year, his strategy has not changed. If anything, Buffett has been investing more aggressively by taking advantage of plummeting stock prices.
In the past, Buffett has been critical of Robinhood (HOOD), the financial services platform that makes “investing simple.” He said the platform significantly contributed to the “casino aspect” that fueled the market last year.
However, his portfolio includes several stocks listed among Robinhood users’ 100 most popular holdings.
So, it’s clear that not all Robinhood investors are gambling with their investments — many have their eyes peeled for bargains, just like Buffett.
If there’s one stock that Buffett has been buying hand over fist, it’s Apple.
Based on Buffett’s aversion to buying technology stocks, Apple was a surprising pick at first.
However, those investments are minuscule when compared to Berkshire’s stake in Apple, which currently accounts for over 40% of his $300+ billion portfolio.
In Q2 2022, Berkshire bought another 3.9 million shares, and by the end of the quarter, Buffett’s holding company owned nearly 895 million shares of Apple.
There are many reasons why Apple is a smart investment. Aside from Apple being one of the most valuable companies in the world, with a market cap of over $2 trillion, the tech giant has enormous brand appeal and over $100 billion of annualized free cash flow.
Considering the high demand for Apple products and the company’s unmatched customer loyalty, Apple continues to have significant growth potential.
Even with the current macroeconomic headwinds, iPhone saw no evidence of weakening demand.
In Q3 2022, iPhones and Apple services drove the company’s quarterly revenue record of $83.0 billion. And then there’s Apple’s 10-year plan. With the rise of augmented and virtual reality, Apple will continue to innovate, perhaps in ways that will surprise many.
It’s not unimaginable to think that one day you may need your phone to turn on your car. With so many applications of this kind on the horizon, the crux of daily activities is evident: your phone. And Apple is at the epicenter of them all.
Bank of America
The second-largest bank in the United States, Bank of America, also made Robinhood’s top 100 list.
When the pandemic first hit, Berkshire sold many of its large bank stocks, but not BAC. Instead, Berkshire poured over $2 billion into the stock over just 12 days.
Berkshire now owns over one billion shares of BAC, currently valued at more than $31 billion. These shares will make Berkshire hundreds of millions in dividend payouts each year.
In the near term, Bank of America will be one of the industry’s largest beneficiaries of rising interest rates.
Net interest income (NII) is anticipated to grow quickly, with management anticipating an additional $1 billion in Q3 2022 and even faster growth in Q4. The most recent earnings release reported $9.1 billion in revenue, an increase of 12%. Higher balances and rising interest rates are driving the growth in NII.
Long term, there is little doubt that Bank of America is tied to economic cycles. That said, when looking at the all-time progression of BAC shares, the share price has increased by over 1950%.
In the last five years, shares have increased by more than 46%. Since shares are down nearly 27% year to date, the present may be the opportune time to get in.
In recent years, Berkshire has bought plenty of its own stock through share repurchases. This strategy signals to the market that Warren thinks Berkshire shares are undervalued.
In 2021, many investors bought stocks aggressively. However, Berkshire wasn’t as enthusiastic since the market was rapidly climbing. Instead of heavily investing in other companies, Berkshire invested $27 billion into Berkshire share buybacks.
Berkshire has continued to buy its own shares in 2022 but at a much slower rate. The market has suffered the worst first half of the year in five decades, which Berkshire recognizes as a buying opportunity.
Buffett and Berkshire made the right decision to scoop up BKR.A shares, which are only down 1.5% over the past year, compared to the S&P 500, which sank around 14% over the same time period.
After reviewing Berkshire’s second-quarter results, some investors are hung up on the company’s $44 billion net loss, compared to a $28 billion gain in Q2 2021. But these wild swings are a function of accounting laws, not operations.
Indeed, Berkshire is in very good shape regarding revenue and operating profit. Plus, its diversified portfolio is built to weather storms like the one we experienced in the first half of 2022.
Is Now the Time to Buy Buffett’s Picks?
Regardless of the companies that Buffett invests in, he focuses on a long-term perspective. Although it’s important to discuss the three stocks above in terms of their most recent reports, Buffett thinks years, if not decades, in advance.
All three of the stocks above have significantly increased in value over the last five years. However, stock prices are now considerably lower compared to their 52-week highs. Reward to risk ratios favor the long-term holders.