So Warren Buffet’s Berkshire Hathaway Inc. (NYSE: BRK.B) (NYSE: BRK.A) delivered its annual report recently, and the big headline seemed to be that the Warren Buffett stock picks in Berkshire’s portfolio didn’t perform all that well so far this year. I think that’s a ridiculous way to evaluate Warren Buffett stock picks because he is a long-term investor.
However, what would be instructive is to examine the 10-year return of some of these Warren Buffett stock picks. That’s because the 10-year history of a company is going to tell us a lot more about that company and its stock than four months’ worth of results. Let’s take a look at the best and worst performing 10-year Warren Buffett stock picks.
Best Warren Buffett Stock Picks
Warren Buffett is famous for saying he doesn’t like to purchase, or really understand, technology stocks. That hasn’t stopped him from throwing his money into the right places from time to time. While he has wisely sold out of International Business Machines (NYSE: IBM), his 10-year return on Apple Inc. (NASDAQ: AAPL) is 665%.
I think Buffett figured out that Apple’s brand was very similar to the brands of many of the famous consumer stocks that he owns. He was obviously smart to get in on Apple stock when he did. However, there is also a great lesson here. Ten years ago, it wasn’t as apparent to investors as it is today what a great company and stock Apple would be. Even though the market is significantly overvalued at this time, that 665% return also includes the mortgage crisis. So this should be a lesson to everyone to hold a stock that you believe in through the bad times.
Another of these high-performing Warren Buffett stock picks is Visa Inc (NYSE: V), which is up 556% in the last 10 years. The key with Visa is something that I’ve written about often: It is part of an oligopoly. There are only a few large-scale payment processors in the world, and Visa is one of them. Clearly Warren Buffett made the right choice with Visa — but did well with Mastercard Inc (NYSE: MA) as well, which was up 583%.
I’m frankly surprised at this next choice. I never expected Warren Buffett to buy into the airlines. But he did when he purchased stock in Delta Air Lines Inc. (NYSE: DAL), which is up 550% in the past 10 years. I admit I wouldn’t guess that Delta has had this kind of performance. Airline earnings can be very erratic and unstable.
Worst Warren Buffett Stock Picks
Alas, when it comes to Warren Buffett stock picks, there can be a few comparative clunkers. Mind you, I only see two actual losers in the entire portfolio, although there are a few that have delivered a below-average market return over the past 10 years.
The biggest loser in the portfolio is Teva Pharmaceutical Industries Limited (ADR) (NYSE:TEVA), which is down 52% in the past 10 years. However, it should be noted that much of that loss came over the past couple of years. Teva made a gigantic and ill-advised acquisition which added tons of debt to its balance sheet, and it has not been executing well at all. That being said, I personally think there’s some bottom fishing to be done here, or possibly at lower prices.
The other 10-year loser of Warren Buffett stock picks is Bank of America Corp (NYSE: BAC), which is down 15% in the past 10 years. Once again, it’s a miracle that the bank is even around after the mortgage crisis. Buffett’s position is really only here because he took a position in the company during the crisis to shore up its finances. It’s notable that Bank of America stock is returned 157% in the past five years.
The third worst performer of Warren Buffett stock picks is a company called USG Corporation (NYSE: USG). This is a building materials company that specializes in gypsum. However, it also offers construction plaster products and ceiling products. It seems like a strange business for Warren Buffett to buy, but he did. The company is up 14% over the past 10 years, and 62% over the past five years.
Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance and is the manager of The Liberty Portfolio at www.thelibertyportfolio.com. He owns shares of AAPL. He has 23 years’ experience in the stock market, and has written more than 2,000 articles on investing. Lawrence Meyers can be reached at [email protected].