InvestorPlace’s Chris Markoch recently discussed the Warren Buffett effect on Bank of America’s (NYSE:BAC) stock price. Up almost 20% since the beginning of October, Markoch explained that Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) filed a petition in mid-October with the Federal Reserve to raise its stake above the 10% threshold.
Investors viewed this in a very positive light, pushing Bank of America higher.
However, it’s believed that Buffett filed the petition as a mere formality because share repurchases have increased Berkshire’s Bank of America stake to 10.5%, and not because he wanted to raise Berkshire’s stake in the bank.
Sometimes investors tend to get ahead of themselves.
Regardless of how you view Bank of America’s fourth-quarter surge, the reality is that Berkshire’s equity portfolio has several stocks that have outperformed it in 2019 and are likely to do so again in 2020.
Here are three you might consider in the final days of the year.
Warren Buffett Stocks: JPMorgan Chase (JPM)
Year-to-date through Nov. 29, JPMorgan has a total return of 38.4%, 117 basis points higher than Bank of America. However, over the past five years, JPM’s 18.9% annual total return beat Bank of America by 329 basis points.
InvestorPlace analyst Louis Navellier recently included JPMorgan in a list of seven bank stocks worth owning. Navellier’s argument centered on the bank’s sheer size.
“JPM is massive. It’s one of the top 5 banks in the world. It has a massive trading desk, but didn’t get caught up in the 2008 financial mess like many of its peers. It remains well managed and works to keep its customers and workers satisfied,” Navellier wrote Nov. 25. “In times like this, JPM is a winner on sheer volume. With commercial and personal accounts, real estate, credit cards, investment services and everything else, it is a quality global financial institution that will endure.”
I might not agree with CEO Jamie Dimon’s compensation, but it’s hard to argue with his ability to lead a major bank.
Apple (NASDAQ:AAPL) is Berkshire’s largest holding, accounting for slightly less than 26% of the $236.4 billion portfolio.
Not only is Apple Berkshire’s largest position, but it is also the portfolio’s third-best performer with a year-to-date total return of 71.4%. The same Berkshire shareholders that were annoyed with Buffett’s International Business Machines (NYSE:IBM) tech buy a few years ago are much happier about the Oracle of Omaha loading up on Apple stock.
This past weekend I was visiting family. I took my 83-year-old uncle-in-law to Best Buy (NYSE:BBY) to get a new iPad. With a limited vision in one eye and no vision in the other, he screamed out “this is the best I’ve been able to see in years” while playing with his new toy.
I’ve been a fan of Apple stock for several years because of the company’s contribution to society through products like the iPad and iPhone.
Although bank stocks are a must-own for most diversified portfolios, I don’t think there’s any doubt Apple is also a prerequisite for any portfolio looking to meet or exceed the S&P 500.
Berkshire has owned Costco (NASDAQ:COST) for more than a decade. Since the second quarter of 2010, it has held 4,333,363 shares of the retailer’s stock. It hasn’t budged higher or lower in those nine years.
Many stocks have come and gone in the past decade. While it would have been nice if Berkshire Hathaway had upped its stake a little — COST stock represents just 0.6% of the entire portfolio — Buffett has said in the past that retail stocks do not particularly enamor him.
“Retailing is too tough for me. I’ve been in various things in retailing … and got my head handed to me,” Buffett said in a 2016 interview. “The online thing is very hard to figure out. … I just decided I would look for a little easier game.”
Interestingly, Buffett now owns 537,300 shares of Amazon (NASDAQ:AMZN), which accounts for 0.4% of the Berkshire portfolio. That’s 15 basis points less than Costco.
It’s my guess Costco remains in the Berkshire portfolio because even in the market correction of 2008-2009, its stock only lost 35% of its value, more than 200 basis points better than the S&P 500.
As a regular Costco shopper, I believe Buffett ought to consider raising his stake.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.