There’s no question that Warren Buffett is the greatest investor of all time. From a small family office in Omaha, Nebraska, he has built a portfolio that is today worth more than $300 billion. And while his portfolio is structured around stalwart blue-chip stocks such as Coca-Cola (NYSE:KO), American Express (NYSE:AXP), Bank of America (NYSE:BAC), and Apple (NASDAQ:APPL), the so-called “Oracle of Omaha” is not immune from making bad investment decisions.
A close look at his portfolio reveals several stocks that have woefully underperformed, some for many years now. Several of the worst performers in Buffett’s holding company, Berkshire Hathaway (NYSE:BRK-B), are long-term investments that he seems reluctant to part with. Yet these underperforming stocks are dragging down the value of his entire portfolio. Here are three stocks Warren Buffett SHOULD sell next quarter.
Paramount Global (PARA)
Warren Buffett is continuously on the lookout for new picks. However, one of Buffett’s newest holdings, and one of his worst performers, has been Paramount Global (NASDAQ:PARA).
The legendary investor took a $2.6 billion stake in the entertainment company during the first quarter of 2022, when the share price was around $30. Since then, the price of PARA stock has been cut in half, putting Buffett’s investment seriously underwater. Still, Buffett has continued to chase the stock lower, buying more Paramount Global stock last Fall and again at the end of 2022 as the share price slid.
Today, Berkshire Hathaway owns 15% of Paramount Global’s stock. By some estimates, the investment has lost more than a billion dollars for Warren Buffett. Paramount Global recently cut its dividend as it looks to conserve cash and attempts to make its streaming business profitable. Warren Buffett acknowledged the difficulties related to PARA stock at Berkshire Hathaway’s recent annual meeting, saying, “It’s not good news when any company cuts its dividend dramatically.”
Over the last five years, PARA stock has declined 70%. Warren Buffett has refused to sell, but probably should.
Technology company Snowflake (NYSE:SNOW) was an unusual pick for Warren Buffett from the outset. First, Buffett got in on Snowflake’s initial public offering, something he seldom does. Second, Snowflake continues to be unprofitable, raising another red flag that makes Buffett typically avoid a stock. And third, Snowflake is involved in the highly-technical area of cloud computing–based data, a subject that is almost certainly out of Buffett’s “circle of competence” when it comes to investing.
Owing to some of these factors (namely, the company’s lack of profits), SNOW stock has proven to be a bad investment since making its market debut in September 2020. After cresting with the rest of the tech sector in November 2021, Snowflake’s share price has fallen 56%. The stock hit a bottom of $110 a share in June 2022, which was 8% below its IPO price of $120 per share Buffett bought at.
While the software company’s stock has recovered since last summer, it still has a long way to go. And there’s the lack of profits to consider as well.
This one’s a doozy. Buffett first invested in Brazilian financial technology (fintech) company StoneCo (NASDAQ:STNE) in October 2018, also during its IPO. He paid $24 per share for the stock, acquiring 14 million shares for a stake worth $336 million. Today, STNE stock is trading 42% below where Buffett bought it five years ago. The company’s share price is 85% lower than where it peaked in February 2021. While Buffett has trimmed his position in StoneCo, he still owns more than 10 million shares worth $151 million.
Why hold on? Perhaps Buffett is waiting for the stock to rebound and get back to the break-even IPO price he paid for it. Or maybe he continues to like that StoneCo has a dominant position in its home market of Brazil and is a leading fintech company across Latin America?
Whatever the reason, there is no denying that STNE stock has been one of the worst investments Buffett has ever made, and it continues to drag on his portfolio’s performance. Thus, it might be best for the Oracle of Omaha to cut his losses in this dud of a stock.
On the date of publication, Joel Baglole held long positions in AAPL and BAC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.