2 Stocks Warren Buffett Is Loving (and One He Let Go)


  • Warren Buffett was actively buying and selling stocks last quarter. These are some of the more notable trades he made.
  • D.R. Horton (DHI): The largest homebuilder in the U.S. also has some unique tailwinds pushing it forward.
  • Capital One Financial (COF): The financial institution suffered from the regional banking crisis, but has a good long-term outlook.
  • McKesson (MCK): The pharmaceutical distributor is solid financially and trading at a discount, making Buffett;s sale of the stock intriguing.
Warren Buffett Stocks - 2 Stocks Warren Buffett Is Loving (and One He Let Go)

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Warren Buffett is an investing legend because he’s just that good. Since he became CEO of Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B) in 1965, the Oracle of Omaha generated 3.7 million percent returns for investors. This has led to the rise of Warren Buffett stocks he bought and sold recently.

To put that in perspective, The S&P 500 returned 24.7 thousand percent. 

It’s why investors follow his every move. To paraphrase the old E.F. Hutton commercial, “When Warren Buffett talks, people listen.”

We already know Apple (NASDAQ:AAPL) is one of those favorite Warren Buffett stocks. He owns over 915 million shares worth $159.3 billion. It accounts for more than 45% of Berkshire Hathaway’s total portfolio value. Notably he didn’t buy any more in the second quarter.

But Buffett was an active buyer and seller during the period. Here are two stocks the investing sage actively acquired, according to the most recent 13F filing. I’ve also included one he sold out of completely.

D.R. Horton (DHI)

A shot of a single family home with a green lawn and trees in the background.
Source: Shutterstock

Buffett went on a buying binge with homebuilders this quarter. He actually bought the stock of three homebuilders, but he acquired more shares of D.R. Horton (NYSE:DHI) than any other. The Oracle bought almost 6 million shares at around $121  per share. At current prices, that translates into a total value of more than $695 million.

In comparison, he also bought $18 million worth of Lennar (NYSE:LEN) and $67 million worth of NVR (NYSE:NVR).

So why buy so much D.R. Horton versus the others? First, It’s the biggest homebuilder in the U.S. It’s held that title since 2002.

Second, we have a massive inventory shortage. According to Realtor.com, the country “is in the clutches of the largest housing shortage it’s ever experienced — and there’s no relief on the horizon.” 

At over 7%, mortgage interest rates are also the highest they’ve been since 2001. That means existing homeowners who have mortgages with rates of 3% or less won’t give that up to buy a new, more expensive home. That takes inventory off the market, meaning only newly built homes will be available. Homebuilders get a big tailwind from the disparity.

Finally, D.R. Horton targets more affordable homes than either Lennar or NVR. Its average closing price is $381,000. For Lennar, it’s $449,000 while NVR has an average selling price of $447,300. The median sales price of a U.S. home is $422,137, almost 2% higher than last year. This makes it one of those important Warren Buffett stocks.

With consumers struggling and the cost to buy a home rising, being the more affordable homebuilder is a plus for D.R. Horton.

Capital One Financial (COF)

Toy bull figurine standing on a financial paper
Source: shutterstock.com/Tony Mathews

Buffett’s didn’t start a new position in Capital One Financial (NYSE:COF) this quarter as he did with the homebuilders. He did that in the first. Rather, Buffett increased his position by about 25%, adding 2.5 million more shares to Berkshire’s portfolio. That increased the value of the holding to about  $1.3 billion today.

As a bank targeting credit cards, auto loans, and banking accounts, Capital One is on a rollercoaster ride. Shares are struggling in the wake of the regional banking crisis. The collapse of Silicon Valley Bank and Signature Bank earlier this year created a crisis of confidence. Ratings agency Moody’s (NYSE:MCO) downgraded Capital One’s outlook to negative due to the current high interest rate environment.

Those same consumers struggling to buy a house are also facing a difficult time paying their auto loans and credit cards. Car loan and credit card delinquency rates are rapidly rising.

Buffett likely believes Capital One Financial will navigate the crisis just fine. It’s a long-term pick for the investing guru and he’s willing to pick up shares when they are down.

McKesson (MCK)

Brown glass pill bottle on its side showing white pills inside, with other pill bottles behind it representing MACK stock.
Source: shutterstock.com/Champhei

One of the three stocks Buffett sold in the second quarter was McKesson (NYSE:MCK). He sold all 2.3 million shares of the pharmaceutical and surgical supplies distributor for $1 billion. He first bought the stock in early 2022, but began selling it in the first quarter. So this sale is another of the many times Buffett broke his long term buy-and-hold philosophy.

McKesson is one of the country’s largest distributors, but it trades at an incredible discount. Shares go for just 13 times next year’s earnings estimates, a tiny fraction of its sales, and a bargain 12 times the free cash flow it produces.

Buffett was very active in the medical field during the pandemic, but has traded in and out of related stocks in the field afterwards. McKesson’s sale and cheap valuation make it one you might  want to consider buying yourself. It pays an annual dividend of $2.58 per share that yields a modest 0.6%. But with a payout ratio of 8%, there is significant room for further increases.

On the date of publication, Rich Duprey did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Article printed from InvestorPlace Media, https://investorplace.com/2023/08/2-stocks-warren-buffett-is-loving-and-one-he-let-go/.

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