75% of Warren Buffett's Portfolio Is Invested in 5 Stocks: Here's the 1 That's Made Him the Most Money
por newsfeedback@fool.com (Keith Speights)

The Motley Fool / 2023-02-19 11:02



Warren Buffett once said, "Keep all your eggs in one basket, but watch that basket closely." He has practiced what he preaches for the most part. Nearly all of the billionaire's net worth is in one stock: Berkshire Hathaway (BRK.A 0.02%) (BRK.B 0.02%).

Berkshire itself doesn't keep all of its eggs in one basket, though. The conglomerate owns over 50 stocks. But those investments aren't as diversified as you might think. A whopping 75% of Buffett's Berkshire portfolio is invested in just five stocks. Here they are -- including the one that's made him the most money.


Image source: The Motley Fool.

Buffett's top five
Buffett likes businesses that have proven themselves over time. Therefore, it isn't surprising that his top five holdings in Berkshire's portfolio are all household names.

Stock Shares Owned Percent of Total Portfolio
Apple (AAPL -0.76%) 915,560,382 41.5%
Bank of America (NYSE: BAC) 1,032,852,006 10.7%
Chevron (NYSE: CVX) 167,353,771 8.2%
American Express (NYSE: AXP) 151,610,700 7.9%
The Coca-Cola Company (NYSE: KO) 400,000,000 6.9%
Data source: CNBC. Chart by author.

If you only look at Berskhire's 13F filings to the U.S. Securities and Exchange Commission (SEC), you won't get the complete picture of its holdings. New England Asset Management (NEAM), an investment firm that's a subsidiary of Berkshire Hathaway, also owns quite a few stocks. The numbers on the above table for Apple, Bank of America, and Chevron include the shares owned by NEAM.

His biggest moneymaker
Determining which of Buffett's top five stocks has made him the most money is easier said than done. For one thing, we don't know exactly when he bought the stocks. Berkshire's and NEAM's SEC filings only narrow the purchases down to a specific quarter. That means we also don't know Buffett's specific cost basis for each stock. However, we can make some pretty good guesses to figure out which of the legendary investor's top five stocks have been most profitable for him.

Let's start with Berkshire's biggest holding by far -- Apple. Buffett even called the company one of Berkshire's "four giants" in his letter to shareholders last year. But Apple wasn't always one of those giants. Buffett first bought nearly 129.4 million shares of the tech company in the first quarter of 2016.Since the beginning of that quarter, Apple stock has skyrocketed nearly 490%.

What complicates matters, though, is that Berkshire has bought and sold shares of Apple throughout the years. The company also conducted a 4-for-1 stock split in August 2020. However, we can still get a good feel for how big of a winner Apple has been for Buffett. His heaviest buying of Apple occurred between 2016 and 2018. Berkshire has held onto most of its position since then, with the stock nearly quadrupling in value.

Apple's performance and Berkshire's massive stake in the company allow us to eliminate some contenders. For example, Buffett initiated a position in Chevron in the fourth quarter of 2020. Although the big oil company has delivered a total return of nearly 170% since the beginning of that period, that's a much smaller gain than Buffett has seen with Apple.

Similarly, Berkshire opened a new position in Bank of America in the third quarter of 2017 (after exiting a previous stake several years earlier). The bank stock has delivered a total return of less than 70% since then.

That leaves two of Buffett's long-term holdings. He bought a big chunk of shares in American Express in the fourth quarter of 2000, and there was some significant buying and selling in subsequent years. However, it doesn't appear that Buffett's American Express investment has paid off as significantly as Apple has.

Buffett's relationship with Coca-Cola goes back even further. He initiated a position in the food and beverage giant in the fourth quarter of 1998. Coca-Cola has been a big winner for the legendary investor. Still, though, Apple has delivered an even greater gain.

Staying at the top
Apple reigns as Buffett's biggest moneymaker (outside of Berkshire itself). Can it stay at the top? I think so.

It's not surprising in the least that Apple was one of only four stocks Buffett bought in the latest quarter. He loves the company's business. Pretty much anytime Apple goes on sale because of a pullback, Buffett is likely to scoop up more shares.

I don't see Apple's iPhone ecosystem losing steam anytime soon. If anything, the company could gain momentum. A recent patent filing could hint that a folding iPhone is on the way. Apple also has tremendous opportunities in augmented reality. My prediction is that the stock will continue to make the most money for Buffett for a long time to come.

American Express is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Keith Speights has positions in Apple, Bank of America, and Berkshire Hathaway. The Motley Fool has positions in and recommends Apple, Bank of America, and Berkshire Hathaway. The Motley Fool recommends the following options: long January 2024 $47.50 calls on Coca-Cola, long March 2023 $120 calls on Apple, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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VW, Mercedes-Benz urge Berlin to accelerate EV charging network expansion, report says
por Reuters

Investing.com: Stock Market News / 2023-02-19 11:20



2/2  © Reuters. FILE PHOTO: A board showing an electric Volkswagen car at a charging station is pictured in front of the construction site of German carmaker Volkswagen's so called "Mission SalzGiga", a plant for battery cell production, including battery recycling, in S 2/2
BERLIN (Reuters) - German carmakers Mercedes-Benz and VW have urged the government to do more to scale up the number of electric vehicle charging stations across the country, German paper Bild am Sonntag wrote on Sunday.

"To speed up the change (to electric vehicles), we need to be sure that the charging station infrastructure is being built up," Mercedes-Benz Chief Executive Ola Kallenius was quoted as saying by the paper. "That's also a question for politics."

VW Chief Executive Oliver Blume agreed more speed was needed and that the construction of charging stations was "a common task of the economy, federal government and communes".

The German government last October approved a plan to spend 6.3 billion euros ($6.74 billion) to rapidly scale up the number of charging stations across the country, as part of its push towards net zero emissions. The plan included speeding up state approvals to build charging points.

Industry associations, which have long complained the government has not kept pace with the rapid expansion of electric vehicles, said the implementation of the proposals was key.

"The future of the car is electric," Kallenius was quoted as saying. "By the end of this decade, we want to be ready to completely transition to electric cars in our market segment, wherever the market conditions allow it," he said.

"It's not a foregone conclusion, rather it will require a gigantic industrial conversion."

($1 = 0.9351 euros)

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Companies Are Laying Off Workers to Control Costs. What 27 Said on Earnings Calls.
Yahoo! Finance: Top Stories / 2023-02-19 11:23



What do PayPal,  AT&T , and Tinder owner Match Group all have in common? They are among the several S&P500 companies saying that trimming their workforces should provide a boost to their financials this year.

At least 27 U.S. companies with market capitalizations of $10 billion or more have mentioned positive effects from layoffs since the start of the latest profit-reporting season in January, according to Barron's analysis of earnings call transcripts on Sentieo, a financial analytics platform. If not already delivered in the past quarter, corporations estimated a boost to earnings, margins, or free cash flow from layoffs in the year ahead.

Consider investment banking giant Goldman Sachs Group (ticker: GS). Chief Financial Officer Denis Coleman, on Jan. 23 while discussing the fourth quarter earnings, said the bank exercised a head count reduction earlier this year, letting go of 3,200 employees, and "we expect to benefit in 2023 north of $200 million associated with that."

The credit bureau company, Equifax (EFX), on Feb. 9, said it plans to cut over 10% of its employees and contractors in 2023. The actions, among others, will drive an estimated spending reduction of about $200 million in 2023, CEO Mark Begor said.

Among technology companies, Western Digital 's (WDC) CEO David Goeckeler, last month, said the hard disk seller had reduced its quarterly adjusted operating expense by over $100 million since the close of the fiscal year 2022 by lowering head count among other actions. 

Snap (SNAP) said it continues to wind down various operations to take $450 million out of the cost base. Investors will see the full benefit of this reduction in the first quarter, which ends in March, Chief Financial Officer Derek Andersen said, citing the current reduced head count, down 20% from the peak in the second quarter.

PayPal Holdings (PYPL), a fintech company, last week, said it has identified an additional $600 million of cost savings for 2023 on top of the previously planned $1.3 billion due to "the very difficult decision to reduce our head count by 7% as we continue to improve our processes." 

Other companies in the list of about 27 include healthcare firm Baxter International (BAX), News Corp (NWSA), the owner of Barron's and The Wall Street Journal, and insurance brokerage Marsh & McLennan (MMC)

These are just the companies who have talked about layoffs on their earnings calls. Overall some 380 companies have laid off employees this year just within the tech industry, according to Layoffs.fyi, though not all have discussed the benefits to the bottom line. Spotify Technology (SPOT) , for instance, denied quantifying savings from the head count reduction when an analyst asked in a fourth-quarter call discussing earnings. The streaming music service company announced plans to cut about 6% of its workforce across the company in January.

Sadly, for tech employees specifically, more layoffs could be in the cards, according to Savita Subramanian, head of U.S. equity & quant strategist at BofA Global Research. Subramanian, in a note this month, said tech has more costs to cut given the 20% excess hiring over the past three years.

That's "too high relative to real sales growth," she noted. "Tech is still too bloated even after layoffs."

BofA calculated that announced layoffs would represent an estimated 1.7 percentage point average operating lift, defined as cost savings as a percentage of 2022 sales for growth companies.

Lower costs can be big drivers of earnings and revenue. An announcement on cost savings can please investors, even if the fundamentals of those companies have worsened overall.

For instance, despite a broader advertising pullback, investors have cheered Meta Platform 's (META) stock partly due to CEO Mark Zuckerberg lowering the capital expenditure outlook and telling analysts the company would remove some layers of middle management. Meta stock is up 44% this year.

Outside of tech, FedEx 's (FDX) stock was recently upgraded by both Citi analyst Christian Wetherbee and BofA Securities analyst Ken Hoexter to Buy from Hold on increasing signs of cost control despite falling shipping volumes given the weakening economy. The logistics company announced a plan to reduce management head count by 10%. Hoexter estimated 40 cents quarterly earnings per share tailwind. The stock is up 22% this year. 

"The playbook was easy for Wall Street this earnings season," Edward Moya, senior market analyst at brokerage OANDA told Barron's. "Announce cost-saving measures and layoffs and your share prices will rally."

If only it were so easy for the workers.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com

Enclosures

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SPX: Another Great Shorting Opportunity
Seeking Alpha: Stock Market Analysis / 2023-02-19 11:30


CreativaImages

Shorting stocks over the long-term is a fool's errand as the cumulative effects of dividend payments and nominal GDP growth tend to result in heavy losses. However, there are times when shorting can be highly profitable, and I believe such a time is upon us, for three main reasons. Firstly, with overnight interest rates at 4.6%, the interest received from shorting the S&P 500 Futures (SPX) is above the 1.7% dividend yield that you have to pay out. Secondly, nominal GDP growth is poised to slow sharply as the economy enters recession, which suggests earnings and dividend growth will be weak. Thirdly, valuations have risen back into extremely overvalued territory and a downward mean reversion is likely. Finally, cracks are appearing in the bond market and look likely to spill over into the stock market.

Shorting The SPX Is Highly Cash Flow Positive
When shorting stocks, investors receive interest payments for lending the money to borrow the stock, and in return must pay any dividend payments that the stock makes. Currently, overnight USD libor is 2.9% higher than the dividend yield on the SPX, meaning that a short position will yield a steady positive return all else equal. As the chart below shows, the current spread is the highest since November 2007, following which short sellers made a killing.


Overnight USD Libor Vs SPX Dividend Yield (Bloomberg)

Nominal GDP Growth Is Set To Collapse
While shorting the SPX generates positive cash flows as interest rates exceed the dividend yield, a key factor that must be taken into account is the pace at which dividends are likely to grow at, which tends to track the performance of nominal GDP. If nominal GDP growth exceeds 2.9% then shorting will likely generate losses assuming no change in valuations.

1-year breakeven inflation expectations currently sit at 2.9% and real GDP growth is likely to be negative over this period. The Conference Board's Leading Indicator Index, for instance, sits at -6.0% which is consistent with negative real GDP growth over the next few quarters.


LEI Vs Real GDP Growth (Bloomberg, Conference Board)

Money supply growth is also pointing to a collapse in nominal GDP growth. M2 growth is often a good leading indicator of subsequent nominal GDP growth, and it is now in contraction for the first time on record. If CPI growth is faster than money supply growth as is the case at present, this suggests that real GDP is in contraction. I would not be surprised to see nominal GDP turn negative over the next 12 months, particularly if stock market sentiment turns sour and the demand for cash surges, but even if this does not occur, 2.9% seems optimistic.

Valuations Face Downside Risks
The rally in the SPX since the October lows has seen valuations rise back into extreme territory. The price-to-sales ratio is above any other point in history outside the past 2 years, and free cash flows are in decline amid intense downside margin pressure.


SPX PE Ratio, PS Ratio, And Profit Margins (Bloomberg)

The equity risk premium - the difference between expected returns on the SPX and expected returns on cash or bonds - may well be the lowest it has ever been from an ex-ante perspective. For instance, if nominal GDP growth averages 2.9% over the next 12 months and dividend payments follow suit, this would result in 4.6% total returns after taking into account the current dividend yield, which would be in line with current interest rates, meaning a zero percent equity risk premium. Considering that the long-term average equity risk premium is 5%, this suggests that stocks face major downside risks. The SPX dividend yield would have to rise to 6.7% in order for the equity risk premium to return to its long-term average based on the above assumptions, which would require a 75% decline in stock prices.

The Bond Market Is Giving An Early Warning Signal
Renewed upside pressure on US inflation-linked bond yields is putting pressure on corporate bond yields. In 'normal' economic conditions, rising real bond yields tend to coincide with narrowing high yield credit spreads as both are driven by improving economic conditions. However, the Fed's increasingly restrictive policy is now occurring alongside a deterioration in economic conditions which is causing high yield corporate bond spreads to remain elevated. As a result, real high yield bond yields are rising and suggest renewed downside for the SPX.


SPX Vs Real High Yield Bond Yields (inverted) (Bloomberg)

Risks To Consider
Shorting futures is risky in the sense that losses can theoretically be infinite as there is no upper bound to stock prices, and this risk is heightened when using high leverage. Such bearish equity bets are not recommended as an outright position but rather a hedge against long positions. Personally, I am now fully hedged, with my short US equity positions fully offsetting my long equity positions, which are concentrated in emerging markets. I am also aggressively long Treasury bonds, which should also benefit if my short US equity positions lose out.

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