The Oracle of Omaha has just released his portfolio holdings for the third quarter.
And the big news is that Warren Buffett has poured $4 billion into creating a sizable new stake in JP Morgan (JPM – Research Report).
Better late than never: Earlier this year, the investing guru told Yahoo Finance: “I should’ve [invested in JP Morgan],” Buffett said. “Very obviously. I mean, it’s been a terrifically run operation. And it was very cheap, just like a number of others were.” He also said he personally owns shares of JPMorgan Chase.
Plus Buffett is a long-standing supporter of JP Morgan’s CEO Jamie Dimon. Not only does he read Dimon’s annual shareholder letter for banking industry insights, but the pair have also joined forces with Amazon CEO Jeff Bezos to cut health-care costs and improve services for their US employees.
With this latest addition, half of Berkshire Hathaway’s top 10 holdings are banks. The conclusion is clear: Buffett is feeling optimistic about the financial sector right now. Note how he also upped his holdings of both Bank of America (BAC – Research Report) and Goldman Sachs (GS – Research Report) by 29% and 38% respectively.
In total the Berkshire portfolio now has a whopping $221 billion in managed 13F securities, with a top 10 holdings concentration of 80.32%.
So without further ado, here are the top 10 holdings in Buffett’s portfolio right now. As you will see Buffett is ignoring the naysayers and sticking tight with Apple (AAPL – Research Report), which remains the firm’s number 1 holding by a long shot:
- Apple (AAPL): 252,478,779 shares valued at $56,994,561,000, added just over 500,000 AAPL shares in Q3
- Bank of America (BAC): 877,248,600 shares valued at $25,843,745,000, ramped up holding by 29% in Q3
- Wells Fargo (WFC): 442,361,700 shares valued at $23,250,531,000, slightly reduced holding by 2%
- Coca Cola (KO): 400,000,000 shares valued at $18,476,000,000, no change in quarter
- Kraft Heinz (KHC): 325,634,818 shares valued at $17,945,735,000, no change in quarter
- American Express (AXP): 151,610,700 shares valued at $16,145,025,000, no change in quarter
- US Bancorp (USB): 124,923,092 shares valued at $6,597,189,000, increased holding by 24% in Q3
- Moody’s (MCO): 24,669,778 shares valued at $4,124,787,000, no change in quarter
- Goldman Sachs (GS): 18,353,635 shares valued at $4,115,619,000, made a significant increase in Q3 of 38%
- JP Morgan Chase (JPM): 35,664,767 shares valued at $4,024,412,000, initiated new position
Is Now the Time to Buy JP Morgan?
So the key question is now: Should you follow Warren Buffett into JP Morgan?
We turned to the Street’s best analysts to see what they make of Buffett’s latest stock pick.
As you can see from the TipRanks screenshot below, top-performing analysts are split 50/50 on JP Morgan right now. This gives the stock its cautiously optimistic Moderate Buy consensus. Meanwhile the average analyst price target of $128 indicates upside potential of 19% from current levels.
The Bulls
Top 100 Vining Sparks’ analyst Marty Mosby (Track Record & Ratings) isn’t just bullish on JPM; he’s super bullish. He reiterated his ‘Strong Buy’ rating on the stock following stellar 3Q results that came in 3% above consensus estimates.
“This quarter’s results continue to display why JPM has become the lone leader among the Large Cap U.S. Banks” Mosby explained. “We estimate that by the end of this year it will have increased its earnings per share since 2015 by over 70% and be producing a return on tangible common equity of around 17.”
And no doubt Mosby would approve of Buffett’s decision to buy now:
“JPM’s meaningful return of capital coupled with high returns make it a strong value investment at this entry point. Moreover, JPM has a strong valuation floor around 200% of TBV given its dividend yield and higher quality business mix which makes its current return-to-risk ratio exceed 2X.”
Indeed, this makes it sounds like a perfect Buffett value stock pick! Mosby’s price target stands at $125 (16% upside potential).
The Bears
The stock doesn’t have any Sell ratings, but several top analysts are staying on the sidelines.
One of these analysts is Oppenheimer’s Chris Kotowski (Track Record & Ratings). He has a Hold rating on JPM right now, and has not assigned the stock a price target.
However what’s interesting is that his analysis of the stock is a lot more bullish than you might expect given his Hold rating. This is especially true when it comes to a long-term value investor like Buffett:
“We view JPM as a high-quality core holding in the group” writes Kotowski. “At ~11x our 2019 EPS estimate and ~1.9x TBV, we believe the shares are reasonably priced, but not quite the bargain they were even in the fairly recent past. At this juncture, we think BAC and C are more timely, but JPM is a well-managed company that should create value over time.”
Kotowski singles out both BAC and Citigroup as preferred stock picks right now. Notably of course, Buffett does also have a major stake in BAC as we saw in the Top 10 holdings list above. And we can see that from a Street perspective, BAC is currently a Strong Buy stock.
Enjoy the Research Report on the Stocks in this Article:
Apple Inc (AAPL) Research Report
Bank of America (BAC) Research Report
JP Morgan Chase (JPM) Research Report
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