Sometimes identifying the best stocks to buy can be difficult, but you could do a lot worse than checking out the stocks selected by one of the world’s savviest hedge fund managers — Warren Buffett. Just-released SEC forms reveal a valuable glimpse into stocks Buffett likes (and the stocks Buffett doesn’t like). These are the stocks he poured money into in the second quarter.
Buffett’s stock picks are a popular source of inspiration for investors, and for good reason. His formidable stock-picking ability has given him the nickname “the Oracle of Omaha” and a fortune of more than $87 billion. Investors have keenly analyzed the secrets of Buffett’s success for decades. What stands out is his long-term investing strategy, coupled with the ability to place logic over emotion when making critical investing decisions.
And now we can track the latest trades of his $191 billion Berkshire Hathaway fund. Here we also include TipRanks’ stock insights from Wall Street’s best-performing analysts. Does the Street sentiment match Buffett’s latest stock picks — or is he going rogue with his investing decisions? Let’s take a closer look at the top Warren Buffett stock picks now:
Apple (NASDAQ:AAPL)
Apple is easily Buffett’s largest investment. After missing the tech sector rally, the Oracle of Omaha has been busy plowing money into AAPL. He now has a whopping $46.6 billion invested in the tech giant.
In Q2, Buffett further boosted his AAPL investment by 5%. This means that he has now dedicated almost a quarter of Berkshire’s portfolio to Apple stock.
“I clearly like Apple. We buy them to hold,” Buffett told CNBC in May. “We bought about 5 percent of the company. I’d love to own 100 percent of it. … We like very much the economics of their activities. We like very much the management and the way they think.”
And the stock also has the seal of approval from top Monness analyst Brian White (Profile & Recommendations). “We continue to believe Apple remains one of the most underappreciated stocks in the world with a valuation that remains depressed (13.7x our CY:19 EPS estimate, ex-cash)” cheers White.
He added: “Now, Apple is heading into the seasonally strongest time of the year with a new iPhone cycle on the horizon.” Indeed, White’s Street-high $275 price target indicates big upside potential of 31%.
In total, however, the stock has a “Moderate Buy” analyst consensus rating. This is with a $213 price target. See AAPL Price Target and Analyst Ratings Detail.
Delta Airlines (NYSE:DAL)
Only a few years ago Buffett called the airline industry a “death trap for investors.” How times change! In 2016, Buffett shocked the market with a return to this notoriously tricky industry. The reason: industry consolidation.
Buffett’s partner, Charlie Munger, explains “It (the railroad industry) was a terrible business for 80 years … but they finally got down to four big railroads, and it was a better business. And something similar is happening in the airline business.”
One of Buffett’s favorite airline stocks is Delta Air Lines. A further $559 million investment in Q2 means Buffett now holds over 63 million DAL shares. This equates to a whopping $3.15 billion investment.
Luckily, Imperial Capital’s Michael Derchin (Profile & Recommendations) believes DAL is enjoying strong pricing power as well as encouraging international business and leisure travel trends. His $68 price target indicates 23% upside potential. Overall, DAL, a “Strong Buy” stock has received eight buy ratings versus just a single “hold” rating. See DAL Target Price and Analyst Ratings Detail.
Teva (NYSE:TEVA)
Buffett surprised the market with a big bet on flailing pharma giant Teva Pharmaceutical back in Q417. No doubt Buffett sees the cut-priced pharma as a longer-term rebound stock. He gobbled up 19 million shares in TEVA, worth about $358 million. Since then, the Oracle of Omaha hasn’t stopped buying.
And now for Q2 we see another 6% boost to his position (with 61 million shares). This takes his total bet on TEVA to a staggering $1.05 billion.
There’s no doubt this is a risky move. Out of 14 recent analyst ratings, only three are buys. This is versus 10 buy ratings and one sell rating. Maxim analyst Jason McCarthy (Profile & Recommendations) is sitting this one out. He has a “hold” rating on the stock due to the acceleration of competing generics.
McCarthy explains “Overall Teva’s 2Q did have some positives- restructuring and cost savings, guidance raised, fremenezumab PDUFA is coming in September, etc. However, an eroding generics business and debt continue to weigh on the stock; maintain Hold.” Indeed, it’s hard to forget that TEVA still has massive debt pile of over $28 billion. See TEVA Price Target and Analyst Ratings Detail.
General Motors (NYSE:GM)
Top dividend stock General Motors is one of Buffett’s 20 biggest holdings. After upping Berkshire’s GM position by 2% in Q2, the fund now holds 51 million GM shares valued at $2.02 billion.
Unfortunately, GM is going through a bit of a rough patch right now. According to Morgan Stanley’s Adam Jonas (Profile & Recommendations), GM has the biggest exposure to China in terms of “profitability and cash flow” among its U.S. industry peers.
This is worrying given the escalating trade tensions between US and China. While many investors appreciate GM’s SOTP [sum of the parts] potential, many of these same investors do not want exposure to China trade tensions, says the analyst.
According to Jonas, the company’s China sales may decline 10 percent or more. And as a result, he slashed his GM price target from $50 to $46 (26% upside potential). However, he retained his ‘Buy’ rating on the stock.
Plus, overall, analysts still have a bullish “Strong Buy” consensus on GM. The average analyst price target of $52 suggests shares can climb an impressive 44% from current levels. See GM Price Target and Analyst Ratings Detail.
Goldman Sachs (NYSE:GS)
Last but not least we have Goldman Sachs- one of the world’s largest investing banks- and one of Buffett’s favorite financial stocks. In Q2 Buffett ramped up his stake by a significant 20%. The fund now has a total GS position worth $2.9 billion.
It looks like Oppenheimer’s Chris Kotowski (Profile & Recommendations) would approve. Following ‘excellent results’, Kotowski boosted his price target from $304 to $336. From current levels, this indicates sizeable upside potential of 44% upside potential.
“Goldman has consistently earned higher core operating returns than the commercial banking industry for the past several years but trades at a discount to it” writes the analyst. And ultimately, “With the stock trading at 1.24x TBV compared to 1.44x for MS, we believe GS is undervalued and reiterate our Outperform rating.” Total revenue of $9.4B came in $0.6B higher than Oppenheimer’s $8.8B estimate and $1.5B higher Y/Y.
The overall Street perspective is more cautious. In the last three months, analysts have evenly split between Hold and Buy ratings. This is with a $283 average price target. See GS Price Target and Analyst Ratings Detail.
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