Plenty of Berkshire Hathaway's (BRK-A, BRK-B) top stock picks have been home runs during and prior to the COVID-19 pandemic.
The famed stock portfolio run by billionaire investor Warren Buffett ballooned to a value of $281.17 billion by the end of 2020, or more than double the cumulative cost of building these stakes at $108.62 billion, according to Berkshire's latest annual shareholder letter. The value of the portfolio's total equity investments carried at market was up 13.4% compared to year-end 2019. However, Berkshire's own stock underperformed the broader market over that time period: The S&P 500 rose 16.3% in 2020, without including reinvested dividends, while Berkshire's Class B shares increased 2.4%.
Berkshire's stock performance in 2020 relative to the broader market, however, belies what has been, in aggregate, decades of outperformance for the Omaha, Nebraska-based company. Berkshire Hathaway's annual compounded gain between 1965 and 2020 was 20%, versus just 10.2% for the S&P 500. And the firm's cumulative returns over that period have been a whopping 2,810,526% to the S&P 500's 23,454%.
On May 1, Buffett and long-time business partner Charlie Munger will hold Berkshire Hathaway's annual shareholder meeting in Los Angeles. This may serve as a forum for the pair to discuss additional investments purchased and sold in the first months of 2021, ahead of formal 13-F filing reveals later in the month. Last year, Buffett disclosed at the annual meeting that Berkshire had sold out of its entire interest in the airline stocks American Airlines (AAL), United Airlines (UAL), Delta Air Lines (DAL) and Southwest Airlines (LUV) in the first quarter of 2020.
Here's how Berkshire's top 10 stock investments by market value fared over the course of the pandemic, based on the stakes disclosed in the Buffett's latest annual shareholder letter.*
Apple
Buffett pointed to Apple (AAPL) as one of the most valuable assets for Berkshire Hathaway alongside the firm's insurance operation and BNSF Railway, thanks in large part to the iPhone-maker's hefty share repurchases.
Berkshire owned 907,559,761 shares of Apple as of the end of December for a total market value of $120.4 billion. By contrast, the firm spent just $31 billion accumulating this stake since late 2016.
That massive holding — comprising 44% of Berkshire's disclosed assets, according to Bloomberg data — came even after the firm pocketed $11 billion after selling a small portion of its position in 2020.
"Despite that sale – voila! – Berkshire now owns 5.4% of Apple," Buffett said in the shareholder letter. "That increase was costless to us, coming about because Apple has continuously repurchased its shares, thereby substantially shrinking the number it now has outstanding."
Though Buffett has historically steered away from investing in technology companies in favor of businesses he has understood more deeply, Berkshire's major holding in Apple proved auspicious during the pandemic, when Big Tech companies led the market higher.
Photo by: STRF/STAR MAX/IPx 2021 3/15/21 An iPhone 12 pro ·STRF/STAR MAX/IPx
Apple's stock posted a total return of 82% in 2020, outperforming every other "FAANG" stock including Facebook, Amazon, Netflix and Alphabet. The run-up has since cooled in early 2021, however, with the stock posting a total return of just 1.4% for the year-to-date through market close on April 27.
Bank of America
While Berkshire Hathaway unloaded many of its bank stock holdings over the course of 2020, it increased its stake in Bank of America (BAC).
The firm held 1,032,952,006 shares of Bank of America as of the end of 2020, after adding 85.1 million shares in the third quarter alone. This gave Berkshire Hathaway an ownership stake of 11.9%.
By the end of last year, the value of that holding was worth $31.3 million, and cost $14.6 million to amass.
The increase in the size of Berkshire Hathaway's Bank of America holding bucked the trend of the other bank stocks in the portfolio last year. Berkshire cut its holdings of Wells Fargo (EFC) from 345.7 million shares at year-end 2019 to 52.4 million by year-end 2020, and completely exited its holdings in JPMorgan Chase (JPM) and M&T Bank Corp (MTB).
With interest rates sliding amid ultra-accommodative monetary policy during the pandemic, bank stocks were among the worst performers last year. Bank of America shares fell nearly 14% in 2020, underperforming against both the S&P 500 and S&P 500 financials sector, which dropped just 4.1%. However, with interest rates back on the rise and consumer spending accelerating, shares have already started to reverse these declines, and Bank of America shares have risen 32% so far in 2021.
The Coca-Cola Company
Berkshire Hathaway's stake in Coca-Cola (KO) remained unchanged between 2019 and 2020 at 400 million shares, offering 9.3% ownership in the beverage giant. Buffett has been a long-time investor in the firm, having first purchased shares in Berkshire's portfolio in 1988. It has comprised a significant portion of the firm's total holdings and mark value value ever since.
This long-term investment has paid off for the company, with the market value of the shares held totaling $21.9 billion at the end of 2020. Berkshire spent just under $1.3 billion building its stake in Coca-Cola.
Berkshire Hathaway chairman Warren Buffett drinks a can of Cherry Coke at the Berkshire Hathaway annual meeting in Omaha May 1, 2010. Berkshire Hathaway owns about 8.7 % of Coca-Cola Co. REUTERS/Rick Wilking (UNITED STATES - Tags: BUSINESS) ·Rick Wilking / Reuters
While Berkshire's overall return on its investment in Coca-Cola has been formidable, the stock did underperform the broader market in 2020. Coca-Cola shares declined 0.9% during the year as a dearth of live events and concessions weighed on sales, though the stock did still eke out a total return of 2.44% during the year with reinvested dividends. Shares have extended a run of underperformance in 2021, with the stock falling 1.5% so far this year.
American Express
Berkshire Hathaway held 151,610,700 shares of American Express (AXP) as of the end of 2020, with the stock comprising another of the firm's long-standing investments. Berkshire began building its stake nearly six decades ago, paying a total of just $1.29 billion to amass a stake worth $18.33 billion at the end of 2020.
As a business relying heavily on both consumer and corporate spending, however, American Express' suffered a blow in 2020, with its stock dipping 2.9%.
While Buffett has characterized Berkshire's holdings of marketable stocks as a "collection of businesses" in which he shares in long-term prosperity but does not control operations, that hasn't stopped him from imparting advice to executives at some of his top-held companies — especially during the nadir in business and economic activity during the pandemic.
"I talked to our largest shareholder, Warren Buffett, and I've talked to him during this time, the one thing he has and will continue to always point out to us is that the brand is special," American Express CEO Stephen Squeri said during an analyst day presentation in mid-March 2020. "And that brand needs to be cared for, the brand needs to be invested in and we will continue to do so through tough times and through the good times."
More recently, however, American Express's operating results and stock have picked back up. The stock outperformed the S&P 500 with a rise of 25% for the year-to-date. And Squeri said in a fourth-quarter update that non-travel and entertainment spend exceeded pre-COVID levels for a second straight quarter, and that trends overall have "continued to steadily improve," despite some lingering impacts from the pandemic.
Verizon Communications
Verizon Communications (VZ), the parent company of Yahoo Finance, was one of Berkshire's new purchases in the second half of 2020.
Berkshire revealed it amassed a stake of 146,716,496 shares of the telecommunications giant last year, good for a 3.5% ownership of the company.
The holding was worth $8.62 billion as of year-end, representing one of several major investments Berkshire held below cost, which in this case came in at $8.69 billion. The decline likely would have been greater had Berkshire purchased the sizable stake earlier, however, with Verizon's stock having declined 4.3% excluding reinvested dividends over the the full-year 2020.
But even given the pandemic, Verizon's business held up relatively strongly. Full-year 2020 sales edged down by just 3%, and adjusted EBITDA was flat year-over-year. Still, the stock has declined by 4% for 2021-to-date, or by 2% with reinvested dividends.
Warren Buffett, CEO of Berkshire Hathaway Inc, tours the exhibit hall at the company's annual meeting in Omaha, Nebraska, U.S., May 5, 2018. REUTERS/Rick Wilking ·Rick Wilking / reuters
Moody's Corporation
Berkshire Hathaway had a 13.2% ownership stake in Moody's Corporation (MCO) at the end of 2020, with 24,669,778 shares worth a total of $7.16 billion. That generated a notable return for Berkshire, with the cost of building this stake amounting to just $248 million. Berkshire first held shares of Moody's Corporation in 2000.
The credit rating agency outperformed the S&P 500 in 2020 and has since performed about in-line with the market during the COVID-19 recovery. Shares rose by 22% over the course of 2020 and have increased by 12.5% for the year-to-date.
U.S. Bancorp
U.S. Bancorp (USB) was one of a number of holdings Berkshire Hathaway trimmed during the pandemic.
The firm's stake in the parent company of U.S. Bank National Association was reduced to 148,176,166 shares by year-end 2020, compared to 149,497,787 in 2019. However, Berkshire Hathaway stopped short of fully exiting its position in the firm, as it did with some other big banks. Berkshire's position in U.S. Bancorp was worth just over $6.9 billion in year-end 2020, compared to total cost of $5.6 billion.
As was the case for many financial institutions during the pandemic, U.S. Bancorp's stock came under pressure in the low-rate environment of 2020, but has since rebounded. Shares slid by 21.4% in 2020, but have so far risen more than 25% for the year-to-date.
BYD
Shenzhen-based BYD Co. (BYDDF) marks one of just a couple non-U.S. companies in Berkshire Hathaway's portfolio as of the end of 2020. The electric-vehicle manufacturer's stock was also the best-performing in Berkshire's portfolio during the pandemic on a price-appreciation basis, consistent with the outperformance among tech and growth stocks seen over the course of last year in the broader market. In fact, the market value of Berkshire's BYD Co. stake was more than double that of its other major auto-related position in General Motors (GM).
Microsoft Corporation founder Bill Gates, second from right, speaks while American investor Warren Buffett, center, Charlie Munger, vice chairman of Berkshire Hathaway, second from left, and Chinese tycoon, BYD Chairman Wang Chuanfu, right, look on after unveiling BYD's new M6 model in Beijing, China Wednesday, Sept. 29, 2010. (AP Photo/Andy Wong) ·ASSOCIATED PRESS
Berkshire purchased the entirety of his 225 million share stake in BYD back in 2008 for $232 million, after Buffett's business partner Charlie Munger touted the vision of its founder Wang Chuanfu. The value of that stake ballooned to $5.9 billion at the end of 2020. Shares of BYD surged by 432% in 2020 alone, though they have dipped by 13.5% for the year-to-date as some of the exuberance around electric-vehicle stocks moderated at the start of this year.
Chevron
Berkshire Hathaway pounced at the opportunity to purchase Chevron (CVX) during a dip in oil prices and energy stocks last year, snapping up 48,498,965 million shares at a total cost of $4.02 billion. This represented 2.5% of shares outstanding for the stock.
By year-end, the market value of Berkshire's stake increased slightly to about $4.1 billion, with energy prices back on the rise following the worst points of spring 2020. Chevron's stock slid 30% between year-end 2019 and year-end 2020.
Berkshire's investment has already begun to appreciate in value in the early months of 2021, with energy as the best-performing sector in the S&P 500 for the year-to-date. Chevron shares have risen 21.6% so far this year for a price appreciation nearly double that of the broader market, not including reinvested dividends.
Charter Communications
Charter Communications (CHTR) marked another holding Berkshire Hathaway trimmed in 2020. In August of last year, Berkshire reported it had cut its stake by 4% to a total of about 5.2 million shares.
The sale still left Berkshire with a 2.7% stake in the company, and holdings worth $3.45 billion by year-end 2020, at a total cost of just $904 million. Berkshire had been accumulating its stake in Charter since 2014.
Shares of Charter Communications rose 36% in 2020, but have given back some of these gains after dipping 1.2% so far in 2021.
* This analysis excludes Berkshire Hathaway's Kraft Heinz holding of 325,442,152 shares, since this is held using a different accounting method. Berkshire reported that the market value of these shares was $11.3 billion as of December 31, 2020.
