What Happens to Warren Buffett’s Top 10 Performing Stocks of 2012? (BRK-B, BRK-A, USG, IR, MCO, AXP, WFC, V, BK, VRSK, INTC, MA, AAPL, JNJ, BAC)April 18, 2012 by Jon C. Ogg
Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B) will be in the news quite a bit now that the world’s most famous investor, chairman Warren Buffett, has been diagnosed with prostate cancer. We already have offered a brief road map of what investors can expect in the months ahead based on the face value of the news and based on Mr. Buffett’s comments. With so many investors wondering what comes next, we wanted to take a look at Berkshire Hathaway’s best-performing stock holdings so far in 2012.
Some investors may worry that, if Buffett were to leave, the portfolio would perhaps find a large rotation out of current positions. While anything is possible, we expect almost no change whatsoever to the Berkshire Hathaway portfolio based on the cancer news. Some new stocks may still get added with two new portfolio managers inside the conglomerate. Some stocks also may get paired down further. That being said, Buffett has treated these holdings in many cases as though they are “partner companies” rather than mere stock investments that are to be bought and sold solely based on the price gain or loss at a certain time.
Buffett’s top 10 performers so far this year are significantly outperforming the broader market indexes. The DJIA is currently up about 8.1% so far in 2012, and the S&P 500 Index is outperforming the DJIA with a gain of 11.3%, due to such a high weighting and strong performance of Apple Inc. (NASDAQ: AAPL). Berkshire Hathaway Inc. (NYSE: BRK-A) is only up by 5.7% so far in 2012, and that is before the effect of Buffett’s cancer news. Only one of Berkshire Hathaway’s 30-plus common stocks is down so far in 2012, and that is Johnson & Johnson (NYSE: JNJ), with a loss of only 1.2%.
What was most interesting about the holdings noted as 2012’s 10 best performers is that the dividends are often paltry. Most have dividend yields that are well below average. We have given some color on each position, shown some trends on each, and shown the price and relative price performance on each. It is no coincidence that the financial stocks in the Berkshire Hathaway portfolio are up so much when you consider that the financial sector led the market in the first quarter and so far this year.
USG Corporation (NYSE: USG) is Warren Buffett’s single best stock performer so far in 2012, as Americans continue to look for ways to play a coming housing recovery. The latest NAHB confidence dip may be a concern, but perhaps a remodel housing economy can be enough to return a turnaround here. What is interesting is that Thomson Reuters is currently looking for a loss of $1.30 per share in 2012 and a loss of $0.52 in 2013, despite what it expects to be rising sales. Unlike most of Buffett’s top stocks, USG pays no common dividend. The $16.89 share price compares too a 52-week trading range of $5.75 to $19.44.
Ingersoll-Rand Plc (NYSE: IR) turned out to be Buffett’s second-best common stock in 2012, with a gain of 32%. The company makes tools, compressed air systems, ARO fluid products and lifting and material handling products, among other products and services. The dividend yield here is roughly 1.6%. At $40.06, its 52-week trading range is $25.86 to $52.33.
Moody’s Corporation (NYSE: MCO) may be quite out of favor and may be widely disliked for its role in missing the whole mortgage crisis when it came to ratings, but it is actually Buffett’s third-best performing common stock, with a gain of 27.4% so far in 2012. It is probably worth noting that Buffett has taken this position lower since the recession, but he kept more of this one than we would have anticipated considering an obvious secular change that was going to be an overhang compared to the past of pay-for-ratings. Moody’s pays a dividend yield of only about 1.5% based on today’s price. At $42.73, its 52-week trading range is $26.79 to $43.05.
American Express Co. (NYSE: AXP) is the number-four common stock, as far as best performers in the Berkshire Hathaway portfolio, with a gain of 24.2% year to date. And it should be noted that Buffett has one monster gain here and that it has been in the portfolio for years and years. AmEx is hardly a bank. But it is worth noting that the Buffett carry-cost and market value of his huge investment in Bank of America Corporation (NYSE: BAC) preferred shares and warrants would be rather interesting to see in a comparison because BofA shares are up 60.7% so far in 2012. The shares are now much higher than when Buffett made the big investment last year. Still, we are keeping this on an apples-to-apples comparison. AmEx pays a dividend of only 1.4% based on current share prices. It trades at $58.18, and the 52-week range is $41.30 to $59.26.
Wells Fargo & Co. (NYSE: WFC) is Buffett’s favorite money-center bank stock, and the 22.7% gain so far in 2012 puts it as the fifth best-performing stock in the Berkshire Hathaway common stock portfolio. This is the only one of the money-center banks trading above its book value as well, based on the notion that Dodd-Frank and trading regulations will have the least impact on this operation. Buffett has continued to add to this position, and the market value of this holding alone is worth about $12.9 billion as of now. Wells Fargo offers up a 2.7% dividend yield, based on the price of $33.68, and its 52-week trading range is $22.58 to $34.59.
Visa Inc. (NYSE: V) is Berkshire Hathaway’s sixth-best common stock year-to-date, with a gain of more than 20.4%. Buffett and friends have added to the stock position here of late and now hold more than 2.8 million shares. The attraction is obvious in that Visa is merely the toll road for retail transactions and carries effectively no transaction risks, nor does it have to worry whether customers are slow or delinquent in their monthly credit card bills. Its dividend yield is a paltry 0..7%, but that should rise through time. At $122.08, its 52-week range is $73.11 to $123.68.
The Bank of New York Mellon Corporation (NYSE: BK) came in at number-seven of the common stock performers as this trust and fiduciary bank is up 20.3% so far in 2012. The bank’s common stock dividend is currently 2.2%. At $23.80, the 52-week range is $17.10 to $29.25.
Verisk Analytics, Inc. (NASDAQ: VRSK) came in at eighth of the best performers year-to-date, with a gain of 18.8%. Portfolio manager Todd Coombs added this position and Verisk is a relatively young public company compared to Berkshire Hathaway’s other portfolio positions. Verisk offers risk management software and services to the insurance and financial sectors. It currently pays no dividend, and at $47.69 its 52-week trading range is $30.88 to $47.99.
Intel Corporation (NASDAQ: INTC) is fresh off of earnings and its year-too-date performance without considering the earnings report reaction was 18.3%. This is one of Buffett’s first real technology investments, and while it has grown it is still a relatively small position for Berkshire Hathaway of only about 11.5 million shares (worth about $327 million). Intel is one of the higher-yielding stocks, with a dividend of about 3% today. At $28.47, the 52-week range is $19.16 to $28.78.
MasterCard Inc. (NYSE: MA) is the tenth-best return for Team Buffett so far in 2012, with a gain of 17.7%. Just like Visa, it acts as the toll road. It is also likely one of the positions of the new portfolio managers, as it is still small at $177 million or so in value. MasterCard pays a paltry divided with a yield of only 0.3% based on the current price of $438.43, and it has a 52-week trading range of $258.34 to $443.80.
JON C. OGG