Warren Buffet has been an icon of Wall Street for decades. There’s no question about his investment acumen, given his track record and even the cost basis for many of his investments. Many investors look to him for guidance, and even a select few will pay millions just to have lunch with him.
Buffett has literally coined phrases that Wall Street uses regularly, and with this wisdom he has cashed in as well. Perhaps one of the most famous was: “Only when the tide goes out do you discover who’s been swimming naked.” If anything, that’s more applicable now than ever.
Needless to say, Buffett’s knowledge on the market is valuable. The average investor can only get a glimpse of his ideas, based on his portfolio. Buffett has picked numerous winners in the past and his holdings are balanced enough to withstand economic turmoil.
Buffett has picked losers before too (nobody is perfect), and he most recently has been dealt a tough hand with his airline holdings. However, his overall portfolio remains strong because of the winners that he has picked in the process. Looking ahead to 2021 and beyond, Berkshire Hathaway Inc. (NYSE: BRK-A) has some winners that could very well outperform in the coming months.
24/7 Wall St. has compiled a few of these potential winners among Buffett’s holdings, and why they could rally from here.
Coca-Cola Co. (NYSE: KO) has been a longstanding Berkshire Hathaway holding made by Buffett, and he has collected dividends so many years his cost basis may be close to zero, on a dividend-adjusted basis. This is obviously a defensive stock in Buffett’s portfolio, but there is upside as the economy reopens.
Pepsi’s earnings report on Monday demonstrated that its North American beverage sales slumped by about 7% due to less patronage of restaurants and other social venues. Coca-Cola may have a similar problem, but the worst may be over as the economy is beginning to reopen.
While Coca-Cola has lagged the broad markets in the recovery, it’s entirely possible that the stock will pick up speed as restaurants and other places begin to reopen.
Ironically, Goldman Sachs Group Inc. (NYSE: GS) could be an undervalued position of Buffett’s, considering that he has unloaded so much of it now. Buffett previously disposed of roughly 84% of the stake in Goldman Sachs.
The firm sold down 10.08 million shares of the stock and still held approximately 1.92 million shares at the end of the first quarter. This stake had ties back to a $5 billion preferred share investment during the 2008 and 2009 financial crisis.
One thing to point out here is that this bank has been a king at printing money in the past, and now it is branching out into more retail and social efforts. So what if he sold most of it? He has been wrong about many sales before.
Though Biogen Inc. (NASDAQ: BIIB) has been treated cautiously by most analysts, some still see the stock as undervalued. Buffett’s portfolio managers made that pick, but their stake has potential massive upside if their drug speculation on pays off.
Biotech stocks have been a big winner so far this year, with so much focus on COVID-19. Luckily, Biogen’s portfolio is almost as expansive is Buffett’s, albeit in drugs. Although Biogen does not have any specific COVID-19 plays, it still has promising ongoing trials in Alzheimer’s and Parkinson’s.
This is a fairly new stake at 18.9 million shares, but it makes sense as Kroger Co. (NYSE: KR) has solidified its position as a must-own and essential business that has much more potential upside in the years ahead. It could even become a Buffett buyout target if it were to get cheap again.
Grocery stores are an essential part of the economy during this pandemic, plus with more people staying in and eating at home, rising comparable sales are sure to abound.
Internet infrastructure company Verisign Inc. (NASDAQ: VRSN) enables navigation for various recognized domain names worldwide. It is no secret that tech stocks have been some of the biggest winners from the pandemic, especially software and e-commerce stocks. Although Verisign doesn’t fall directly into e-commerce, it does help facilitate network domains that support it.
Verisign stock is currently holding near its February range, and while it has recovered handily like most of the tech industry, there is still more room to run. Other companies involved in e-commerce have seen massive runs. Considering the market has more or less stabilized, the stock could rise even more as a rising tide lifts all ships.
Sirius XM Holdings Inc. (NASDAQ: SIRI) was trimmed as a position, with the sale of about 3.85 million shares. The Berkshire Hathaway position had been 136.27 million shares at the end of 2019, but at the end of March 2020, it was 132.418 million shares.
Berkshire Hathaway is the second-largest independent holder directly, but it also has the Liberty version of Sirius XM shares. One thing that people do not tend to cut off is Sirius XM, even if there are other choices. Sirius’s acquisition of Pandora and recent podcast deal (buying Stitcher for $325 million) have broadened out its competition. One thing that it holds over the competition, namely Apple and Spotify, is that it has a huge installed base in automobiles.