Warren Buffett stocks for 2021! What we can learn as investors.

let's analyze warren buffett's recent moves in the stock market and what we can learn as value investors from that [Music] hey guys welcome to my channel investing on tangles hope you're all doing well on this channel i post videos about stock market research detail business and stock analysis and also educational videos about stock market investment and if this is something that interests you then hit the subscribe button and follow my content here in this video today i'll discuss what moves warren buffett has been making in the stock market in the last two quarters warren buffett is the ceo of berkshire hathaway which is a huge holding company which wholly owns many companies and also has huge stakes in publicly traded companies in the us and elsewhere and warren buffett is the best investor in the world and learning from his moves teaches us a lot about value investing principles it also gives us an indication of what the market in general looks like and as value investors we should always be looking at the 13f data which comes out every quarter where we can track what our favorite investors are doing so here today i'll be discussing what moves berkshire hathaway is making what sectors they are betting on and what warren is buying and selling and we can analyze these businesses and think why warren is actually betting on these businesses and this will teach us a lot about value investing principles and what warren is looking for when he invests in companies so without further ado let's get started and see what warren has been up to in the last two quarters so historically berkshire's cash on hand has been a very good indicator for value investors like us here you can see how the cash reserves have fluctuated in berkshire in the last many years so around 2006 2007 the cash reserves were around 47 billion dollars and around the financial crisis which hit around 2008 and 2009 the cash reserves went down because warren was doing a ton of buying so he deployed his cash to buy a ton of different businesses and after that as the market started going up so did the cash reserves of berkshire that means the opportunities in the market became more and more limited there was a very strong bull market going up and warren was holding cash and waiting for opportunities and he found actually opportunities in apple around 2016 2017 time and that's when he deployed a ton of cash buying apple and you can see that here 2016 quarter one was when warren started buying apple and that's right here and over the years he has built this position up quite massively and right now it is actually the biggest position in warren's portfolio now if you look at what prices warren actually paid for apple there was a stock crash of apple around 2015-16 so the stock price went all the way from around 33 dollars down to 23 and that's when berkshire started its position and since then it kept building its position and then apple had a major bull run especially in the last year but now looking at what warren has been doing in the last quarter you see actually in the last two quarters you see here berkshire actually has been reducing apple stock and here in q4 they trimmed it by six percent also in q3 they reduced it by 3.7 percent so all in all they have been actually reducing apple and if you look at the numbers for apple here you see that the stock price is actually significantly overvalued it is at its all-time highs and the valuation rank for apple is very low it's just one out of ten and apple is at a forward pe of 30 which is very high for a company with a limited growth going forward and i think this is the reason why berkshire has been actually trimming its position in apple and this is sort of unlike buffett because he has said in the past that berkshire doesn't believe in trimming positions and they only sell when the economics of a business changes when the fundamentals change but here it seems that apple has become extremely overvalued and they have started sort of modifying their investing style and they have started trimming this position here the other major trend that continues for berkshire is leaving financial companies behind so buffett totally closed the position of jp morgan and also mtb and also reduced the us bank corp and sold out pnc financial services there was also a massive reduction in wells fargo close to a 60 reduction and this trend actually continues from their activity in q3 where they actually started selling banks so jp morgan was already reduced pretty massively in q3 and also wells fargo pnc financial services m t bancorp so it seems warren is moving away from banks and he's selling off these bank stocks and moving to other sectors that i'll show you in a bit now the biggest bank that they hold in their portfolio is bank of america and this is almost 12 so 11.34 off their portfolio jpmorgan chase was one of the banks that warren completely sold and here you can see jp morgan is at its all-time highs so again suggesting that he thinks probably that it is overvalued and the sector as a whole is probably not going to grow its revenues a lot and and the interest rates are right now low and that's going to affect their revenues a lot so that's probably why he is just stepping out of banks warren also sold barrack gold corporation which actually had recently bought and this was kind of surprising to me and he also sold out pfizer completely now looking at their cash position as of the third quarter of 2020 so the fourth quarter numbers aren't out yet berkshire's sitting at a cash pile of 23 billion dollars and they have 118 billion dollars in short-term investments meaning this can be converted to cash readily so all in all it's almost 140 billion dollars that they have in cash or they had in cash at the end of third quarter of 2020 and that is a lot of money that is on the sideline so clearly it doesn't seem like there are a whole lot of opportunities out there that they're finding where they can deploy all this cash and value investors have traditionally seen berkshire's cash positions to get an indication of the market in general and what kind of opportunities are out there and if the cash pile of berkshire keeps increasing that is suggestive of the market getting into a bubble territory and the market getting more and more expensive now let's look at what berkshire actually bought in the fourth quarter of 2020 so warren seems to be pretty bullish on the pharmaceutical sector he has been adding to his positions in pharmaceutical companies bristol meyer's crib have we merck and he actually started these positions in q3 of 2020 so here you can see that these were new buys all three of them along with pfizer which surprisingly he just sold in this quarter so he has been adding to these pharmaceutical positions and if you look at one of the companies for example abv you see that it is at a price to forward earnings of 8.49 which is very attractive given how expensive the market is right now so this seems to be a nice value play and every has gone up recently but berkshire actually bought every uh in the third quarter of 2020 when it was in the 80 90 range on top of a low forward price to earnings abby also has a very nice dividend yield of almost five percent and two more interesting positions that he actually added to were verizon and chevron corp and he started actually both these positions in q3 of 2020 now if you look at verizon it trades around 56 dollars right now and the reported price on data roma at which berkshire bought the stock is around 58 so this is a solid blue chip company with a very good profitability rank and it follows classic buffett parameters like high net margins of around 14 very high return on equity 28 and very high return on invested capital of 23 the company in my opinion is fairly valued as it is also shown here on the guru focus page so i don't think that it is a steal at these prices and if you look at their valuation rank so here you see they have 5 out of a 10. so this company is at a forward p e of 11 which is very nice and has a current ratio of 1.38 suggesting that they can easily cover for their current liabilities now if you look at their financial strength they do have quite a bit of debt with a debt to equity ratio of 2.22 which is on the higher side so in this regard this is unlike other positions that berkshire has warren generally likes companies which are very very low on leverage they do have a good interest coverage though at 6.78 and interest coverage is basically a ratio between a bit which is earnings before interest and taxes and the interest expense so you can imagine if the interest expense is low the interest coverage is high that means the company can easily pay off its interest expense so the higher this number the better the company is financially so in my opinion this is a classic warren buffett style move in the in the regard that it is a very solid company and it is fairly priced so it's not expensive i don't think it's undervalued either but in my opinion they are probably going to have a good increase in revenues because of 5g coming along and berkshire started buying verizon in the q3 of 2020 and they actually filed a confidential order with the sec where they did not disclose one of their buys and here you can see for the first time in years buffett disclosed that the firm is withholding confidential information from its 13f and this was q3 of 2020. so they were actually building this position up but they did not disclose it so that the price remains low the other interesting investment by berkshire was chevron corporation this oil and gas company and here also berkshire was actually buying it in the third quarter of 2020 and the reported price is around 85 dollars and this sector has already seen a big run up in the last few weeks and right now the price has gone up to 95 already and berkshire is already in profit and i actually thought this is also very unlike warren buffett because generally he is not interested in price competitive businesses that have very high capital expenditures and oil and gas sector is generally the sector where the capital expenditures are extremely high and these companies have price competition but i guess the rationale was that there was such a big pent-up demand because of lockdowns and travel restrictions and all this demand would actually trigger an increase in prices and that will eventually increase the revenues of these oil companies so that's probably why berkshire bought chevron so the lessons that are to be learned from these investments here are that you have to be flexible in your approach even though warren has said that he generally doesn't trim positions he started doing that with apple he also doesn't generally go for high capex industries he did that with chevron so basically if the opportunity fits in the broader guidelines of value investing meaning you're buying a solid company at a fair price or at an undervalued price and your downside is minimal while the growth opportunity for the company and the sector is good you make the investment so this finishes the analysis let me know in the comments section below if you are interested in any of these sectors that berkshire is deploying its cash in and i'll be sure to follow up with you if this video was informative for you please consider leaving a like and subscribe to this channel investing on tangle i'll be bringing in a lot of new videos like this and also detailed stock analysis videos so this is pretty much all for this video and i'll see you in my next one [Music]

Channel: Investing Untangled

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Keywords: warren buffett stocks, warren buffett portfolio 2021, warren buffett 2021, warren buffett investment strategy stocks, warren buffett investment strategy 2021

Id: LN1TztRIqB4

Length: 12min 12sec (732 seconds)

Published: Sun Feb 21 2021