Wondering how Buffett’s top picks are faring in 2018?

 

Warren Buffett has dominated news headlines the last couple of days following Berkshire Hathaway’s (BRK.A) annual shareholders meeting.

The biggest news to come from the meeting was the big bet the firm made during the first quarter on tech titan Apple (AAPL). While others see potential weakness in the company for fear of slowing iPhone sales, Buffett sees a fantastic company that was worth buying an additional 75 million shares in addition to its previous 165 million shares, and stated that he would like to own 100% of the company.

Buffett is the most legendary of all investors, with a rabid following that track his every move in hopes of duplicating the investing success that he has enjoyed over the years. His moves are so respected that his Apple announcement pushed the stock to a new record high.

Buffett is a long term investor with a very impressive track record, so it is understandable why some traders try to replicate and copy his every move. For investors that like to invest based on which stocks Buffett believes in, let’s take a look at how his largest positions have fared so far in 2018.

Wells Fargo

Banking giant Wells Fargo (WFC) was Berkshire Hathway’s largest position at the end of 2017, although that is very likely to change after the buying spree in Apple (AAPL) that took place during the first quarter. Wells Fargo has struggled in 2018, with shares being dragged down by fallout over the bank opening accounts without customer’s permission. It is estimated around 3.5 million accounts were created, which is around 70% more than the number originally reported. Buffett has stated that the company made one big mistake, but overall is a very good business. The stock appears to have found support, but it will be hard to see shares make a meaningful rally while the fake account scandal lingers. WFC is down 12.0% on the year.

Chart courtesy of www.stockcharts.com

Apple

iPhone maker Apple (AAPL) was the second biggest position at the end of last year, but after buying an additional 75 million shares during the first quarter, it is apparent that it has become the largest. Buffett loves the company, and stated he would like to own 100% of it. He cites the company’s enormous profits, which are far ahead of any other U.S. corporation. There are fears over a saturated and slowing smartphone market, but Apple recently announced another strong quarter of iPhone sales, which has somewhat quieted its critics for the time being. The stock hit a new all-time high on news of Buffett’s additional holdings, and the stock has appreciated 11.0% in 2018.

Chart courtesy of www.stockcharts.com

Bank of America

At the end of 2017, Bank of America (BAC) was Buffett’s third-largest holding. The stock enjoyed strong gains during the latter part of 2017 when rising interest rates were driving financial stocks higher, but the stock has cooled off in 2018, and shares have trended sideways for the last two months. The overall market has been volatile, with uncertainties over rising interest rates, inflation, and possibility of a trade war putting the brakes on the market’s strong run over the last year. The financial sector has held up pretty well, but the weak overall market has prevented bank stocks from building on last year’s gains. BAC has remained basically flat on the year, with shares up just 0.3%. Higher interest rates are generally viewed as a positive for the financial sector, so bank stocks should continue to hold up well versus the overall market, but investors should not expect another year of big gains unless the overall market finds its footing and starts trending higher.

Chart courtesy of www.stockcharts.com

Coca-Cola

Buffett has always been a fan of soft-drink maker Coca-Cola (KO), but the overall market has definitely taken a bearish stance on the stock in 2018, with shares losing 7.4% on the year. The U.S. consumer has shifted away from sugary soft drinks, and while Coca-Cola has managed to grow its snack and non-carbonated beverage businesses, traders will continue to take a bearish view of the company due to lower soda sales. The company has reported year over year revenue declines for 12 consecutive quarters, which is another reason investors are bearish on the stock, despite rising earnings as the company cuts costs to help drive the numbers higher. The latest set of quarterly numbers were better than expected, but the top and bottom line beats did nothing to drive the stock higher, and in fact shares hit a new 52-week low in the days following the report. The market is going to need to see meaningful improvement in the company’s soda sales for the stock to regain its strength.

Chart courtesy of www.stockcharts.com

American Express

Credit card stocks have been strong over the last year, and American Express (AXP) is no exception. A strong underlying economy, and low unemployment is boosting consumer sentiment, and credit card usage hit an all-time high in 2017. AXP rose sharply higher in the latter part of 2017, but the stock has trended sideways in 2018. AXP stock is flat on the year, as the sector has cooled in sympathy to a rocky overall market. The company already report its first-quarter numbers, shattering estimates on both the top and bottom line. The outlook remains bright for the sector, which should build on last year’s gains as the overall market finds its footing.

Chart courtesy of www.stockcharts.com

Symbols: AAPL AXP BAC KO WFC
Michael Fowlkes

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.

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