Berkshire Hathaway Chair Warren Buffett is a legendary value investor, buying great companies with long-term potential at reasonable prices for massive gains over time. He maintains a diversified portfolio worth $331.68 billion, according to Berkshire Hathaway's 13F filing for the quarter ended March 31.
While Buffett's investments range across industries, these three stocks can make waves this year.
1. Apple (Nasdaq: AAPL)
Buffett first invested in Apple in 2016. It is now the largest holding in his portfolio, with a 40% exposure worth over $135 billion.
Despite posting a 4% year-over-year (YoY) drop in overall revenue to $90.8 billion on slower iPhone, iPad, and Apple Vision Pro sales in the March-ended quarter, Apple somewhat offset the revenue decline with a markable jump in sales from its services sector covering segments like iCloud and Apple TV+.
The Apple stock has rebounded from its low of around $165 on April 19 and continues to climb, hovering above $193 as of June 11. The tech giant has long avoided getting into the AI frenzy but finally joined Google and Microsoft to announce multiple AI tools and features yesterday in collaboration with OpenAI.
In an hours-long presentation at the Worldwide Developer Conference organised by Apple yesterday, the company announced upgrading the virtual assistant Siri, which will be more effective with assistance from ChatGPT. Apple also highlighted that customers can create emojis based on language prompts and produce email summaries in the mailbox using its in-house tech.
However, the presentation primarily focused on user privacy. Apple senior vice president of software engineering, Craig Federighi, said that "Apple Intelligence" puts AI models "right at the core of your iPhone, iPad and Mac" and "protects your privacy at every step."
Wedbush analyst Daniel Ives reiterated his "Outperform" rating on the stock with a stock target price of $275 per share, implying more than a 30% upside potential. He sees Apple's AI strategy announcements likely trigger an AI-based iPhone growth cycle.
Ives noted that AI in the Apple ecosystem will introduce scope for "ample monetisation" and add between $30 and $40 per share to the company's growth story. He anticipates a formal announcement from Apple about its OpenAI collaboration and the launch of the AI-powered iPhone 16 this year to position the company for iPhone volume growth as a major overdue upgrade cycle begins next year.
2. Amazon (Nasdaq: AMZN)
Buffett's Berkshire Hathaway started investing in Amazon in 2019 and currently owns 10 million company shares worth $1.8 billion. Buffett had called himself an "idiot" for not buying Amazon stocks sooner.
The company's popular Prime loyalty program, dominance in the cloud infrastructure business, and never-ending focus on improving customer satisfaction are receiving a boost with the infusion of AI.
In its Q1 earnings results, Amazon posted a 17% YoY growth in Amazon Web Services (AWS) to drive an overall increase in net revenue by 13% YoY to $143.4 billion. The company's net income and operating income also tripled YoY as CEO Andy Jassy explained that "the combination of companies renewing their infrastructure modernisation efforts and the appeal of AWS's AI capabilities is reaccelerating AWS's growth rate (now at a $100 billion annual revenue run rate)."
Jassy added that the "Stores business continues to expand selection, provide everyday low prices, and accelerate delivery speed (setting another record on speed for Prime customers in Q1) while lowering our cost to serve."
The company also announced AWS' partnership with IT giant Accenture to assist companies in highly regulated sectors in integrating and scaling generative AI tech with Amazon Bedrock. Furthermore, AWS is also collaborating with Nvidia on Project Ceiba to develop an AI supercomputer for the latter's R&D requirements.
On the grocery side of the business, Amazon announced plans to trim the prices of over 4,000 grocery items with its Fresh service by more than 30% as competitors like Walmart and Target also slash prices, and groceries remain a category where Amazon is not the market leader.
Bernstein analysts remained overweight on Amazon and recently noted that the March-quarter earnings reports showed "cloud optimisation efforts for the Big Three look to have bottomed out."
"We expect revenue to continue accelerating sequentially, as core migrations and activity are picking back up while optimisations continue to fade, and exit the year on a roughly 20%+ growth rate," they wrote.
3. Chubb (NYSE: CB)
Buffett's latest filings with the US Securities and Exchange Commission also revealed his mystery stock, Chubb, a leading insurance provider worldwide. He secured regulatory approval to keep the stock a secret until his fund finished building its stake.
Berkshire Hathaway increased its stake in Chubb last quarter by 5.82 million shares to own 25.92 million company shares worth $6.72 billion. Chubb is in over 50 nations and offers a range of products covering property and casualty (P&C) insurance and health and life insurance policies.
For the quarter ended March, Chubb's net income grew 13.3% YoY to $2.14 billion, while core operating income jumped by an impressive 20.3% to $2.22 billion. The firm's P&C net premiums written (ex-agriculture) gained by 13.3% YoY, with consumer insurance up 19.3%. Meanwhile, P&C's underwriting income increased by 15.4% to $1.40 billion.
Chubb CEO Evan G. Greenberg said, "We produced double-digit premium revenue growth from across the globe with strong results in our commercial and consumer P&C and Asia life businesses."
"The P&C underwriting environment in North America overall is quite favourable, financial lines aside, with pricing exceeding loss costs, which remained steady. From our large middle market business to small commercial to personal lines, and driven by both property and casualty, we saw the best rates and pricing overall that we have seen in the last four to five quarters," Greenberg added.
He concluded: "Looking forward, we are confident in our ability to continue growing operating earnings at a rapid pace through P&C revenue growth and underwriting margins, investment income, and life income."
The Oracle of Omaha's Berkshire Hathaway has a large insurance business with subsidiaries like Geico. Hence, Chubb may be a comfortable buy for Buffett.
Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.
