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Warren Buffett’s Performance in 2021: 10 Best Stock Picks

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·9 min read
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In this article, we discuss the 10 best stocks picks and performance of Warren Buffett in 2021. If you want to skip our detailed analysis of these stocks, go directly to Warren Buffett's Performance in 2021: 5 Best Stock Picks.

Warren Buffett and his hedge fund, Berkshire Hathaway, were one of the best performers in 2021 and look set to have an even better 2022 as the Federal Reserve prepares to raise interest rates. Buffett is already one of the most successful investors of the modern era, having delivered a compound annual growth rate of around 20% to investors between 1964 and 2020. To put this achievement into perspective, the returns of the benchmark S&P 500 during the period, including dividend payouts, clock in at just over 10%.

Most of the stocks in the Berkshire Hathaway portfolio in 2021 registered double-digits returns. Some of the best performing stocks in the Berkshire Hathaway portfolio in 2021 included Apple Inc. (NASDAQ:AAPL), Wells Fargo & Company (NYSE:WFC), Bank of America Corporation (NYSE:BAC), and The Bank of New York Mellon Corporation (NYSE:BK), among others discussed in detail below. The portfolio value of Berkshire Hathaway at the end of September 2021 was more than $293 billion with the top ten holdings comprising 88% of the portfolio.

Reports suggest that the Fed could raise interest rates three times in 2022 to keep pace with rising inflation. This would suggest that a broad correction in growth stocks is on the way. The rise in interest rates would also favor bank and finance stocks, increasing their earnings by hundreds of millions overnight. In the first few weeks of 2022, the market valuation of Berkshire Hathaway, the holding company that Buffett owns, has already climbed to over $700 billion, putting it on track to reach the $1 trillion milestone.

Our Methodology

The companies listed below were picked from the investment portfolio of Berkshire Hathaway at the end of the third quarter of 2021. The stocks that have featured in the portfolio consistently for the first, second, and third quarter of 2021 were selected and sorted based on their gains in 2021.

The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey.

Warren Buffett's Performance in 2021: 10 Best Stock Picks
Warren Buffett's Performance in 2021: 10 Best Stock Picks

Warren Buffett's Performance in 2021: Best Stock Picks

10. U.S. Bancorp (NYSE:USB)

Number of Hedge Fund Holders: 42

Gain in 2021: 21%

U.S. Bancorp (NYSE:USB) is another long-term holding in the Buffett portfolio. According to data available with Insider Monkey, Berkshire first bought a sizeable stake in U.S. Bancorp (NYSE:USB) during the fourth quarter of 2010. The fund has added to that stake in years since, most prominently in the second and third quarter of 2018. The stake was worth more than $7.5 billion at the end of September 2021.

Hedge funds have been bullish on the U.S. Bancorp (NYSE:USB) as a new fiscal year begins. At the end of the third quarter of 2021, 42 hedge funds in the database of Insider Monkey held stakes worth $8.39 billion in U.S. Bancorp (NYSE:USB), up from 41 the preceding quarter worth $8.30 billion.

In its Q4 2020 investor letter, Mairs & Power, an asset management firm, highlighted a few stocks and U.S. Bancorp (NYSE:USB) was one of them. Here is what the fund said:

“On the negative side, one of the Fund’s biggest detractor in 2020 was U.S. Bancorp (USB). Like all banks, U.S. Bank was hurt by the difficult interest rate environment and credit cycle concerns. We believe banks are strong enough to survive the current sector doldrums, and they remain some of the market’s most attractive opportunities.”

9. Moody's Corporation (NYSE:MCO)

Number of Hedge Fund Holders: 58

Gain in 2021: 33%

Moody's Corporation (NYSE:MCO) is an integrated risk assessment firm. It has been one of the favorite stocks among hedge funds for many years. At the end of the third quarter of 2021, 58 hedge funds in the database of Insider Monkey held stakes worth $15 billion in Moody's Corporation (NYSE:MCO), up from 44 in the previous quarter worth $16 billion.

Moody's Corporation (NYSE:MCO) comprises close to 3% of the Berkshire Hathaway portfolio. The company has featured in the Buffett portfolio since the fourth quarter of 2010. The last activity of Berkshire around the stake, worth over $8.7 billion at the end of the third quarter of 2021, was registered in the fourth quarter of 2013.

Just like Apple Inc. (NASDAQ:AAPL), Wells Fargo & Company (NYSE:WFC), Bank of America Corporation (NYSE:BAC), and The Bank of New York Mellon Corporation (NYSE:BK), Moody's Corporation (NYSE:MCO) is one of the stocks attracting the attention of elite investors.

In its Q4 2020 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Moody's Corporation (NYSE:MCO) was one of them. Here is what the fund said:

“Moody’s Corporation provides credit ratings, financial intelligence, and analytical tools to assist businesses in making decisions. Moody’s reported excellent financial results due to continued growth in rated debt issuance. However, the stock detracted on investor expectations that issuance trends will moderate into 2021.The announced retirement of long-time CEO Ray McDaniel may have also weighed on sentiment. We continue to own the stock due to our views of the company’s long runway for growth and strong competitive advantages.”

8. Apple Inc. (NASDAQ:AAPL)

Number of Hedge Fund Holders: 120

Gain in 2021: 37%

Buffett, who generally likes to invest in value stocks with long-term growth potential, made headlines when he bought a small stake in Apple Inc. (NASDAQ:AAPL) through Berkshire Hathaway in the first quarter of 2016. The fund then added heavily to the stake in the coming two years, adding as much as 276% and 125% in late 2016 and early 2017. Buffett has largely held onto that stake and Apple Inc. (NASDAQ:AAPL) is now the largest Berkshire holding worth more than $125 billion.

Apple Inc. (NASDAQ:AAPL), the largest tech firm in the world, is also one of the most popular stocks among hedge funds. At the end of the third quarter of 2021, 120 hedge funds in the database of Insider Monkey held stakes worth $146 billion in Apple Inc. (NASDAQ:AAPL).

Apple, like Wells Fargo & Company (NYSE:WFC), Bank of America Corporation (NYSE:BAC), and The Bank of New York Mellon Corporation (NYSE:BK), remains one of the most famous stocks in Buffett's portfolio.

In its Q1 2021 investor letter, Distillate Capital, an asset management firm, highlighted a few stocks and Apple Inc. (NASDAQ:AAPL) was one of them. Here is what the fund said:

“Apple is an even more notable situation and one that highlights our free cash valuation methodology and bears further discussion given its Q3 ‘20 sale from our strategy. For an extended period, Apple was extraordinarily inexpensive on a free cash flow basis and was the largest position in our strategy, exceeding 5% of the portfolio.”

7. American Express Company (NYSE:AXP)

Number of Hedge Fund Holders: 57

Gain in 2021: 38%

American Express Company (NYSE:AXP) has attracted the attention of hedge fund titans as inflation rises and finance stocks make a strong comeback at the market. Among the hedge funds being tracked by Insider Monkey, Washington-based firm Fisher Asset Management is a leading shareholder in American Express Company (NYSE:AXP) with 15.6 million shares worth more than $2.6 billion.

Buffett invested in American Express Company (NYSE:AXP) in late 2010, just around the time that finance stocks had been battered by the 2009 crisis and were trading at a discounted price. The legendary investor held onto that stake for a couple years before selling all of it and then rebuying in late 2013. American Express Company (NYSE:AXP) is now the third largest holding in the Berkshire portfolio worth over $25 billion.

In its Q2 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and American Express Company (NYSE:AXP) was one of them. Here is what the fund said:

“In financials, American Express has done an excellent job demonstrating the resiliency of its franchise in the midst of a global pandemic that drove a 60% decline in its core travel and entertainment business. The company’s spend-centric model has been helped by fiscal stimulus ensuring a flush consumer, while management continues to execute well by adding millions of new consumer and small and medium business accounts, which should benefit the franchise over the medium to long term. We remain optimistic regarding the company’s prospects as travel and entertainment activity rebounds, adding to our position in the quarter.”

6. Chevron Corporation (NYSE:CVX)

Number of Hedge Fund Holders: 51

Gain in 2021: 38%

Energy stocks like Chevron Corporation (NYSE:CVX) have seen a lot of hedge fund investment in the past few months as energy prices take off. At the end of the third quarter of 2021, 51 hedge funds in the database of Insider Monkey held stakes worth $4.4 billion in Chevron Corporation (NYSE:CVX), up from 50 in the preceding quarter worth $4.2 billion.

Buffett, well-known for his long-term bets, only invested in Chevron Corporation (NYSE:CVX) in the third quarter of 2020, buying a stake worth 44 million shares in the energy giant at an average price of $84.1 per share. The fund then reduced that stake by almost half in early 2021 before adding to it in the third quarter of 2021. The holding is presently worth close to $3 billion.

In addition to Apple Inc. (NASDAQ:AAPL), Wells Fargo & Company (NYSE:WFC), Bank of America Corporation (NYSE:BAC), and The Bank of New York Mellon Corporation (NYSE:BK), Chevron Corporation (NYSE:CVX) is one of the stocks that hedge funds are buying.

In its Q1 2021 investor letter, ClearBridge Investments highlighted a few stocks and Chevron Corporation (NYSE:CVX) was one of them. Here is what the fund said:

“While reducing in health care and consumer staples, we increased our exposure to high-quality names in economically sensitive areas of the market. We added to low-cost, high-quality energy names, (including) Chevron. We are positive on the company’s strong balance sheets, competitive positions and exposure to an economic recovery.”

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Disclosure. None. Warren Buffett's Performance in 2021: 10 Best Stock Picks is originally published on Insider Monkey.