S&P 500: Warren Buffett makes all his money with just 11 stocks

Warren Buffett is having a much better year than most S&P 500 investors. And he can thank a handful of stocks for that.


Only 11 shares in Berkshire Hathaway‘s (BRKB) just reported portfolio of 50 US listed companies – inclusive Western petroleum (OXY), Chevron (CVX) and McKesson (MCK) — are rising this year, says Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That means only 22% of its stocks are up in this rough year for the S&P 500.

It’s not a great achievement. It’s a lower success rate than the S&P 500, where more than 27% of the stocks in the index are up this year. But the fact shows how important Buffett’s runaway winners are this year. Shares of Berkshire Hathaway are up 2.5% this year, while the S&P 500 is down 17%.

The source of most of Buffett’s big profits

If you’re losing money on three-quarters of your stock but still beating the market like Berkshire Hathaway did this year, it pays to see what works so well.

And for Buffett, there’s no question what that is: energy. Both of Buffett’s top stocks this year come from the energy sector. And the energy sector is the only one of the 11 S&P 500 sectors to rise this year.

Energy is the third largest weighted sector in Buffett’s portfolio at 13%. Energy, on the other hand, makes up only 5% of the S&P 500, ranking eighth among all sectors. And that’s enough to make up for Buffett’s two biggest individual bets, Apple (AAPL) and bank of America (BAC), both are down about 16% this year.

Looking at Buffett’s big winners

Some of Buffett’s energy stock picks have also been absolute home runs. Occidental Petroleum, a Houston-based energy explorer, is by far Buffett’s top stock this year, up more than 142%. That was an exceptionally good call, beating the 64% gain of the Energy Select Sector SPDR ETF (XLE).

And he has aggressively added to the position as well. With a portfolio holding of $14.5 billion, Occidental is now Buffett’s sixth largest bet. It ranks just behind some of his perennial favorites such as Coca-Cola (KO), which is also rising this year, by almost 2%.

Berkshire Hathaway now owns more than 21% of Occidental.

Another of Buffett’s big winners is an energy game: Chevron. Shares are up more than 54% this year. Buffett also bet heavily on it, increasing the advantage. Berkshire Hathaway’s stake in the company is estimated to be in excess of $31 billion, making it the No. 3 largest holding in its portfolio.

Buffett’s winners: more than just energy

That’s not to say that energy is the only reason why Buffett is having a better year than the S&P 500. McKesson, a service provider to the pharmaceutical industry, saw its shares rise more than 46% this year. With a position size of $1.1 billion, it’s not a big gamble for Buffett’s Berkshire Hathaway, but it’s not a small one either.

And Buffett is holding on to telecom stocks T-Mobile US (TMUS) after finally throwing in the towel on his rival Verizon (VZ). And it’s a good thing. Shares of T-Mobile — in which Buffett is still a relatively small investor, with less than 1% of shares outstanding — are up more than 27% this year.

But it’s important to note that it’s hard to evaluate Buffett’s record based on just one year — no matter how dramatic a year it may have been.

“Do you want to know why (Buffett) is one of the richest people in the world? Part of it is natural that he has put together money at a high interest rate,” said Whitney Tilson of Empire Financial Research. But most people don’t fully appreciate the equally important second part of the equation: He did it for a long period of time. of time.”

But it’s still worth noting what works for the world’s most famous investor in a year like this.

Warren Buffett’s Best Stocks This Year

Top performing stocks in Berkshire Hathaway’s portfolio

Company Symbol Year-to-date change Sector
Western petroleum (OXY) 143.6% Energy
Chevron (CVX) 55.8 Energy
McKesson (MCK) 46.1 healthcare
T-Mobile US (TMUS) 27.5 Communication Services
Bulb life (GL) 20.1 Finance
Activision Blizzard (ATVI) 11.0 Communication Services
Kroger (KR) 6.0 Consumer Goods
Kraft Heinz (KHC) 5.2 Consumer Goods
Coca-Cola (KO) 2.1 Consumer Goods
Johnson & Johnson (JNJ) 1.9 healthcare
Markel (MKL) 1.7 Finance
Sources: S&P Global Market Intelligence, IBD

Follow Matt Krantz on Twitter @mattkrantz


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