Stocks That Could Be The Next Berkshire Hathaway: There isn’t an investor anywhere who wouldn’t want a slice of Berkshire Hathaway.
But if you’re new to investing, you might not A) know about this conglomerate or B) have the finances to invest Class A style.
Buying shares in companies poised to be the next Berkshire Hathaway might be your next best bet.
Berkshire Hathaway 101
Not only does Buffett captain Berkshire Hathaway, he largely controls it with a 30% voting- and 16% economic-interest stake.
As of April 2020, Berkshire Hathaway’s Class A stock was selling for $271,475 per share (closed at $271,600 on June 19, 2020).
The average investor might not have that type of investing power and would instead purchase Class B shares which are a watered-down version of the A-shares in price, but no less quality an investment.
How Does Berkshire Hathaway Look in 2020?
In addition to the companies listed above, the Berkshire Hathaway portfolio has gained a few new additions to its roster recently, such as Apple and Amazon – two stocks that could become the next Berkshire Hathaway in their own right.
But upon further examination, Buffett’s stocks look a little more complicated. The Berkshire Hathaway portfolio has undergone significant changes recently.
The most notable of these changes was the exiting of investments in all four of the United States’ major airlines. The market as a whole was rather bullish before the coronavirus took hold, particularly decimating travel and the airline industry.
But airline stocks aren’t the only ones Buffett exited. Buffett held stocks in 49 companies as of Q4 2019.
By end of Q1 2020, Berkshire holds just 43 according to the most recent filing with the SEC. and even though this is still a large number of stocks, the Berkshire portfolio isn’t as diversified as you might think.
Some of these stocks are so new and so small they’re but a drop in the bucket. Others are leftovers from the portfolio’s earliest holdings that have been all but exited entirely.
Which Stocks Get the Buffett Seal of Approval?
The Berkshire Hathaway portfolio already had several health industry holdings as of the end of 2019, but this was significantly added to in Q4 2019 when Buffett put Biogen on the Berkshire roster. He purchased nearly 650,000 shares – the stake is worth over $203.4 million.
Of course, this isn’t huge in the sense of Buffett’s normal stock purchases – in fact, the purchase only accounts for slightly more than .001% of the total equity in Berkshire’s Class B holdings.
Berkshire Hathaway isn’t even in the top 25 of Biogen’s investors. It’s thought that, because the holding is relatively small, it wasn’t necessarily Buffett’s idea.
While he does take place bets in the healthcare industry, the small share indicates it might have been proposed by Buffett’s two right-hand men, Weschler and Combs.
What makes Biogen such an interesting investment is their foray into Alzheimer’s treatments. Their current trials of aducanumab could prove groundbreaking and the company is currently seeking FDA approval.
It’s thought that some of Buffet’s current stocks will eventually fail to be profitable – however, Biogen still trades at around 10 times what analysts have predicted and continues to generate billions in cash flow every year.
Another stock Buffett finds interesting is Occidental Petroleum. In early Q2 2019, Buffett invested $10 billion in Occidental Petroleum in a bid to help finance their exploration into Anadarko Petroleum.
Buffett received 100,000 shares. Buffett outbid both Chevron and Carl Icahn, a billionaire in his own right. Icahn didn’t see the appropriateness of the bid and some say is still hoping the deal backfires on Buffett.
Buffett put another $330 million into Occidental in Q3 2019, firing back at Icahn, and sealed the deal in Q4 by acquiring another 11.5 million Occidental shares. Finally, in March of 2020, Occidental came to a truce with Icahn, agreeing to make alterations to its board.
Buffett’s stake in Occidental equates to just over 2% of the company’s shares, making Berkshire Hathaway its 8th-largest shareholder. Occidental is still only a fraction of Berkshire’s entire holdings, thankfully, as falling oil prices forced the oil giant to slash its dividends.
Could These 3 Stocks Be the Next Berkshire Hathaway?
Like Berkshire Hathaway, these following companies also have many other companies beneath their umbrella.
Berkshire Hathaway is certainly the largest company in the world when considering revenue and profit, but not when considering their market capitalization.
The following companies, while much larger by market capitalization, still have a long way to go in catching up to Berkshire Hathaway in terms of revenue and profit.
Alphabet = Google + YouTube + Cloud + …
CEO: Sundar Pichai replaced original CEO and co-founder, Larry Page, in December 2019. Page’s net worth is more than $62 billion while Pichai’s hovers around $600 million.
Top Services: Google search, YouTube, Cloud, Autonomous Driving Cars
Market Capitalization: It’s safe to say when it comes to market capitalization, Alphabet crushes it. The conglomerate not only controls nearly the entire search and online video landscapes, but they’re sitting on a boatload of cash and securities. As of Q4’s end in 2019, this amount totaled over $119 billion.
By mid-January 2020, Alphabet became only the fourth company in history to have greater than a $1 trillion market capitalization.
After the stock split of 2014, which maintained Brin and Page’s company control, there are now three separate stock classes – A, B, and C. Class A – GOOGL – conveys one vote. Class B shares are privately held by founders and executives and each convey 10 votes. Class C – GOOG – do not convey any voting rights.
Apple Takes On Netflix
CEO: Tim Cook has a net worth of $625 million
Top services: iPhone, iTunes, Apple Pay, Cloud, Streaming.
Market capitalization: In August of 2018, Apple set a record becoming the first ever United States company to surpass a trillion-dollar market capitalization.
At the end of Q4 2019, Apple was Berkshire Hathaway’s largest holding – valued at nearly $72 billion.
As of Q4 2019, Apple held 49% of the smartphone market in the United States and was also leading in tablets with a 36.5% market share. Even in February, Apple held up its quarterly dividend payments of $0.77 per share.
Amazon = Ecommerce + AWS + Grocery +…
CEO: Jeff Bezos is the founder and CEO of Amazon. Bezos is ranked No. 1 in the world as richest individual with $159.9 billion net worth.
Services: Amazon shopping, Amazon advertising, Amazon Web Services, Retail, and others.
Like its other rival, Microsoft, Amazon relies heavily on its cloud computing services, AWS, which drives much of its revenue and profits.
Amazon stock has provided an average return of 47.23% annually between 2015 and 2019. Amazon was also the 2nd in line behind Apple to reach the $1 trillion market capitalization mark. Bezos celebrated this victory in September of 2018.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.