Warren Buffet’s Berkshire Hathaway has over the years created a reputation for beating the market. According to the research data analysed and published by StockApps.com, despite the 2020 economic downturn, the three best performing stocks on its portfolio have delivered exceptionally.
In the lead is RH, previously known as Restoration Hardware. Benefitting from the uptrend in home improvement, the stock has gained a remarkable 77.69% year-to-date (YTD) as of October 6, 2020 according to Marketwatch. For the trailing one-year period, its gains are even higher, at 116.27%.
Analysts at Cowen & Co. taking note of its performance have also expressed optimism, upgrading its stock status to ‘Outperform.’ The firm is planning to expand to Europe and is scheduled to launch in England in summer 2021.
According to Cowen estimates, its revenue could hit $160 million in the UK in the first year of launch, growing to $450 million in the second. Berkshire Hathaway holds 1.71 million shares in the luxury furniture chain, almost 9% of the stock.
On September 10, the stock hit a new 52-week high of $405.55 following the release of its Q2 results which beat analyst estimates. During the quarter, income rose from $63.8 million ($2.86 per share) to $98.4 million ($3.71 per share) year-on-year (YoY).
Revenue also increased from $706.5 million to $709.3 million. According to Thomson Reuters, analysts’ expectations were $3.41 per share and $707.14 million in revenue.
Amazon gains 71.60% YTD as Apple soars by 56.83%
Buffet’s second-best performer is Amazon, which according to Marketwatch, gained 71.60% YTD as of October 6, 2020. Over the trailing one-year period, it has surged by 84.64%. The tech giant is ranked first in online retail as well as in cloud computing infrastructure.
In 2020, it has thrived as a result of the consumer shift to eCommerce. Moreover, its cloud hosting segment has had a boost as plenty of organizations have moved their data and apps to the cloud.
According to Amazon’s reported earnings for Q2 2020, revenue increased by 40% to $88.9 billion YoY. Net income doubled from $2.6 billion to $5.2 billion, and so did EPS, which rose from $5.22 to $10.30 YoY.
The quarterly profit of $5.2 billion was its highest yet since it was founded two and a half decades ago. Analysts expectations were $81.53 in revenue and $1.46 EPS. Amazon Web Services (AWS) accounted for 12.1% of the total revenue. It grew 29% to $10.8 billion.
Berkshire Hathaway’s third best-performer for 2020 is Apple, whose YTD gain as of October 6 is at 56.83%. Comparatively, it has grown 107.66% over the trailing one-year period.
For its fiscal third quarter, which ended on June 30, 2020, Apple’s revenue grew by 11% to $59.7 billion against an expected drop of 2% to $52.6 billion. On the other hand, EPS soared 18% to $2.58, against the analyst forecast of $2.07. This went on record as Apple’s best third quarter ever and was even better than the 2014 holiday quarter.
The iPhone segment had the highest hardware sales at $26.42 billion, followed by Mac at $7.08 billion and iPad at $6.58. Wearables, home and accessories brought in $6.45 billion while services totaled $13.16 billion.
Berkshire earnings to drop by 14% in fiscal 2020, rebound 27% in 2021
It is noteworthy though that despite having some of the best performing stocks globally, Berkshire Hathaway has lagged behind the S&P 500 in 2020. Due to the unusual market conditions surrounding the pandemic, the portfolio has come under extreme pressure.
In Q2 2020, the stock dropped by 2% compared to the S&P 500’s 20% rally. As of October 6, 2020, the YTD return was -5.8% according to Finbox, against the S&P’s 4.97%.
The Berkshire Hathaway portfolio features investments in at least 50 different stocks. However, the top 10 positions make up almost 85% of the total. Consequently, any movement in the 10 holdings has an exaggerated impact on overall performance.
Notably, the portfolio is bank-heavy, and unfortunately, the banking sector has been among the worst hit during the pandemic. In the top 10 positions of the portfolio, banks make up 32.5%. By itself, the Bank of America makes up 11% of the top 10, and it is down by 30.10% YTD. Wells Fargo previously held a 5.3% share while JP Morgan Chase had 3%.
Berkshire Hathaway offloaded 26% of its holdings in Wells Fargo and 61% of its JP Morgan Chase position. Wells Fargo, which held a 3% share of the top 10 category in mid-August is down by 54.55% YTD. On the other hand, JP Morgan Chase, whose share is 1%, is down by 28.95% YTD.
The portfolio also has large exposures in the airlines and energy sectors. These are among the top 5 industries most negatively impacted by the pandemic according to SP Global.
Though analysts predict an earnings drop of 14% for Berkshire Hathaway in 2020, they also project a rebound of 27% in 2021.