In this article, we discuss the top 10 growth stock picks of Warren Buffett. If you want to see more stocks in this selection, check out Growth Stock Portfolio: 5 Stock Picks By Warren Buffett.
Investors for the past few months have been piling into companies with resilient growth prospects over cheaper value stocks. This drastic change of pace is supported by varying views on interest rates, inflation, and the likelihood of a US recession. Investors are closely monitoring growth sensitive stocks as it is foolish to ignore the value in high-quality tech stocks in the current environment.
Rampant inflation and government’s plans to withhold the fiscal stimulus from the COVID-era bludgeoned growth stocks in the first half of 2022, but the recession fears have caused the tables to turn and growth stocks are shining again. Michael Hartnett, chief investment strategist at Bank of America, told Financial Times in August 2022:
“Investors were obsessed about inflation risks in the first half of the year and they are now haunted by worries about recession. That explains the violence of the flip in sentiment to growth stocks from value.”
In times of market uncertainty, investors turn towards market titans like Warren Buffett. Some of the best growth stocks in his Berkshire Hathaway portfolio include Activision Blizzard, Inc. (NASDAQ:ATVI), Apple Inc. (NASDAQ:AAPL), and Moody’s Corporation (NYSE:MCO).
We selected the top 10 growth stocks from the Berkshire Hathaway portfolio as of the end of the second quarter of 2022 for this analysis. The stocks are arranged according to Berkshire’s stake value in each holding. Insider Monkey’s database of 895 elite hedge funds tracked as of the end of the second quarter of 2022 was used to assess the hedge fund sentiment around the securities.
Growth Stock Portfolio: Stock Picks By Warren Buffett
10. Floor & Decor Holdings, Inc. (NYSE:FND)
Number of Hedge Fund Holders: 29
P/E Ratio as of November 9: 26.32
Floor & Decor Holdings, Inc. (NYSE:FND) was founded in 2000 and is headquartered in Atlanta, Georgia. It operates as a specialty retailer of commercial flooring, hard surface flooring, and related accessories. Warren Buffett owns 4.78 million shares of Floor & Decor Holdings, Inc. (NYSE:FND) as of Q2 2022, worth nearly $301 million and representing 0.13% of the total holdings.
On November 3, Floor & Decor Holdings, Inc. (NYSE:FND) reported its Q3 results, posting earnings per share of $0.70 and a revenue of $1.10 billion, outperforming market estimates by $0.05 and $5.25 million, respectively.
Baird analyst Justin Kleber on November 4 maintained an Outperform rating on Floor & Decor Holdings, Inc. (NYSE:FND) but lowered the price target on the shares to $90 from $95. The analyst observed that although its disruptive model continues to rack up impressive share gains, the weakness in housing turnover is starting to pressure the fundamentals.
According to Insider Monkey’s data, 29 hedge funds were bullish on Floor & Decor Holdings, Inc. (NYSE:FND) at the end of June 2022, compared to 30 funds in the prior quarter. Colin Moran’s Abdiel Capital Advisors is a prominent stakeholder of the company, with 4.3 million shares worth $273.8 million.
Like Activision Blizzard, Inc. (NASDAQ:ATVI), Apple Inc. (NASDAQ:AAPL), and Moody’s Corporation (NYSE:MCO), Floor & Decor Holdings, Inc. (NYSE:FND) is one of the top growth picks of Warren Buffett.
Here is what Madison Funds specifically said about Floor & Decor Holdings, Inc. (NYSE:FND) in its Q2 2022 investor letter:
“Floor & Decor Holdings, Inc. (NYSE:FND) is the dominant category killer retailer of tile, wood, stone, and resilient flooring products into the renovation and replacement market. This is a business we know quite well, having successfully invested in the company from 2018-2020. We believe the company is early in its store opening phase, with many more years of expansion left. Its stock has come down meaningfully from its highs given concerns over a slowing housing market and more cautious consumer. While these concerns have merit, the resulting valuation discount appears opportunistic for long-term investors.”
9. Markel Corporation (NYSE:MKL)
Number of Hedge Fund Holders: 26
P/E Ratio as of November 9: 673.43
Markel Corporation (NYSE:MKL) is an American company involved in the insurance, reinsurance, and investment businesses around the world. In the second quarter of 2022, Berkshire Hathaway owned 467,611 shares of Markel Corporation (NYSE:MKL) worth about $605 million, representing 0.20% of the total portfolio. The hedge fund boosted its stake in the company by 12% during the June quarter. On November 1, Markel Corporation (NYSE:MKL) reported a Q3 GAAP EPS of $3.50 and earned premiums of $1.96 billion, up 20.2% year-over-year.
Truist analyst Mark Hughes on August 5 maintained a Hold rating on Markel Corporation (NYSE:MKL) and lowered the price target on the shares to $1,300 from $1,500 after its Q2 results.
According to Insider Monkey’s second quarter database, 26 hedge funds were long Markel Corporation (NYSE:MKL), compared to 29 funds in the prior quarter. Brian Ashford-Russell and Tim Woolley’s Polar Capital held a prominent stake in the company, with 115,400 shares worth $149.2 million.
Here is what Vltava Fund has to say about Markel Corporation (NYSE:MKL) in its Q3 2022 investor letter:
“While it is true that Berkshire Hathaway’s unique and successful business model has for decades been apparent for all to see, it is interesting that almost no one has been able to replicate it. In fact, this should not be all that surprising, though, because, first of all, it would be very difficult to do so and, second, it would take an awfully long time. A company that is following in BRK’s footsteps and has probably gone the furthest down that path is Markel. Moreover, it is not doing badly at all. From its stock market listing in 1986 to today, Markel has returned only slightly lower than BRK and substantially more than those of the index.
MKL’s business model, like BRK’s, is founded upon insurance companies that produce a growing amount of cash (so-called float) which can be invested over the long term into both publicly traded stocks and private companies. Markel CEO Tom Gayner therefore talks about the three pillars upon which the company is built. The first is insurance companies. These are very profitable in their own right over the long term and also produce the aforementioned float. This has enabled MKL to build up an investment portfolio of USD 26 billion (the second pillar) as well as a portfolio of private firms through Markel Ventures (the third pillar)…” (Click here to see the full text)
8. T-Mobile US, Inc. (NASDAQ:TMUS)
Number of Hedge Fund Holders: 96
P/E Ratio as of November 9: 122.87
T-Mobile US, Inc. (NASDAQ:TMUS), an American wireless network operator, is one of Warren Buffett’s top picks for a growth stock portfolio. Berkshire Hathaway owns 5.2 million shares of T-Mobile US, Inc. (NASDAQ:TMUS) as of the second quarter of 2022, worth $705.25 million and representing 0.23% of the total 13F securities.
On October 27, T-Mobile US, Inc. (NASDAQ:TMUS) reported its Q3 results, announcing a Q3 GAAP EPS of $0.40, beating market estimates by $0.14. The revenue of $19.48 billion, however, fell short of Wall Street consensus by $500 million.
Cowen analyst Paul Gallant on October 28 raised the price target on T-Mobile US, Inc. (NASDAQ:TMUS) to $201 from $187 and kept an Outperform rating on the shares. The analyst said they reported resilient Q3 2022 results, driven by industry-leading phone adds, good churn upside, FWA adds upside margins, and a guidance raise.
According to Insider Monkey’s Q2 data, 96 hedge funds were bullish on T-Mobile US, Inc. (NASDAQ:TMUS), compared to 91 funds in the preceding quarter. Andreas Halvorsen’s Viking Global is the leading position holder in the company, with 9.17 million shares worth $1.2 billion.
“As mentioned, the communication services sector has come under some pressure, and irrational pricing competition has negatively impacted wireless industry growth and profitability of late, weighing on T-Mobile. Faced with these headwinds, and with pressure from other wireless carriers and cable companies that could cause the company to cede share in subscriber growth in 2022, we exited our position in the fourth quarter.”
7. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 252
P/E Ratio as of November 9: 81.80
Amazon.com, Inc. (NASDAQ:AMZN) is one of the premier picks of Warren Buffett for a growth stock portfolio. Buffett’s Berkshire Hathaway strengthened its hold on Amazon.com, Inc. (NASDAQ:AMZN) by a whopping 1900% in Q2 2022, with 10.6 million shares worth $1.13 billion, representing 0.37% of the total 13F securities.
On November 2, Tigress Financial analyst Ivan Feinseth reiterated a Buy recommendation on Amazon.com, Inc. (NASDAQ:AMZN) but trimmed the firm’s price target on the shares to $192 from $232. The analyst said the new price target reflects a re-rating of valuation and growth rate adjustments.
According to Insider Monkey’s data, Amazon.com, Inc. (NASDAQ:AMZN) was part of 252 hedge fund portfolios at the end of the second quarter of 2022, compared to 271 in the prior quarter. Ken Fisher’s Fisher Asset Management featured as a significant position holder in the company, with 48.6 million shares worth $5.16 billion.
Alger Capital made the following comment about Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2022 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) is a well-known online retailer and cloud computing leader. The company’s amazon web services business provides utility-scale cloud offerings that facilitate corporate America’s transition to digital systems. Shares outperformed during the quarter as investors were encouraged by strong second-quarter performance despite a challenging macroeconomic environment. Moreover, the company’s retail segment was resilient and avoided discounting inventory like some major retailers did. Revenues for the company’s cloud computing segment, amazon web services (AWS), grew faster than analysts’ estimates during the quarter due to continuing corporate demand for digitization. As a result, management provided better-than-expected forward guidance.”
6. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 137
P/E Ratio as of November 9: 32.54
Mastercard Incorporated (NYSE:MA) is the second-largest payment technology corporation worldwide. It is one of the most prominent growth stocks in the Berkshire portfolio. Warren Buffett, as of Q2 2022, owns approximately 4 million shares of Mastercard Incorporated (NYSE:MA) worth $1.26 billion, representing 0.41% of the total securities.
On October 27, Mastercard Incorporated (NYSE:MA) reported a Q3 non-GAAP EPS of $2.68 and a revenue of $5.8 billion, topping Wall Street consensus by $0.10 and $140 million, respectively. Net revenue increased 15% during the third quarter, or 23% on a constant currency basis, which includes a 1% benefit from acquisitions.
Mizuho analyst Dan Dolev on November 4 maintained a Buy recommendation on Mastercard Incorporated (NYSE:MA) but lowered the price target on the shares to $380 from $385 following the Q3 results. The analyst raised 2022 estimates but slashed outer-year expectations.
Among the hedge funds tracked by Insider Monkey, 137 funds reported owning stakes in Mastercard Incorporated (NYSE:MA) at the end of Q2 2022, compared to 136 funds in the last quarter. Charles Akre’s Akre Capital Management is the largest stakeholder of the company, with 5.8 million shares worth $1.8 billion.
Like Activision Blizzard, Inc. (NASDAQ:ATVI), Apple Inc. (NASDAQ:AAPL), and Moody’s Corporation (NYSE:MCO), elite investors are piling into Mastercard Incorporated (NYSE:MA) as they look out for growth opportunities.
Here is what L1 Capital International specifically said about Mastercard Incorporated (NYSE:MA) in its Q2 2022 investor letter:
“Growth in electronic payments, the continued shift away from cash and cheques, and the provision of additional services such as fraud identification and prevention continue to power Mastercard Incorporated (NYSE:MA)’s growth (Figure 14). In person cross-border transactions are recovering alongside normalization of travel.
Mastercard and Visa (we have invested in both) continue to dominate the electronic payments industry outside of China, utilizing their own multi-faceted networks as well as Government and third-party payments infrastructure to facilitate transactions. Another perfect example of a ‘Noah’s Ark’ industry structure.
Regulation, technological disruption and disintermediation, and geopolitical constraints are perennial issues for consideration, but Mastercard (and Visa) management have repeatedly demonstrated their ability to manage these issues…” (Click here to read the full text)
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Disclosure: None. Growth Stock Portfolio: 10 Stock Picks By Warren Buffett is originally published on Insider Monkey.
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