Warren Buffett Invested $99 Billion of His Portfolio in 2 Stocks That Could Rise 19% and 20%, According to a Couple of Wall Street Analysts
Warren Buffett took the helm at Berkshire Hathaway in 1965. Since then, shares of the holding company have soared by about 4,631,475%, making him perhaps the most well-regarded investor of his time.
Buffett knows as well as anyone that the price you pay for a stock is a big factor determining the return it will eventually provide. If you’d like to see your portfolio perform the way Buffett’s has, purchasing shares of quality businesses while their stock prices are depressed should be a big part of your strategy.
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The benchmark S&P 500 (SNPINDEX: ^GSPC) index has risen by about 36% over the past 12 months, and it looks like Buffett expects continued gains from at least a couple of its components. At the end of September, $98.6 billion of the holding company’s portfolio was invested in two S&P 500 stocks that have lagged the benchmark index, Apple (NASDAQ: AAPL) and Coca-Cola (NYSE: KO).
Both of these stocks have been trading well below the expectations of Wall Street analysts who follow them closely. Here’s a look at why they’re expected to outperform to see if they deserve a place in your portfolio too.
Berkshire Hathaway has been trimming its Apple stake, but it is still the equity portfolio’s largest holding. The holding company valued its Apple stake at $69.9 billion at the end of September, down from $174.3 billion at the end of 2023.
Apple stock underperformed the S&P 500 index by rising just 25% during the 12 months ended Nov. 8, 2024. Gains have been subdued because it’s been a long time since the iPhone maker launched a new product that can drive sales growth. Trailing-12-month revenue contracted by 0.8% since late 2022.
Apple’s lack of growth is concerning but not for Morgan Stanley analyst Erik Woodring, who thinks the stock can climb much higher. He recently reiterated a $273 price target that implies a gain of about 20% from recent prices.
Whether it was iPhones, Macs, or accessories, sales of every product category were lower in fiscal 2024, which ended on Sept. 30, than they were in 2022. Wall Street isn’t turning its back on the stock because service sales are way up. Over the same 2-year period, revenue from the App Store, streaming, and cloud services grew by 23% to $96.2 billion.
Equipment sales can fluctuate with economic downturns and new product cycles. Recurring-service revenue is often more predictable and nearly always more lucrative. A revenue mix shifting toward services improved gross-profit margin in fiscal 2024 to 46.2% from 43.3% in 2022.
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