Warren Buffett ranks as one of the greatest investors of all time. But the billionaire’s investments didn’t fare well in the first half of 2020. Buffett’s Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) shares fell 21% in the first six months of the year. Most of the stocks in Berkshire’s investment portfolio were down as well.
However, there some stocks in the group that delivered impressive returns. Here are Warren Buffett’s three biggest winners in the first half of 2020 — and whether or not they’re still great stocks to buy for investors who aren’t yet legends.
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Buffett readily acknowledges that he has been a fan of Amazon.com (NASDAQ: AMZN) for a long time but didn’t buy the stock. It took the prodding of one of his trusted investment managers to add the e-commerce giant to Berkshire’s portfolio last year. Buffett is undoubtedly happy with the purchase: Amazon was his biggest winner in the first half of the year with a 49% gain.
Like most stocks, Amazon’s shares slid during the coronavirus-fueled market sell-off that began in late February. However, investors realized pretty quickly that Amazon’s business was actually booming as a result of the COVID-19 pandemic as consumers increasingly shopped online.
It didn’t seem to matter too much to investors that Amazon’s profits were squeezed somewhat as the company’s pandemic-related costs rose. Many of the products with a spike in demand generate low margins. Amazon also is spending a lot more on wages and bonuses, personal protective equipment, and is even investing $300 million to build a COVID-19 testing lab for its employees.
2. Teva Pharmaceutical
Earlier in his career, Buffett was known as a by-the-book value investor. His training under another legendary investor, Benjamin Graham, might have made Teva Pharmaceutical (NYSE: TEVA) look like an attractive value stock. And the drugmaker’s value was unlocked quite a bit in the first six months of 2020 as Teva’s shares jumped 25%.
Teva’s revenue fell in 2019. However, the company posted a 5% year-over-year revenue jump in the first quarter. That’s pretty impressive considering that Teva continues to face declining sales for its former top-selling multiple sclerosis drug Copaxone and a challenging U.S. generic drug market.
Buffett has always maintained a long-term perspective, though. He led Berkshire to invest in Teva when it wasn’t performing very well. It’s likely that he viewed the pharma stock as dirt cheap considering the potential growth in the generic and prescription drug markets over the next couple of decades as the world’s population ages.
Apple (NASDAQ: AAPL) ranks as Berkshire’s top holding, by far. Buffett said in an interview with CNBC earlier this year that Apple is “probably the best business I know in the world.” It’s also one of his best-performing stocks, with Apple shares vaulting 24% higher in the first half of the year.
The company closed its Apple stores across the world temporarily in response to the COVID-19 pandemic. Apple stock plunged more than 30% during the overall market meltdown. But it roared back as investors realized the impact on the company’s business should only be temporary.
Apple also benefited from several moves. It launched a new 13-inch MacBook Pro. The company unveiled 12-month no-interest installment payment plans for all of its devices. Apple also confirmed a highly anticipated shift to using its own chips in its Mac computers.
Are they buys now?
My view is that two of Buffett’s three biggest winners of the first half of 2020 are still good picks, but one isn’t.
I’m not a big fan of Teva. Some stocks are cheap for a season, while some are cheap for a reason. I think the latter is the case for Teva. The drugmaker still has a massive debt load even after paying down some of its debt. Its solid Q1 results were likely boosted largely by individuals stocking up on prescription drugs during the early part of the COVID-19 pandemic — a temporary effect. Teva claims some promising new products. But it also has plenty of headwinds.
On the other hand, I really like both Amazon and Apple. Amazon continues to have strong growth prospects in e-commerce and cloud hosting. I suspect the company will also become a major player in healthcare. Apple should see stronger sales as it rolls out 5G iPhones. The company’s services business is another solid growth driver. My hunch is that Amazon and Apple could be two of Buffett’s biggest winners not just in 2020 but over the next 10 years.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Speights owns shares of Amazon, Apple, and Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Amazon, Apple, and Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), short January 2022 $1940 calls on Amazon, long January 2022 $1920 calls on Amazon, and short September 2020 $200 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
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