Five stocks Warren Buffett is selling but are to buy
When Warren Buffett speaks, the rest of the investors listen carefully. But these five closed positions for Berkshire Hathaway should be reconsidered, according to Sean Williams on The Motley Fool.
Last week Buffett filed Form 13F with the Securities and Exchange Commission.. This allows us to have first-hand the latest modifications to your portfolio. Specifically, it added five companies and reduced or closed 13 positions.
Although Buffett’s track record speaks for itself, it is not perfect. Of the 13 stocks that were downgraded or completely withdrawn, five stand out as intriguing stocks that investors should buy, not sell, “says Williams.
Buffett is not a big fan of these types of companies. since you don’t have the time to keep abreast of clinical trial results and patent deadlines. These decisions are due to his lieutenants, Todd Combs and Ted Weschler.
In the first trimester, Herkshire Hathaway divested 10.8 million shares. These stocks are valued 11 times future year’s earnings, according to Wall Street’s consensus earnings per share estimate.
Merck’s superstar is still Keytruda cancer immunotherapy, to which the US Food and Drug Administration has given the green light for two dozen indications. Last year, during the worst economic recession in decades, it generated 30% growth and $ 14.4 billion in sales. With Keytruda benefiting from label expansion opportunities, better cancer screening diagnostics, longer duration of use, and strong pricing power, it could become the world’s best-selling drug in a few years.
Merck Stock Chart
Also, don’t overlook the animal health division, which increased sales by an impressive 17% in the first quarter. Livestock may be the biggest income generator in animal health at the moment, but the fastest growth comes from companion animal therapies.
In the first trimester, Buffett’s company downloaded about 6.3 million shares, or 12% of its previous holdings.
Although the satellite radio space isn’t the high-growth trend it once was, Sirius XM offers a couple of strategic advantages that make it a high-quality stock. For example, you are in a much better position to navigate through the inevitable recessions and economic downturns than their peers. While most terrestrial and online radio operators rely almost exclusively on advertising for revenue, ad sales quickly sell out when recessions strike.
The satellite firm generated 78% of its revenue in the first quarter from subscriptions. History has shown that subscribed customers are unlikely to cancel during temporary economic disruptions.
Sirius XM Stock Chart
Plus also You benefit from a series of relatively fixed or slightly variable costs. For example, no matter how many new net subscribers sign up, the company will continue to pay the same streaming rates and will have more or less the same equipment costs. Although the costs of acquiring talent and royalties may vary, this operating model is set up for long-term margin expansion.
Another pharmaceutical firm in which the fund reduced its stakes in the company by 10% (about 2.7 million shares) from the fourth sequential trimester.
It currently has in its portfolio the best-selling drug in the world, Humira. This well-known anti-inflammatory generated $ 19.8 billion in sales in 2020 and accounted for approximately 43% of total revenue. Beginning in 2023, Humira biosimilars will begin to hit drug store shelves in the US, potentially impacting sales. However, it is such a well-known drug with multiple label indications that it can remain a source of income for many years.
The pharmaceutical company has also done a good job of diversifying its product portfolio through acquisitions. Last year it bought Allergan, which brought in new therapies, improved its global distribution and is expected to generate more than $ 2 billion in annual cost synergies.
Abbvie Stock Chart
The point is, it generated more than $ 18 billion in operating cash flow over the last year and is achievable for a reasonable profit nine times that in the year ahead.
Berkshire 13F shows 5.5 million shares were sold, which reduced the remaining stake in GM to 67 million shares.
The main buzz surrounding GM, and the reason it remains a stock to own in the auto industry, is the company’s push toward electric vehicles (EVs) and autonomous driving technology. It had previously set plans to spend $ 20 billion through 2025 on alternative energy technology.
But in November 2020 he increased his commitment to $ 27 billion until the middle of the decade.. In total, it plans to launch 30 electric vehicles around the world. This is a company with over a century of history behind its brand, which means that it should have no problem entertaining a global audience for its electric vehicles.
General Motors Stock Chart
Equally encouraging is the momentum it has experienced in China, the world’s largest auto market. Despite losing share in the US market, share in the Asia / Pacific, Middle East and Africa segment increased 70 basis points in the first quarter to 7.5%. Cadillac sales more than doubled in the region to 60,000 vehicles, while Buick vehicle sales increased 73% to 225,000. By 2035, about half of all new vehicle sales in China could be electric, marking a huge opportunity for GM.
During the first trimester, Berkshire Hathaway discarded 2.3 million shares, reducing its total holdings in the company by 6% to about 31 million shares.
Bristol-Myers Squibb Stock Chart
What you really have to appreciate is that it is growing organically and inorganically. Speaking of the former, you have the world’s leading oral anticoagulant (Eliquis) in your portfolio and are likely to see another surge in Opdivo cancer immunotherapy sales growth. Although sales stalled at $ 7 billion in 2020, it is being tested in dozens of clinical trials as monotherapy and combination therapy. If only a small fraction of these are successful, it will continue to offer significant sales growth potential.
He has also done an excellent job of filling in his results with acquisitions. The Celgene purchase in November 2019 should generate significant cash flow through the middle of the decade. This is because this acquisition brought the prized multiple myeloma drug Revlimid into the portfolio that has increased sales annually by double digits for more than a decade. It has had its label expanded in multiple instances and has benefited from a longer duration of use.
Such a profitable company is valued at a multiple of just eight times Wall Street’s projected earnings for the future year.