Warren Buffett ranks as one of the greatest investors of all time. But the billionaire’s investments did not pay off 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 shares in Berkshire’s investment portfolio also declined.
However, there are some stocks in the group that yielded impressive returns. Here are Warren Buffett’s top three winners in the first half of 2020, and whether or not they are big stocks to buy for investors who aren’t legends yet.
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1. Amazon.com
Buffett readily acknowledges that he has been a fan of Amazon.com (NASDAQ: AMZN) for a long time but did not buy the shares. It took one of its trusted investment managers to add the e-commerce giant to the Berkshire portfolio last year. Buffett is certainly happy with the purchase: Amazon was its biggest winner in the first half of the year with a 49% increase.
Like most stocks, Amazon shares slipped during the coronavirus-driven selloff that began in late February. However, investors quickly realized that Amazon’s business was booming as a result of the COVID-19 pandemic as consumers increasingly bought online.
Investors didn’t seem to mind too much that Amazon’s profits were down a bit as the company’s pandemic-related costs increased. Many of the products with an increase in demand generate low margins. Amazon is also spending far 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
Early in his career, Buffett was known as a book value investor. His training under another legendary investor, Benjamin Graham, could have made Teva Pharmaceutical (NYSE: TEVA) looks like an attractive stock value. And the value of the pharmacist unlocked quite a bit in the first six months of 2020, as Teva shares rose 25%.
Teva’s revenues fell in 2019. However, the company recorded a 5% year-over-year revenue increase in the first quarter. That’s pretty impressive considering Teva continues to face declining sales of its former best-selling multiple sclerosis drug Copaxone and a challenging generic drug market in the US.
However, Buffett has always maintained a long-term perspective. It led Berkshire to invest in Teva when it was not working very well. You have likely seen pharmaceutical stocks as very cheap considering the potential growth in the generic and prescription drug markets in the next two decades as the world population ages.
3. Apple
Apple (NASDAQ: AAPL) It ranks first in Berkshire by far. Buffett said in an interview with CNBC earlier this year that Apple is “probably the best business I know of in the world.” It is also one of its best-performing stocks, with Apple shares rising 24% more in the first half of the year.
The company temporarily closed its Apple stores worldwide in response to the COVID-19 pandemic. Apple shares fell more than 30% during the overall market crash. But it roared again when investors realized that the impact on the company’s business should only be temporary.
Apple also benefited from various moves. Launched a new 13-inch MacBook Pro. The company submitted 12-month interest-free installment payment plans for all of its devices. Apple also confirmed a long-awaited change to use its own chips on its Mac computers.
Are they buying now?
My opinion is that two of the three biggest Buffett winners in the first half of 2020 are still good choices, but one is not.
I am not a big fan of Teva. Some stocks are cheap for a season, while others are cheap for a reason. I think the latter is the case with Teva. The drug maker still has a massive debt load even after paying off part of its debt. Its strong first-quarter results were likely largely driven by people who filled their prescription drugs during the first part of the COVID-19 pandemic, a temporary effect. Teva claims some promising new products. But it also has many headwinds.
On the other hand, I really like Amazon and Apple. Amazon continues to have strong growth prospects in e-commerce and cloud hosting. I suspect that the company will also become a major player in healthcare. Apple should see stronger sales as it launches 5G iPhones. The company’s services business is another solid growth engine. My hunch is that Amazon and Apple could be two of Buffett’s biggest winners not just in 2020 but in the next 10 years.
