In the fourth quarter of 2021, Warren Buffet’s Berkshire Hathaway (NYSE: BRK.A) reported $40 billion in profits, 10% higher than what was reported for the same quarter in 2020. For the full year, profits more than doubled and were about $90 billion. But Warren Buffet does not concern himself with gross figures. Instead, operating earnings, his company's focus, soared to $7.3 billion for the same quarter and had a rise of about 25% for the entire year to about $27.5 billion. So, one can say that business is booming for Warren Buffett.
A wise move the company made that helped boost its earnings per share was the buyback of $6.9 billion worth of stock during the quarter. According to the letter Warren Buffet sent to shareholders, he attributed the success of the company for the year 2021 to stocks such as Apple (NASDAQ: AAPL) and Chevron Corporation (NYSE: CVX).
So this article will concentrate on these two stocks held by Warren Buffet. They could hold some profitable investment opportunities for you this 2022 and beyond.
Apple(NASDAQ: AAPL): Riding on the 5G Upgrade Cycle
Warren Buffet’s highest stake is Apple (NASDAQ: AAPL), a third of Berkshire Hathaway’s book value. Buffet’s original investment in the stock was $36 billion between 2016 and 2018. The Oracle of Omaha’s timing has proved right because Apple stock has risen 300%. So, Buffet’s vote of confidence has paid handsomely.
Apple’s tight bond between customer and brand is one of the stimuli that pushed Warren Buffet to stake highly on the stock. In January, Apple CEO Tim Cook revealed that there were more than 1.8 billion active devices, a significant rise from 1.65 billion active devices at the start of 2021.
The company has a good outlook for further growth. After the launch of the iPhone 13, revenue increased by 9% to $72 billion in 2021. With the iPhone 5G launch later this year, this growth will be eclipsed two-fold. In addition, the release of the iPhone 5G will likely engender an increase in spending in higher-margin services, such as apps and subscriptions.
It is worth noting that over the year 2021, Apple generated $101 billion in free cash flow. No wonder, Buffet is all praises for Tim Cook and continues to increase his stake in Apple.
Chevron (NYSE: CVX): Riding On Higher Gas Prices
Gas prices are rising, especially with the conflict in Ukraine. But consumers can follow Warren Buffet and invest in an energy stock like Chevron (NYSE: CVX). Chevron is a shareholder-friendly stock as it has consistently increased its dividend for 34 years. After the last earnings report, it paid a dividend yield of 4.1%. In addition, Warren Buffet bought additional 10 million Chevron shares last year, and since the end of 2021, the stock has risen 14.7%.
Buffet’s favorite stocks are industry leaders, and Chevron fits that bill. Even while oil prices were falling over the last decade, Chevron was still generating enormous free cash flow and increasing dividends to shareholders. In late 2020, management made a well-timed decision to acquire Noble Energy. The acquisition strengthened Chevron’s business in upstream exploration and production when oil prices were beginning to recover after the shock of the pandemic, which had very low demand.
Notably, Chevron can make profits at low oil prices of $45 per barrel, and right now, when it is above $100 per barrel, you can imagine what its profits will be this year. Also, it is investing heavily in zero-carbon emission technology. It has spent a substantial amount of capital in researching renewables.
Chevron is presently a great hedge against inflation. So, like the Oracle of Omaha, you would be investing wisely in Chevron (NYSE: CVX).
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