Warren Buffett has had some good news and some bad news so far in 2019. First, the bad news: His beloved Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) has lagged well behind the major stock market indexes year to date, rising by only 6% compared with the S&P 500's 24% gain. The good news for the legendary investor, though, is that he's had quite a few really big winners among Berkshire's holdings.
The three best performing Buffett stocks so far this year are StoneCo (STNE +1.99%), Apple (AAPL +1.04%), and Charter Communications (CHTR +3.41%). Here's why these stocks have delivered huge gains -- and whether they're still smart picks to consider buying.
Image source: The Motley Fool.
1. StoneCo
You can think of StoneCo as sort of the Latin American version of the U.S. financial technology (fintech) provider Square. Like Square, StoneCo provides fintech solutions for merchants. Also like Square, it's growing by leaps and bounds.
Berkshire owns more than 8% of the company. That investment is paying off big-time, with StoneCo shares skyrocketing 124% so far this year as its revenue and customer base has grown rapidly.
It hasn't been a smooth ride this year for StoneCo investors, though. The stock sank in April over worries of increased competition from big Brazil-based bank Itau Unibanco Holding SA. However, those worries were soon pushed aside as StoneCo continued to deliver impressive growth in its quarterly update.
StoneCo's third-quarter results announced last week highlight the company's growth trajectory. Revenue jumped 62% year over year, with earnings soaring nearly 112%. StoneCo's total active clients count increased nearly 83% year over year, with a record-high addition of 68,700 net new clients in the third quarter. That's the kind of performance that makes a certain Omaha billionaire smile.
2. Apple
Buffett stated in February 2019 that he viewed Apple stock as too expensive. The tech stock is now even more expensive: Apple has delivered a year-to-date gain of 66%.
That's great news for Buffett since Apple remains Berkshire's top holding. However, Berkshire reduced its position in Apple in the third quarter, selling 750,650 shares. This wasn't a huge sell-off, though, since it represented only 0.3% of Berkshire's Apple stake as of the end of Q2.
Apple's tremendous stock performance has come even though the company has posted year-over-year declines in iPhone sales. However, it's been able to offset these declines with strong growth in services and in its wearables, home, and accessories segment.
Thanks to these other revenue sources, Apple has been able to consistently beat Wall Street earnings estimates in 2019. The company's biggest quarter is now under way with the holiday season about to shift into full gear.
3. Charter Communications
Charter Communications ranks as the second largest cable company in the U.S. and is also a leading provider of broadband communications services. The stock is Buffett's No. 3 top performer so far in 2019 with a year-to-date gain of 64%.
Berkshire Hathaway's stake in Charter Communications isn't among its biggest positions. However, Berkshire has owned the telecom stock since 2014, and Charter has proved to be a solid winner through the years.
The key to Charter's success in 2019 has been its ability to beat expectations on a consistent basis. Even though Charter continues to lose cable customers, it's picking up broadband subscribers.
Charter Communications also jumped into the wireless business in 2018 with its Spectrum Mobile unit. This business has become a strong growth driver for the company, with Charter adding 276,000 new mobile lines in the third quarter.
Are they buys now?
I think two of Buffett's biggest winners of 2019 so far should continue to be winners over the long term. Apple and StoneCo appear to be in a great position to keep delivering nice gains.
My view is that Apple should receive a big boost as it launches 5G iPhones in 2020. I also think the company could create a new market with its highly anticipated augmented-reality products that are on the way. StoneCo should continue to make significant inroads in Latin America with its fintech products.
I'm not as convinced about Charter Communications. The company has successfully built a solid broadband business and is gaining some traction with its mobile business. However, the trend of cord-cutting isn't likely to fade away. My take is that Charter won't be a bad stock, but I'm uncertain about how much growth it will be able to deliver.
What would Warren Buffett do? Buffett's investing style definitely leans toward sticking with stocks for long periods. However, he would probably disagree with one of my calls. Buffett said earlier this year that Berkshire wouldn't buy Apple stock because of its valuation. With the tremendous gains Apple has achieved, the Oracle of Omaha is almost certainly not as much of a fan about buying Apple as he's been in the past.
