2019 was a record-breaking year for the stock market in general, so you can bet Warren Buffett had a fine time of it too. One immense reason for this is the equity portfolio of his investment company, Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B).
Buffett and Berkshire don't always hit home runs with their stock picks. Still, there were more than enough successes within the portfolio to make it a winning year. Now that 2019 is in the rearview mirror, let's look at three of the famed investor's top-performing equities over that 12-month span.
Image source: The Motley Fool.
1. Apple
Buffett was a latecomer to the rocket that is Apple (AAPL 2.15%) stock; he and Berkshire piled into it in mid-2016, nearly a decade after the iPhone changed the cellphone universe.
That's in character for Warren. For years he was extremely tech-adverse, plowing Berkshire's money into sturdy pillars of the economy like finance and transport. Many of the businesses in both the company's equity portfolio and its clutch of direct investments are in such relatively straightforward pursuits. He's not fond of investing in sectors he doesn't have a firm grasp on.
But it's hard to ignore the sky-high margins and prominence of a company like Apple. Plus, as Buffett said of the company, "it's got an extraordinary consumer franchise," which makes it a household name in popular electronics. Finally, Apple's famously strong ecosystem provides it with the kind of economic moat Buffett loves.
The iPhone line is now over 12 years old. Still, the restless company keeps trying to broaden its range -- witness its relatively recent forays into wearable tech products and TV streaming. Most likely not all of these ventures will succeed, but then again it's "a company that can afford a mistake or two," according to Buffett. For all his apparent traditionalism, the man does like a business that pushes and innovates.
Apple was the top-performing stock out of Berkshire's limited pool of tech equities at the end of 2019, rising by 86%.
2. Moody's
One stock that is very much in Buffett's wheelhouse of traditional investments is veteran credit rating agency Moody's (MCO +0.85%). The company is a textbook example of the kind of strong, focused business the famous investor loves to buy and hold.
Berkshire first plowed into Moody's in 2000, when it was spun off as an independent entity from financial services provider Dun & Bradstreet. These days, it's a member of the trio that dominates the deep and wide credit-rating business around the world, along with Standard & Poor's (owned by S&P Global) and privately held Fitch. How's that for a moat?
With the proliferation of credit around the globe -- thank you, persistently low interest rates! -- there is a vast number of debt instruments to rate, and no shortage of parties interested in paying for detailed information about them. In spite of its maturity, Moody's keeps adding nicely to the top line -- in the third quarter, it managed to lift revenue by a meaty 15%. The company's adjusted net income margin, meanwhile, was 33%.
It's little wonder, then, that the stock has recently notched a series of all-time highs. Across 2019, Moody's shares vaulted almost 70% higher.
3. StoneCo
Interestingly, Berkshire's No. 1 hit for 2019 was a relatively recent arrival to the stock market and an obscure company to most Americans -- StoneCo (STNE 0.22%). It is a Brazil-based financial tech company that had its initial public offering (IPO) in late 2018; Berkshire bought over 14 million of the freshly issued shares.
Massive Brazil is very much a cash-transaction economy these days, and StoneCo is a leader in its rapidly emerging digital payments sector. Imagine a country of nearly 210 million people shifting their purchasing habits -- from paper and coins to card and smartphone -- to get an inkling of the company's vast potential.
It's early days, admittedly, but StoneCo is putting up impressive numbers. In its most recently reported quarter, it grew revenue by 62% year over year, while posting a 126% leap in adjusted net income (not using generally accepted accounting principles). Its adjusted net margin was a lofty 30%.
For some time, Berkshire has had what many would consider a "good" problem -- it has an increasingly monstrous pile of cash that it should put to work through investments (as Buffett has admitted). It's wise to look beyond U.S. borders for undervalued investments of quality. So, foreign company off the typical investor's radar, strong position in a high-growth environment, potentially deep moat -- voila, StoneCo.
StoneCo took the No. 1 prize in Berkshire's equity portfolio in 2019. Over the year, its stock price zoomed 116% higher.
