Please ensure Javascript is enabled for purposes of website accessibility

3 of Warren Buffett's Biggest Losers of 2021 That Could Still Be Long-Term Winners

By Keith Speights - May 23, 2021 at 5:01AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Oracle of Omaha likely hasn't lost a minute of sleep over these stocks.

Warren Buffett is on a roll. Shares of his beloved Berkshire Hathaway (BRK.A 0.55%) (BRK.B 0.42%) are handily beating the S&P 500 performance year to date. Most of the individual stocks in Berkshire's equity portfolio are also doing very well.

But there are some exceptions. A handful of stocks that the Oracle of Omaha likes have delivered losses. That doesn't mean they won't rebound in the future, though. Here are three of Buffett's biggest losers so far in 2021 that could still be long-term winners.

Warren Buffett with people in the background

Image source: The Motley Fool.

Merck

Berkshire invested heavily in Merck (MRK -0.46%) last year. However, Buffett is apparently not quite as enamored with the big pharma stock now: He sold more than 10.8 million shares of Merck in the latest quarter.

Merck has been a loser for Berkshire, although not a huge one in 2021. Its shares are down around 7% year to date. That's not much, but it's a lot worse than most of Buffett's stocks. 

The drugmaker missed Wall Street estimates with its first-quarter results. Revenue was flat year over year, while earnings fell. But don't count Merck out. The main problems for the company in the first quarter related to the pandemic and the timing of vaccine shipments to China. Those should only be temporary issues.

Merck's cancer immunotherapy Keytruda continues to have great prospects. The company's spin-off of its women's health, biosimilars, and established brands businesses into a separate entity should clear the path for stronger growth. Its pipeline also includes several promising late-stage candidates.

Snowflake

Snowflake (SNOW 1.04%) ranks as one of the most surprising Buffett buys in recent years. While Berkshire has profited nicely since the tech company's IPO in 2020, Snowflake has been a big loser so far this year with its shares sinking nearly 26%. 

But there are some smart investors betting that Snowflake will rebound. Lone Pine Capital, a hedge fund managed by Stephen Mandel, has significantly added to its position in the cloud-based data warehouse stock. Goldman Sachs analyst Kash Rangan thinks that Snowflake has an upside potential of close to 20% over the next 12 months. 

Snowflake certainly has some happy customers. The 2021 Wisdom of Crowds' Analytical Data Infrastructure Market Study published earlier this year found that 100% of Snowflake's customers would recommend the company to other organizations. Snowflake ranked best in class on several key metrics.

The company reports its first-quarter results next week. If it keeps up the kind of momentum seen in the fourth quarter, when revenue soared 116% year over year, Snowflake's quarterly update should provide a catalyst for a nice bounce. Even if not, though, the stock could still make Buffett plenty more money over the long run.

StoneCo

Shares of StoneCo (STNE 0.33%) have dropped, well, like a stone so far in 2021. The fintech is down 27% year to date and is close to 33% off its high set in February.

Part of the problem has been the overall sell-off in growth stocks that began a few months ago. It didn't help that StoneCo, which sells point-of-sale and other financial-technology solutions in Brazil, missed the consensus earnings estimate with its fourth-quarter results announced in March. 

However, the company added more net new customers in that quarter than it ever has in any other single quarter. Even with StoneCo investing more heavily in its business, it still delivered year-over-year adjusted earnings growth of more than 30%.

It has something that Buffett really prizes: a strong moat. The company continues to strengthen that moat by offering more products and services to its small and medium-size customers. This stock is pricey with shares trading at 55 times expected earnings. But StoneCo's enormous market opportunity seems to justify a premium valuation.

Keith Speights owns shares of Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Snowflake Inc., and Stoneco LTD. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short June 2021 $240 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

StoneCo Ltd. Stock Quote
StoneCo Ltd.
STNE
$12.10 (0.33%) $0.04
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$455,170.00 (0.55%) $2,472.75
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$302.82 (0.42%) $1.27
Merck & Co., Inc. Stock Quote
Merck & Co., Inc.
MRK
$90.60 (-0.46%) $0.42
Snowflake Inc. Stock Quote
Snowflake Inc.
SNOW
$170.44 (1.04%) $1.76

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.