To quote the old proverb, April showers bring May flowers. If you’re a shareholder of Warren Buffett’s investment vehicle Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B) they’ll probably continue to bring the returns too. The company’s renowned equity portfolio keeps growing; the total market value of its top equity positions was nearly $171 billion at the end of 2017, well higher than the $122 billion at the close of 2016.
A clutch of those stocks have good potential to rise over the course of 2018. With that in mind, here is a trio of noted Berkshire titles to consider buying this month.
Bank of America
What a difference a decade makes. Bank of America (NYSE: BAC) was a shell-shocked basket case of a lender in the wake of the financial crisis, to the point where it required one of the largest bailouts from the government’s TARP program.
It’s a confident and prosperous bank these days. A strong efficiency push, in which branches were shuttered and online/mobile interfaces enhanced, reduced its efficiency ratio by 8 percentage points — a significant improvement for such a huge institution. And the bank has managed to boost its total loans (by 3% year over year in the most recently reported quarter) and deposits (4%), which helped improve revenue and profitability.
A humming economy and the near certainty of continued Fed interest rate hikes augur well for the proximate future of Bank of America, not to mention the government’s recent big-company-friendly tax reform. The company has a nice streak of earnings beats behind it, so a fresh surprise on the upside would be entirely in character when the bank reports its Q1 2018 earnings on April 16.
Apple
Since Berkshire started accumulating shares of Apple (NASDAQ: AAPL) in 2016, it has continued to increase its holding. The mighty tech company is now the largest position in Berkshire’s equity portfolio.
The company looks poised to keep performing well for several reasons despite the concern that it’s still too dependent on iPhone sales. Its services revenue is growing considerably — at an 18% clip in the most recent quarter — outpacing the products category.
Also, the company’s customer foundation is getting ever stronger; the installed base of its devices has risen by 30% over the course of two years (to 1.3 billion gadgets in total). This is even more impressive when considering the iPhone’s age and the company’s lack of a world-shaking, revolutionary new product.
On top of that, Apple is a cash-generating machine, with free cash flow rising 7% to a very meaty $25.5 billion in the prior quarter. That’s enough to boost the company’s dividend, which has been continuously fattened with an annual raise since it was reintroduced in 2012.
SiriusXM
Buffett loves the idea of an economic moat so much, he actually coined the phrase.
In the broadcasting world, there aren’t many moats wider than that of Sirius XM Holdings (NASDAQ: SIRI). The company is the market for satellite radio, holding a nearly impossible-to-break grip on this rising business.
This powerful position, combined with auto sales that have been robust over the past few years, keeps lifting the company’s results higher. For its fiscal 2017, Sirius XM managed to expand its subscriber base by 4% over the previous year to almost 33 million listeners. This helped improve revenue and adjusted EBITDA notably by a respective 8% and 13%, respectively, for the year. Both line items notched new all-time records for the company.
Although some experts are fretting that auto sales have either peaked, or will soon, the impact probably won’t be too hard for Sirius XM. After all, with nearly 270 million cars on American roads against that nearly 33 million customer base, there are plenty of autos that could use an upgrade from traditional radio to satellite.
Analysts are expecting per-share net profit growth of around 25% in Sirius XM’s Q1 of 2018. The company will release that quarter’s results on April 25.
Growing season
As of Berkshire’s latest 13F regulatory filing, which details the contents of its equity portfolio, the company held positions in nearly 50 stocks. So there are more than these three winners on its hands (and at least a few clunkers, to be even-handed about it). Still, each member of this trio has excellent potential going forward. Let’s see how high they grow during this fertile time of the year.
