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Warren Buffett and hedge funds are crazy about these stocks

Posted on by darion

We recently made a list Warren Buffett and Hedge Funds Are Going Crazy About These 10 Stocks. In this article, we’ll take a look at how MasterCard Incorporated (NYSE:MA) stacks up against other stocks recommended by Warren Buffett and hedge funds.

Warren Buffett will go down in history as one of the most successful investors on Wall Street, a feat he has achieved through his honesty, wisdom, and wit. He is called the Oracle of Omaha at his investment firm, Berkshire Hathaway, having achieved a compound annual return of 19.8% since 1958, more than twice the 9.9% gain for the S&P 500. Berkshire Hathaway stock has gained more than 3,787,464% since 1965, compared to a 24,708% gain for the S&P 500, underscoring Buffett’s stock-picking skills.

Buffett is one of the most talented investors in Wall Street history, amassing a net worth of $138 billion, according to the Bloomberg Billionaire Index. His net worth would be much higher if not for his generous donations to various charities. Unlike many other billionaires who prefer lavish lifestyles with large homes and luxury vehicles, Buffett is often seen as one of the most modest billionaires in the world.

The significant investment gains over the years have come from Buffett buying stocks in various sectors and holding them for years, even decades. The secret to Buffett’s prosperity lies largely in investing in successful, reputable companies with clear competitive advantages. While this approach focuses primarily on undervalued stocks, it sometimes includes investing in high-growth companies.

The investment strategy is often supported by the large cash pool that Berkshire Hathaway has to generate earnings per share from most of its investments and through dividend payments. Nevertheless, it is becoming increasingly clear that Warren Buffett and hedge funds are crazy about a certain clique of stocks.

High-growth companies and market leaders in specific fields are some of the factors that Buffett and most hedge funds watch closely when choosing stocks. Technology stocks, which consist of some of the largest companies, make up 41% of Buffett’s 13F portfolio at the end of March, which has consistently allowed him to outperform the broader market.

Diversification is another important factor in the stocks that Warren Buffett and hedge funds love. While technology stocks make up the largest portion, billionaire investors also invest in financials (21%) and fundamentals (10.7%). Diversification is in line with billionaire value investing principles, which include undervalued investments in a variety of sectors.

Over the years, Buffett has always sought out securities that are undervalued relative to their intrinsic value. Instead of focusing on short-term market gains, the Berkshire Hathaway CEO selects stocks based on their long-term potential. That was one reason Berkshire Hathaway stock ended 2023 with a 15.8% gain, its eighth consecutive year of gains. The biggest gain of 29.6% came in 2021, at the height of the COVID-19 pandemic.

While Berkshire Hathaway had $189 billion in cash at the end of the first quarter, it is expected to grow to $300 billion by the end of the third quarter. While most people may wonder why Buffett isn’t putting most of his cash to work, the billionaire investor is always careful to focus on value investments rather than simply investing for the sake of it.

The billionaire investor always follows the mantra: never invest in overvalued stocks. That’s why he always takes the time to scan for value investments that are trading at discounted valuations. Furthermore, Berkshire Hathaway’s sheer size means that it can only invest money in select companies that will significantly impact its returns. This is further compounded by the fact that cash equivalent investments, such as short-term government bonds, currently offer returns in excess of 5%, which is quite high at current levels. As a result, Warren Buffett and company are deliberately looking for the perfect investment at the perfect price, and such an opportunity can arise at any time.

Buffett has also been riding the wave in recent times amid a shift in investment focus away from oil and gas amid a shift to clean energy. Buffett remains bullish on investment opportunities in the energy sector amid coal conservation initiatives, even as major players continue to generate significant profits from the lucrative fossil fuel business. Buffett and hedge funds have also shown strong interest in stocks offering exposure to emerging technologies, such as artificial intelligence, that are driving up valuations in the market.

Our methodology

In this article, we’ll take a look at some of the top stocks that Buffett and other hedge funds are investing heavily in. Warren Buffett and hedge funds are crazy about these 10 stocks, in part because of their growth rates and long-term prospects. While some stocks trade at premium valuations, they are market leaders in their fields and therefore well-positioned to generate long-term value. We’ve ranked the stocks in Warren Buffett’s portfolio based on the number of hedge funds invested in them and selected the 10 best.

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MasterCard Incorporated (NYSE:MA)

Berkshire HathawayShare value: $1.92 billion

Number of hedge fund investors: 148

MasterCard Incorporated (NYSE:MA) has come back to life in the face of the AI ​​revolution. The digital payments processor’s move to integrate AI technology into its product offerings to improve how retailers and consumers connect is paying off. For example, MasterCard Incorporated (NYSE:MA) is using the technology to strengthen the security of its platform and improve fraud detection.

These improvements were the catalyst for MasterCard Incorporated (NYSE:MA) to deliver better-than-expected financial results with 13% revenue growth and 20% EPS growth in the latest quarter. With management confident of double-digit revenue growth in 2024, MasterCard Incorporated (NYSE:MA) will remain one of the top stocks Warren Buffett and hedge funds would go wild over.

The number of hedge funds holding shares in the digital payments processing company in the first quarter was 148, up from 141 at the end of 2023, according to Insider Monkey’s database.

In its Q2 2024 investor letter, L1 Capital International Fund shared its commentary on Mastercard Incorporated (NYSE:MA), detailing the company’s performance and strategic direction. Here’s what the fund had to say:

“The stock prices of Mastercard Incorporated (NYSE:MA) and Visa, both long-term holdings in the Fund, have fallen in recent months. There have been no dramatic changes, but there has been a general, modest weakening in the pace of growth in U.S. and global consumer spending, a court decision rejecting Mastercard’s and Visa’s proposed resolution of a long-standing dispute with U.S. merchants, and other modest adverse regulatory changes. We continue to view Mastercard and Visa as two of the world’s best value companies, and both are well-positioned to continue to deliver attractive risk-adjusted shareholder returns over time.”

Total MA takes 4th place on our list of the best stocks to buy according to Warren Buffett and hedge funds. You can visit Warren Buffett and Hedge Funds Are Going Crazy About These 10 Stocks to see other stocks that are on the hedge fund radar. While we recognize the potential of MA as an investment, our belief is based on the belief that some AI stocks are more promising in terms of delivering higher returns and doing so in a shorter time frame. If you are looking for AI stocks that are more promising than MA but are trading at less than 5 times earnings, check out our report on cheapest AI action.

READ MORE: 10 dividend stocks with very high yields and growth potential and 10 best blue chip dividend stocks to buy.

Disclosure: None. This article was originally published on Insider Monkey.