Jewelry

Opinion: Buffett recommends you buy insurance and jewelry from him, but which of his stock holdings are worth owning? - MarketWatch

Warren Buffett is revered as the best investor of our times. His stock-selection ability is unparalleled.

Yet, if you go to his site in hopes of learning about his take on the stock market, the first thing that greets you is a message from Buffett himself. He acts as the “salesman in chief” and advises on how to save money on insurance and jewelry — two long-term holdings (Geico and Borsheim’s). He gives you toll-free numbers for them. But he says he does not make stock recommendations.

Of more interest to investors are the strong earnings that Berkshire Hathaway BRK.B, +1.73% released over the weekend and takeaways from reading its 10-Q. Before discussing the earnings, let us start with an eye-opening chart.

Chart

Please click here for the chart of Berkshire Hathaway compared with the Dow Jones Industrial Average DJIA, +0.63% S&P 500 ETF SPY, +0.39% and Nasdaq 100 ETF QQQ, +0.26% Please note the following from the chart.

• The chart starts from the stock market’s bottom in March 2009.

• The chart covers the entire period of this bull market.

• The chart shows that there is no material outperformance by Berkshire Hathaway stock over the S&P 500 ETF and Dow Jones Industrial Average.

• The chart shows the Nasdaq 100 has significantly outperformed.

The conclusion from the chart is that Warren Buffett is no longer significantly outperforming the market.

Also read: Warren Buffett’s favorite metric suggests some serious pain awaits investors

Ask Arora: Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora.

Earnings

Berkshire Hathaway reported second-quarter operating earnings of $6.89 billion vs. $4.12 billion a year earlier, roughly in line with expectations. The two key metrics in the report are book value and insurance float. Book value per Class A equivalent share was $217,677 and the insurance float was $116 billion.

Trigger for stock appreciation

The trigger for Berkshire Hathaway’s stock appreciation will be any major buyback. Until then The Arora Report rating on the stock is neutral. The company said last month that it changed its buyback policy, giving it more flexibility in deciding when to repurchase shares.

Berkshire holdings — what can you buy?

Warren Buffett’s biggest holding is Apple AAPL, -0.96% He has made billions from his Apple holding. To see The Arora Report take on Apple, please read “Apple stock’s next milestone is $250 as the company makes a crucial transition.”

One reason that Warren Buffett has not significantly outperformed is that, with the exception of Apple, he does not own any of the popular stocks such as Amazon AMZN, +0.61% Facebook FB, -0.31% Netflix NFLX, -0.01% and Google GOOG, +1.81% GOOGL, +1.94% He has holdings in financial stocks, consumer stocks and airlines.

Here are the two real questions for investors. Is it prudent to blindly follow Buffett’s portfolio? Which one of Warren Buffett’s stocks can you buy now? This will be the subject of one of my future columns.

Disclosure: Subscribers to The Arora Report may have positions in the securities mentioned in this article. Nigam Arora is an investor, engineer and nuclear physicist by background who has founded two Inc. 500 fastest-growing companies. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be reached at Nigam@TheAroraReport.com.