Warren Buffett has never minded zigging when others are zagging. After all, this is the man who is famous for saying, "Be fearful when others are greedy and be greedy when others are fearful."
It shouldn't be surprising that Buffett is zigging somewhat in 2024. The legendary investor and his team sold 11 stocks owned by Berkshire Hathaway in the second quarter. However, analysts remain quite bullish about several of them. And Wall Street thinks one of them could soar roughly 45% over the next 12 months.
Buffett's big sale of Apple in Q2 received the most attention. His nearly halving of Berkshire's stake was especially notable because Buffett has praised the company's business and management for years.
Many investors also took note of the fact that Buffett continued to downsize Berkshire's position in Bank of America. Although the stock is still the conglomerate's third largest holding, Buffett doesn't seem to be as enamored with the big bank as he once was.
Chevron is another major Berkshire holding that received a trim in Q2. Buffett sold 3.6% of the oil and gas giant, which remains the fifth-largest position in Berkshire's portfolio.
All of the other Q2 sales were much smaller positions for Berkshire. They include double-digit percentage reductions in Capital One Financial, Floor & Decor, and T-Mobile US. Buffett sold smaller amounts of Liberty Media Class A, Liberty Media Class C, and Louisiana-Pacific.
Finally, Buffett (or his two investment managers, Todd Combs and Ted Weschler) decided to completely exit Berkshire's positions in two stocks in Q2. Paramount Global and Snowflake (NYSE: SNOW) are no longer owned by Berkshire.
Wall Street's favorite of the stocks Buffett sold
Of these 11 stocks, Wall Street is most bullish about one of the stocks Buffett and his team appeared to be the least bullish about -- Snowflake. The average 12-month price target for the cloud software company reflects an upside potential of 45%.
Financial markets infrastructure and data provider LSEG surveyed 44 analysts in September who cover Snowflake. Seven rated the stock as a "strong buy." Another 23 rated Snowflake as a "buy." Twelve analysts recommended holding the stock, while two rated it as an "underperform."
What does Wall Street like so much about Snowflake? Its growth. The company's revenue jumped 29% year over year in Q2 to $868.8 million. Product revenue soared 30% to $829.3 million. Analysts no doubt also like Snowflake's 28% year-over-year increase in customers with over $1 million in product revenue and its sky-high net revenue retention rate of 127%.
Analysts like strong growth prospects even more than previous growth. Snowflake impresses on this front, too. The total addressable market for the company's software platform is expected to more than double between 2023 and 2028 to $342 billion.
Who's right about Snowflake -- Buffett or Wall Street?
I understand Wall Street's optimism about Snowflake's business. The company is certainly in the right place at the right time with its Data Cloud product, which enables customers to consolidate data to more effectively harness the power of artificial intelligence (AI).
Snowflake's latest investor presentation included a slide that said, "There is no AI strategy without a data strategy." That statement is true -- and summarizes the great opportunity that lies ahead for the company.
However, I also understand why Buffett exited Berkshire's stake in Snowflake. Berkshire invested in Snowflake's IPO in 2020 at $120 per share. The stock initially skyrocketed but has fallen sharply this year. Berkshire locked in a profit by selling during Q2.
Snowflake is also an expensive stock -- especially for Buffett. The cloud software company's shares trade at a forward earnings multiple of 135. Even with growth projections over the next five years factored in, the stock still looks pricey with a price-to-earnings-to-growth (PEG) ratio of 1.96.
Wall Street could be right that Snowflake's share price will soar 45% over the next 12 months. However, I suspect Buffett won't regret the decision to sell the stock when he did.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Keith Speights has positions in Apple, Bank of America, Berkshire Hathaway, and Chevron. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Chevron, and Snowflake. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.
Warren Buffett Sold 11 Stocks in Q2. Wall Street Thinks 1 of Them Will Soar 45% Over the Next 12 Months. was originally published by The Motley Fool