Warren Buffetts Worst Stocks of 2016 So Far

By Markets Fool.com

Warren Buffett is widely considered to be one of the best (if not the best) stock pickers of all time, and for good reason. Over the years, his picks have consistently delivered market-beating returns over long periods of time. However, nobody picks winners 100% of the time, and most stocks -- even of the best companies -- don't just go up forever. With that in mind, here are the worst-performing stocks from Berkshire Hathaway's portfolio so far in 2016.

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Berkshire's bottom 10 of 2016

So far in 2016, 17 out of the 45 stocks listed in Berkshire Hathaway's portfolio have produced negative total returns of 1% or more. Some of this was due to industry-specific or overall market weakness -- as you'll see in a minute, several of the worst-performing stocks in the portfolio belong to the financial sector, which has been beaten down this year. On the other hand, some of this is simply due to company-specific issues, as is the case with many others on the list.

Here are the worst performers in Berkshire's portfolio so far in 2016, listed in descending order of performance.

Ranking

Company

Ticker Symbol

YTD total return

Investment value ($millions)

10

Verisign

VRSN

-4.34%

$1,150

9

Moody's

MCO

-5.54%

$2,382

8

American Express

AXP

-7.20%

$9,308

7

Wal-Mart Stores

WMT

-7.42%

$3,783

5 (tie)

Wells Fargo

WFC

-8.54%

$23,198

5 (tie)

General Motors

GM

-8.54%

$1,572

4

Apple

AAPL

-8.62%

$1,069

3

Costco

COST

-10.8%

$683

2

Goldman Sachs

GS

-13.4%

$1,720

1

Liberty Global

LBTYA/LBTYK

-14.1%/-11.9% (-13.41% combined)

$876 (combined)

Total returns as of May 20, 2016

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When reading this information, there are a few things to keep in mind.

First of all, Apple wasn't in Berkshire's portfolio at the beginning of 2016 -- the stake was purchased during the first quarter. So, although Apple has produced a total return of -8.62% for the year, it doesn't mean that Berkshire has suffered that much of a loss on its newly acquired investment.

Next, you'll notice that Liberty Global has two different symbols and two different performance figures listed. Berkshire owns two different classes of Liberty Global stock -- Class A and Class C, which I've considered as one position since it represents the same underlying company. Since the value of Berkshire's Class A position is more than twice that of the company's Class C stock, the weighted average performance of the Liberty Global stake is 13.41%, making it (barely) the worst-performing stock in the portfolio.

Further, keep in mind that this chart represents total returns, which includes the dividends paid by these companies so far in 2016. Excluding dividends, some of these performance metrics would be significantly different. For example, General Motors' share price actually dropped by more than 9.6% thus far in 2016, but dividends should be taken into consideration when assessing a stock's overall performance.

Finally, it's important to take a moment to recognize the dramatic differences in investment sizes within the portfolio. Berkshire's stock portfolio is rather top-heavy -- in fact, the three largest holdings are worth more than the other 42 combined. In the context of performance, this means that although Liberty Global has performed significantly worse than Wells Fargo so far this year, the Wells Fargo stake is more than 26 times larger, so investors should be more concerned with its poor performance.

Berkshire's overall performance in 2016 so far

Although there have been some laggards in Berkshire's portfolio, it's important to keep things in perspective. Many Berkshire stocks have done quite well -- for example, Kraft Heinz (Berkshire's largest holding), Charter Communications, USG, and Kinder Morgan have all delivered double-digit positive returns. And, don't forget about Berkshire's vast portfolio of wholly owned subsidiaries, which make up the bulk of the company's value.

In a nutshell, the losing stocks mentioned earlier are a small part of a much bigger picture. In fact, Berkshire stock is up nearly 8% for the year.

The bottom line is that when you make as many investments as Berkshire does, some of them aren't going to do so well. No stock picker has a 100% success rate or even close to it, and Warren Buffett and company are certainly no exceptions. However, they are certainly right more than they're wrong, and when they're wrong, it's generally to a small degree. As any long-term Berkshire Hathaway shareholder could tell you, that's a winning formula for investing success.

The article Warren Buffetts Worst Stocks of 2016 So Far originally appeared on Fool.com.

Matthew Frankel owns shares of American Express, Apple, Berkshire Hathaway, General Motors, and Goldman Sachs. The Motley Fool owns shares of and recommends Apple, Berkshire Hathaway, Costco Wholesale, and Wells Fargo. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool recommends American Express, General Motors, Liberty Global, and Moody's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.