Has the great Warren Buffett – chair and CEO of Berkshire Hathaway (NYSE:BRK.A)(NYSE: BRK.B) – lost his magic?

Known as the Oracle of Omaha, Buffett is generally regarded as one of the greatest investors of all time. His holding company, Berkshire Hathaway is one of the greatest American success stories of the 20th century. Since 1964, Berkshire shares have grown by an average of 20.9% per year. In other words, back in ’64, a share in Berkshire would have cost you approximately $12.37. Not bad considering one BRK.A share will cost you US$275,000 today.

But Berkshire’s performance over the last 10 years, and particularly during the 2020 market crash, has some investors wondering if Buffett has lost his mojo. According to reporting in the Australian Financial Review (AFR), Berkshire had it’s worst performance against the US S&P 500 benchmark in 2019, and 2020 is looking to be just as bad.

Has Buffett lost his magic touch?

Recent Buffett deals – specifically involving Kraft Heinz and Occidental Petroleum – have been hugely damaging for Berkshire’s balance sheet. And his now-infamous selloff of US airline shares in March looks to have been executed pretty close to the market bottom. To make matters worse, all 4 of the airlines Buffett unloaded at multi-billion dollar losses have rebounded strongly since March.

Berkshire was seemingly ready for the market wipeout in March with more than US$137 billion of cash ready for deployment. Stockpiling cash late in the market cycle has been Buffett’s modus operandi for decades now. Many of Berkshire’s biggest moneyspinners over the past decade stemming from the global financial crisis in 2008-09.

But Buffett didn’t end up putting even a dollar to work in the 2020 market crash, telling investors in May that, “we haven’t seen anything attractive”.

What’s going on at Berkshire?

The unfortunate reality is that Buffett is now close to 90 years old. He openly admits that the tech companies that now make up the lion’s share of US equity markets are mostly outside his circle of competence. Apart from a gargantuan stake in Apple (initiated in 2016), Berkshire has largely stayed away from tech shares. This appears to have cost the company dearly in recent years.

It has been a challenging few years for Berkshire Hathaway and Warren Buffett. But he has managed to come back from periods of underperformance before. If you look at the history of this iconic investor, you’ll see that it’s never been a great idea to bet against Berkshire Hathaway. So I’m not giving up on Buffett just yet.

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Sebastian Bowen owns shares of Kraft Heinz. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short June 2020 $205 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). 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. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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I believe maintaining a diversified portfolio is one of the keys to success when investing.

While a diverse portfolio won’t necessarily protect you from market crashes like we experienced earlier this year, it will limit the damage of them.

This is because it means you won’t be over exposed to sectors that are hit harder than others. The travel sector is a great example of this in 2020.

In light of this, I have picked out three top shares in three different sectors which I think could be great additions to most portfolios. They are as follows:

Financial sector – Commonwealth Bank of Australia (ASX: CBA)

Investors that don’t already have exposure to the banks might want to consider Commonwealth Bank. I think the pullback its share price this year has left it trading at a very attractive level for a long term and patient investment. Especially if, like me, you’re optimistic the worst is now behind the banks and better days are ahead. Another reason to consider Commonwealth Bank is its dividend. I expect a final dividend cut in FY 2021 down to approximately $3.70 per share. This equates to a fully franked 5.3% dividend yield.

Healthcare sector – ResMed Inc. (ASX: RMD)

In the healthcare sector I think ResMed is worth considering. It is a medical device company which manufactures ventilators and sleep treatment products. It is the latter products that I believe will be the key drivers of growth during the 2020s. This is because of the proliferation of sleep apnoea globally, which is leading to increasing demand for solutions. I believe the quality of its CPAP portfolio and its growing software businesses have positioned it perfectly to capture a growing slice of this market and deliver further strong earnings growth for many years to come.

Tech sector – Appen Ltd (ASX: APX)

Finally, I think Appen is one of the best options in the tech sector right now. The language data company looks well-positioned to continue growing its earnings at a strong rate over the next decade thanks to the increasing importance of artificial intelligence (AI). Appen has exposure to the AI market through its million-plus team of crowd-sourced experts that prepare the data that goes into machine learning models. It has worked with the likes of Facebook, Microsoft, and Apple. I believe this is a testament to the quality of its services.

More reading

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• Millennials be warned! Signs of dangerous ASX share trading grow
• 2 ASX shares to buy for beginners
• Is the Macquarie share price a solid buy today?
• 3 high quality dividend shares to buy instead of the big four banks

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended ResMed Inc. 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. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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An online sales boom has been magnified as a result of the lockdown during the pandemic. It’s anticipated this boom will continue post the coronavirus.

ABC News reported that the virus has shifted consumer behaviour. Because consumer preferences have changed, this has forced retailers to re-think their offerings and move to, or compliment, their operations with an online presence.

For this reason, I believe an investment in either one of these 3 companies could reward the willing investor:

• Kogan.com Ltd (ASX: KGN)
• Goodman Group (ASX: GMG)
• NextDC Ltd (ASX: NXT)

Kogan.com

The Kogan.com share price has soared 185% in the past year.

Why?

As an online retailer selling a diversified mix of products and services and with a loyal customer base, sales have soared – especially since the lockdown. 

Is it too late to buy?

After completing a A$100 million capital raise this month, Kogan now has the flexibility to invest and grow the business.

In its investor presentation released this month, the group announced a significant increase in sales, earnings and customer numbers. 

In my view, Kogan has benefited enormously from online sales because of its diverse offering. Its increase in marketing spend is helping attract customers and boost sales. For this reason, I believe the share price will continue to rise.  

Goodman Group

While the share price has increased by 2% in the past year, I believe there are reasons to be optimistic. 

In its recent investor newsletter to security holders, the group advised it remains in a solid position and reaffirmed its FY20 earnings guidance of 57.3 cents per share, up 11% on FY19, and a full year distribution of 30 cents per share. 

Goodman supplies logistics and warehousing globally. This aids in the delivery of goods for the online sales boom. It’s seeing stronger demand for new space and the development book stands at $4.8 billion. 

In my view, Goodman is an attractive investment that I think will reward investors despite the small increase in share price in the past year.

NextDC

The NextDC share price has soared 38% in the past year on the back of the demand for its data centres. 

Last month, the group completed a $191 million share purchase plan for eligible shareholders. It’s expected that the funds raised will help the development of a new data centre to meet increased demand. 

CEO, Craig Scroggie, said 

“…well capitalised to continue growing our premium data centre services platform in support of our key customers who continue to drive the growth of the digital economy.”

As a result, NextDC Ltd could deliver significant capital gains for buy and hold investors. 

Foolish takeaway

The recent crisis promoted the benefit of e-commerce with some trying online shopping for the first time. The above-mentioned companies could reward investors who are looking to profit from the rise of online sales.

More reading

• I would buy and hold Kogan and these ASX shares until 2030
• Up 250% since March: is it too late to buy Kogan shares?
• 2 ASX shares to buy for beginners
• Will Xero shares and these 2 other ASX companies be portfolio staples by 2030?
• Why Zip Co and these All Ords shares have doubled in 12 months

Motley Fool contributor Matthew Donald has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. 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. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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