Investors have had to endure a lot of stock market volatility as 2018 turned into 2019. The selling pressure of December, for the worst year-end performance since the Great Depression of the 1930s, was followed with more volatility at the start of 2019. Some investors are worried that the big moves are showing no signs of quieting down.

Many investors start to seek safer investments during times of uncertainty. Sometimes that is in large defensive stocks, and sometimes it is following the picks of the great market wizards. Warren Buffett has been crowned the greatest investor of the modern era. After all, if you have become the world’s wealthiest person then maybe you know a thing or two.

Buffett’s Berkshire Hathaway Inc. (NYSE: BRK-A) held roughly $207 billion worth of public stocks at the end of September 2018. The stock market slide has negatively affected that huge amount to the tune of billions of dollars. In fact, Berkshire Hathaway’s recent share price of around $295,000 was down 12% from its peak value in 2018 — well over $50 billion in lost market value.

24/7 Wall St. has looked over the top investments of Warren Buffett and his team of portfolio managers for a 2019 outlook. Just seven of these big investments (Buffett has dozens of stocks owned by Berkshire entities) are the so-called make-or-break stocks for how his gains and losses go in 2019. More importantly, these seven likely will be the largest influence on Buffett’s own top metric covering the tangible book value.

We have looked at the prospects for each company based on the end of 2018 and start of 2019, using consensus analyst price targets from Thomson Reuters. Color also has been added on each of these positions, along with a look at just how much the stock market’s drop has hurt the value of each position in a very short time.

American Express

American Express Co. (NYSE: AXP) has been the same 151.6 million share stake as it has been for years. Make that decades now. This was a $16.1 billion stake in Berkshire Hathaway’s latest quarterly earnings report. Upon closing out 2018 at $95.32 a share, this stock was actually down 4% from a year earlier.

One issue that may have kept pressure on Amex in 2018, outside of the overall plunge in financial stocks, was that its shares had gained a surprising 34% in 2017. Gains of that size tend to rob future gains. Amex ended 2018 with an analyst consensus target price of $114.94 and an implied gain of about 20% ahead, or 22% if you include its 1.6% dividend yield.

Berkshire Hathaway continues to remain the anchor shareholder for American Express. Its 17.6% stake is nearly three times the size of Amex’s second largest shareholder (Vanguard).

As for the 2019 outlook, Amex needs to make certain its clients do not see eroding credit metrics with delinquencies and charge-offs. Oddly enough, the consensus target price was less than 0.4% above Amex’s 52-week high.

The Mighty Apple

Apple Inc.  (NASDAQ: AAPL) reached the world’s largest company status and managed to hit the $1 trillion valuation in 2018. But after analysts piled on in an effort to lower iPhone expectations in November and December, Apple CEO Tim Cook announced after the first trading day of 2019 that the company’s sales were going to be handily lower than expectations.

Buffett may have a long-standing friendship with Microsoft founder Bill Gates, but Buffett has amassed a huge bet on the future of Apple. Berkshire Hathaway is the third largest shareholder of Apple after Vanguard and BlackRock. While the Apple stake was listed as worth $57.6 billion in the latest earnings report, the real issue is that Apple’s share price is now down almost 40% from its peak of 2018.

Buffett used to shun technology companies. Now he is willing to buy, but a very mixed bag from his IBM investment and the recent drop here are adding pressure to Berkshire Hathaway’s investment portfolio. In fact, that $57 billion Apple valuation recorded in 2018 was worth less than $40 billion in the second week of 2019. Not many investors can claim that they have lost $20 billion in just one stock.

Bank of America (and Merrill Lynch)

Bank of America Corp. (NYSE: BAC) was a $26.5 billion stake in Berkshire Hathaway’s last earnings report. Buffett actually increased his stake during 2018, just in time for bank and financial stocks to slide lower. After the first week of 2019, the value was closer to $22 billion.

Bank of America’s fate is tied directly to peers and competitors. The whole banking sector was weak heading into 2019, and it remains up for grabs whether the Federal Reserve’s quest to raise interest rates will (or already has) led to “overshooting” on a new neutral rate policy target. An inverted yield curve, where short-term yields are higher than intermediate-term ones, can signal woes for the banking community because they pay out more short-term than they may earn in their longer-term investments.

The pool of analysts had a consensus target price of $33.87 at the start of 2019. What is odd is that this is actually higher than its multiyear high of $33.05. And to make matters worse, the stock would have to rally almost 33% to hit that target.

Before thinking that Buffett is losing his shirt for shareholders here, it is important to consider that this was a big post-recession stake that was from convertible debt at far lower share prices.

Coca-Cola

Coca-Cola Co. (NYSE: KO) is another position that Buffett has owned for decades. His cost-basis after adding in dividends may even be close to zero now, when you add up all the money that Berkshire Hathaway has received in dividends. The value of this 400 million share stake was listed as $18.5 billion on the most recent Berkshire Hathaway earnings report.

Unlike some of the bank and technology stocks, Coca-Cola is a defensive stock by nature, and the company also has moved beyond just Coke (which Buffett drinks daily) into more water and healthier sport beverages. And Coca-Cola shares were even trying to stage an upside technical breakout above $50 before sliding in December with the broader market.

It remains unclear if Buffett, or his successors, would ever consider selling off the stake in Coca-Cola. The stock’s consensus target price at the end of 2018 was $51.66, after a 3% gain in 2018. That is above its 52-week and all-time high of $50.84, and if analysts are correct that recent sell-off might help investors make close to 10% more in 2019. One issue to consider here is that Coca-Cola shares are valued at 21 times annual earnings expectations.

Kraft Heinz

Kraft Heinz Co. (NASDAQ: KHC) is supposed to be defensive since it is the top company in packaged foods, but many consumers have shifted toward more natural product offerings that may be lower in sodium and fat (and fewer ingredients that are hard to pronounce). This stake is also considered to be outside of the normal book-keeping in Berkshire Hathaway’s public equity holdings due to its classification.

Berkshire Hathaway owned more than 325 million shares of Kraft Heinz common stock at the end of September. This represented 26.7% of the outstanding shares, and the fair value with the latest earnings report was roughly $17.9 billion.

The problem here is that Kraft Heinz shares have been cut in half from the $90 share price of mid-2017. It is not normal for a historically defensive stock to see its shares drop that much. It goes without saying that this retreat has been far more than Buffett would have expected.

Wells Fargo

Wells Fargo & Co. (NYSE: WFC) used to be Buffett’s largest equity holding of all his stocks. He had even been adding to the stake for years and years. Wells Fargo’s account opening scandal and other business practice issues that came to light in the past two years hurt the stock. At the start of 2018, this was a $65 stock, but it was closer to $46 at the end of the year.

Even considering that this was shrinking as a stake, the latest Berkshire Hathaway earnings report showed the Wells Fargo holding worth some $24.4 billion. That had been worth of $30 billion at one point but was valued closer to $21 billion at the end of 2018. The September 2018 stake was 442.3 million shares, down from 452.0 million in June and from 456.5 million prior to that.

Buffett had been a key supporter of Wells Fargo for many years, but now he has communicated that he wants to keep his positions under the 10% shareholder mark to ease his regulatory filing status. His stake was last shown to represent almost 9.2% of the outstanding Wells Fargo shares.

Flying the Airliners

A last postion of Buffett and his portfolio managers has been a sector-wide investment made into the airlines. While it is technically four stocks, the reality is that this was one sector-wide investment made and should effectively be treated as a single investment in a make-or-break analysis.

Buffett used to say he would never invest into an airline, but his portfolio managers saw a chance that airlines would be valued higher and have less of the boom-bust business cycles ahead now that the sector of legacy carriers has consolidated over the past decade. Buffett and his team have made small changes to their airline stock holdings in 2018, but the combined value of these four stakes was close to $10 billion on last look. That said, the drop from the peak here has been sharper than Buffett and his portfolio managers would have expected, with an average drop of close to 30% from the peak. Here are the positions in each airline holding at the end of last September, with a note on whether the stake has changed over time.

• American Airlines Group Inc. (NASDAQ: AAL) was a slightly smaller stake of 43.7 million shares in late 2018, down from 44.7 million shares last quarter and making a second quarterly stake change. Sadly, this has fallen 45% from the 2018 high.
• Delta Air Lines Inc. (NYSE: DAL) was a larger stake of 65.54 million shares in 2018, up from 63.67 million shares in June and from almost 54.0 million shares in March. Shares of Delta were seen down almost 30% from the 2018 peak value.
• Southwest Airlines Co. (NYSE: LUV) was a slightly smaller stake of 56.05 million shares last September. That compares with the 56.54 million shares at the end of June but is still larger than the 47.66 million shares in an earlier report. Southwest shares also were down almost 30% from their 2018 peak value.
• United Continental Holdings Inc. (NYSE: UAL) was listed as 25.98 million shares, down from 26.684 million shares in June and 27.7 million shares in March. The shares were seen down 15% from the 2018 high.

Buffett may not be happy to see the value of his public holdings dwindle so fast, but he didn’t make his fortune on short-term market calls. Buffett looks very long term in many cases, and he would remind investors that it is good to be fearful when others are greedy and greedy when others are fearful. He also would tell investors that he his own opinions and ways of valuing a company over time that might differ greatly from how Wall Street analysts would value it.

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