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Warren Buffett's Picks: 1 Stock to Buy Aggressively and 1 to Avoid Like the Plague

Harrison BrooksSunday, May 11, 2025 4:46 am ET

81min read

As the Oracle of Omaha continues to navigate volatile markets, Berkshire Hathaway’s Q1 2025 portfolio shifts reveal both opportunities and caution. With cash reserves swelling to a record $342 billion and net sales hitting $1.5 billion, Buffett’s moves underscore a disciplined strategy. Here’s what investors should buy hand over fist and avoid entirely based on his latest actions.

1 Stock to Buy: Apple Inc. (AAPL) – The Core of Berkshire’s Future

Apple remains Berkshire’s largest holding at $60.27 billion, a testament to Buffett’s enduring faith in its dominance and cash flow. Despite trimming its stake slightly from its peak, Apple’s position as a cash generator—$100 billion in free cash flow in 2023—aligns perfectly with Buffett’s preference for companies that thrive in both bull and bear markets.

Why buy now?
- Valuation: Apple trades at 28.5x forward earnings, below its 10-year average of 31.5x, offering a margin of safety.
- Dividend Strength: A 1.2% yield paired with consistent hikes makes it a cash cow.
- Buffett’s Track Record: His Apple stake has returned 218% since 2016, outperforming Berkshire’s overall portfolio.

The CEO’s recent emphasis on AI and services growth (accounting for 33% of revenue) further justifies long-term optimism.

1 Stock to Avoid: DaVita Inc. (DVA) – The Strategic Exit

Berkshire sold $148 million of DaVita shares in Q1 2025 to avoid crossing the 45% ownership threshold—a regulatory redline that could trigger costly reporting requirements. While this move was defensive, the sale hints at underlying concerns about DaVita’s trajectory.

Why avoid?
- Valuation Risks: DaVita’s P/E ratio of 22.4x exceeds its 5-year average of 18.7x, with margins pressured by rising healthcare costs.
- Operational Challenges: The dialysis provider faces regulatory scrutiny and declining reimbursement rates, squeezing profits. Its Q4 2024 net income dropped 15% YoY to $249 million.
- Buffett’s Playbook: Selling a stake in a once-high-conviction stock signals diminished confidence.

Conclusion: Follow Buffett’s Lead, Not Just His Holdings

Berkshire’s portfolio highlights a stark divide between defensive cash retention ($342 billion in reserves) and strategic bets on high-quality companies. Apple’s position as the top holding—and its alignment with Buffett’s “moat” philosophy—makes it a buy. Conversely, DaVita’s sale underscores that even top holdings can falter if fundamentals weaken.

Investors should focus on:
- Apple’s enduring dominance in tech and services.
- Avoiding stocks where Berkshire reduces stakes without clear catalysts for turnaround.

As Buffett himself warns: “Risk comes from not knowing what you’re doing.” In this case, buying Apple and avoiding DaVita is a playbook even novices can follow.

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