Momentum is such a powerful force in the S&P 500 — even Warren Buffett is feeling it.
Buffett's Berkshire Hathaway owns shares of two companies in the Invesco S&P 500 Momentum ETF, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSurge. They're both homebuilders: Lennar and NVR.
And that's a good thing for Berkshire Hathaway shareholders. The Invesco S&P 500 Momentum ETF is up more than 21% this year, says Morningstar Direct. That puts it miles ahead of the 8.6% return of the S&P 500 this year. And it's also the top large-cap actively traded U.S. diversified ETF so far this year.
Simply stated, S&P 500 stocks that have gone up keep going up. And investors hope profit momentum will support the stock-price momentum. "We'll need accelerating earnings momentum to drive stock prices higher," said Nicholas Colas of DataTrek Research.
Momentum Is Driving Markets
Past performance is having a massive influence on the stocks that are working now.
The top-performing diversified ETF this year is also a momentum play, Invesco S&P MidCap Momentum ETF. It's up nearly 26% this year. Like Invesco S&P 500 Momentum, the ETF owns the stocks that have outperformed in the past 12 months. And that's been a winning strategy this year.
The year's fourth-best diversified ETF is another momentum play. iShares MSCI USA Momentum Factor is up nearly 19%.
What kinds of 100 S&P 500 stocks have the momentum? Nvidia is a big position in Invesco S&P 500 Momentum. But so is Meta Platforms and Broadcom.
You might wonder how could Buffett possibly own such momentum stocks. But he does.
Buffett Owns Some Momentum Plays
Buffett is known for building a portfolio filled with his favorite stocks and not worrying about momentum. But sometimes, his taste overlaps with other investors'.
NVR is a great example. Berkshire Hathaway owns a small stake in the Virginia-based homebuilder. But it's a relative new position for Berkshire Hathaway, which first reported the stake in June 2023. It's been a good performer, though. Shares are up 8% just this year and nearly 41% in 12 months.
The company is on pace to make $485.14 a share this year, up nearly 5% from 2023. Last year, the company's profit sank nearly 6%. Berkshire Hathaway's stake in the company is less than 1% of shares outstanding.
Berkshire Hathaway's other momentum play is Miami-based homebuilder Lennar. It's also a small position for Buffett, with just 152,572 shares. That's also less than 1% of shares outstanding.
Unlike the Invesco S&P 500 Momentum, Berkshire Hathaway owns class B shares of the stock. Shares of that class of Lennar stock, though, are up 65% in the past year, outperforming the main class which are up nearly 52%. Both classes of stock, though, are up more than 2.5% this year.
Momentum's influence of the S&P 500 may not last forever. And Buffett's position in momentum stocks is small. But it's still interesting when these two very different investment styles collide.
Warren Buffett's Momentum Stocks
Also positions in Invesco S&P 500 Momentum ETF
| Company | Symbol | Berkshire Hathaway shares | Sector | One-year % ch. | YTD % ch. |
|---|---|---|---|---|---|
| Lennar* | 152,572 | Consumer Discretionary | 64.8% | 3.8% | |
| NVR | 11,112 | Consumer Discretionary | 40.7% | 8.0% |
