10 Best Value Stocks To Buy According To Warren Buffett

Published on October 27, 2022 at 10:51 am by Mohammed Saqib in Hedge Funds, News

In this article, we will discuss the 10 Best Value Stocks To Buy According To Warren Buffett. You can skip our detailed analysis of Berkshire Hathaway’s strategy and Warren Buffett’s background and go directly to the 5 Best Value Stocks To Buy According To Warren Buffett.

Born in 1930 in Omaha, Nebraska, Warren Buffett is considered the most successful investor in history. Popularly known as the “Oracle of Omaha,” he is the sixth wealthiest person in the world, with a net worth of $95 billion.

After Buffett was denied admission by Harvard Business School, he went on to complete his Masters in economics at Columbia University. Buffett learned the principles of investing from his mentor Ben Graham at Columbia. Graham’s “value investing” included searching for companies that were trading at a significant discount to their “intrinsic value,” or the worth of their underlying assets. Buffett internalized the concept and added to the ideas of Ben Graham by theorizing that the quality of the company’s management and the product’s competitive edge in the market are key factors in evaluating companies.

Warren Buffett created Buffett Partnership, Ltd in 1956. In 1969, he purchased Berkshire Hathaway, a textile manufacturing business, and transformed it into a diversified holding corporation. Since 1970, Buffett has served as Berkshire Hathaway’s chairman and biggest shareholder. Berkshire Hathaway is the parent firm of a number of other companies, including the insurance provider Geico, and has significant investments in a number of Fortune 500 corporations.

Berkshire Hathaway’s investment principles include having a long-time horizon which is why some of its holdings have been in the portfolio for over several decades. Warren Buffett hand-picks companies that he thinks have a competitive advantage and solid business foundations to thrive over a long period of time. Berkshire Hathaway’s Q2 2022 13F filing reported an investment value of approximately $300 billion in managed 13F securities. The fund’s biggest holding is in Apple Inc. (NASDAQ:AAPL), constituting 40.76% of Berkshire Hathaway’s portfolio.

Our Methodology

We picked the top 10 stocks from Berkshire Hathaway’s portfolio as of its Q2 2022 filing.

10. HP Inc. (NYSE:HPQ)

Berkshire Hathaway Stake: $3,424,725,000

Percentage of Berkshire Hathaway’s Portfolio: 1.14%

Number of Hedge Fund Holders: 35

HP Inc. (NYSE:HPQ) is a company operating in the technology sector with a vast portfolio of technology products, including personal computers, printers, mobile devices, and solutions. The company undertakes its go-to-market strategy in an ever-evolving customer landscape using contractual, online, and omnichannel sales. It continues to expand its product portfolio by launching new peripherals, developing its vertical growth business, including packaging and orthotics, and launching solutions for the commercial metals industry. Warren Buffett kept his stake unchanged in HP Inc. (NYSE:HPQ) during Q2 2022. The holding in the company amounted to a value of $3.4 billion at the end of the quarter.

On September 20, 2022, Toni Sacconaghi, an analyst at Bernstein, reduced his price target to $30 on HP Inc. (NYSE:HPQ). The analyst currently has a Market Perform rating on the stock and believes that the decline in the sales of the company’s printers, which are a major revenue contributor for the company, presents a headwind for HP Inc. (NYSE:HPQ) going forward.

At the end of Q2 2022, Berkshire Hathaway held the highest stake in HP Inc. (NYSE:HPQ) with a holding of 104,476,035 shares of the company, constituting 1.14% of the fund’s portfolio. According to Insider’s Monkey database, 35 hedge funds had stakes in the company at the end of the June quarter.

In addition to HP Inc. (NYSE:HPQ), Chevron Corporation (NYSE:CVX), The Coca-Cola Company (NYSE:KO), and Bank of America Corporation (NYSE:BAC) are included in our list of 10 best value stocks to buy according to Warren Buffett.

9. U.S. Bancorp (NYSE:USB)

Berkshire Hathaway Stake: $5,513,432,000

Percentage of Berkshire Hathaway’s Portfolio: 1.83%

Number of Hedge Fund Holders: 43

U.S Bancorp offers payments and cash management solutions for individuals, businesses, government entities, and other financial institutions. Having 3,106 branches and 4,842 ATMs, mainly in the western and midwestern U.S, it is the 5^th largest bank in the country. Warren Buffett reduced his stake in U.S. Bancorp (NYSE:USB) by 6% during the second quarter. His fund held 68,401,150 shares of the company at the end of Q2 2022.

U.S. Bancorp (NYSE:USB) reported solid results for Q3 2022 as the company reported a revenue of $6.33 billion, up 7.5% YoY, beating the market estimate by $130 million. The company posted a normalized EPS of $1.18, beating the market consensus by $0.02.

ClearBridge Investments shared its stance on U.S. Bancorp (NYSE:USB) in its Q4 2021 investor letter. Here’s what the firm said:

Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We have increased our exposure to interest-rate sensitive banks by adding to existing positions in U.S. Bancorp.

At the end of Q2 2022, Berkshire Hathaway remained the leading stakeholder of U.S. Bancorp (NYSE:USB), with an investment value of over $5.5 billion in the company. According to Insider’s Monkey database, 43 hedge funds held shares of U.S. Bancorp (NYSE:USB) at the end of the second quarter 2022.

8. Moody’s Corporation (NYSE:MCO)

Berkshire Hathaway Stake: $6,709,439,000

Percentage of Berkshire Hathaway’s Portfolio: 2.23%

Number of Hedge Fund Holders: 48

Founded in 1909, Moody’s is an American risk assessment company with global operations. It has two key business units, namely Moody’s Analytics and Moody’s Investor Service (MIS). The analytics segment offers Risk management and ERP services for global financial market participants, whereas the investor services unit provides credit rating services. Berkshire Hathaway did not change its position in the company’s stock during Q2 2022. The fund had an investment value of approximately $6.7 billion in the company at the end of the second quarter.

On October 21, 2022, Faiza Alwy, an analyst at Deutsche Bank, reduced her price target on Moody’s Corporation (NYSE:MCO). The analyst currently has a Hold rating on the stock and believes that with the deteriorating market conditions, the environment is not ideal for rating agencies as banks will be tentative in extending loans in the near future.

Here is what Qualivian Investment Partners has to say about Moody’s Corporation (NYSE:MCO) in its Q2 2021 investor letter:

Moody’s: Revenue, operating profit margins, and EPS all exceeded expectations, and annual guidance for these items (and for free cash flow) was raised. In MIS (Moody’s Investors Service) which houses the traditional ratings business, the outlook for debt issuance was raised for the remainder of the year, while MA (Moody’s Analytics) also came in ahead of expectations. The company leveraged strong revenue growth with strong operating profit margin improvement of 200 bps, with EPS coming in $0.22 ahead of consensus estimates. Management alluded to having interesting opportunities in their M&A pipeline, which we will have to assess when the time comes, but Moody’s management team has been very effective at allocating capital in the past toward value-creating bolt-on acquisitions, especially in their Moody’s Analytics business, a key growth driver for the company.

7. Occidental Petroleum Corporation (NYSE:OXY)

Berkshire Hathaway Stake: $9,335,408,000

Percentage of Berkshire Hathaway’s Portfolio: 3.11%

Number of Hedge Fund Holders: 66

With teams across the U.S, Latin America, Africa, and the Middle East, Occidental Petroleum Corporation (NYSE:OXY) is an energy leader serving the oil and gas exploration and production sector. Berkshire Hathaway continued to add onto its stake in Occidental Petroleum Corporation (NYSE:OXY) during the second quarter of 2022 and increased its holding of the company’s stock by 17%. The fund’s investment value in the company amounted to over $9.3 billion at the end of Q2 2022.

On October 19, 2022, Jeanine Wai, an analyst at Barclays, raised her target price on Occidental Petroleum Corporation (NYSE:OXY) shares to $84. The analyst currently has an Overweight rating on the company’s stock, as she expects the company to post good results for Q3 2022.

66 hedge funds in Insider’s Monkey database were long Occidental Petroleum Corporation (NYSE:OXY) at the end of the second quarter of 2022. With a holding of 158,549,729 shares, Berkshire Hathaway was the most bullish fund on the company’s stock at the end of Q2 2022.

Here’s what Smead Capital Management said about Occidental Petroleum Corporation (NYSE:OXY) in its Q2 2022 investor letter:

For the quarter, our best-performing stocks were Continental Resources (CLR), Merck (MRK) and Occidental Petroleum Corporation (NYSE:OXY). Despite a steep sell-off in June in the oil and gas stocks, two of our oil stocks made the quarterly list.

If you are wondering how we are outperforming the S&P 500 Index in the first half of the year, look no further than our top three performers. Occidental Petroleum (OXY), Continental Resources (CLR) and Conoco Phillips (COP) soared in value and were barely represented in the S&P 500 Index. To quote Jerry Jones, owner of the Dallas Cowboys, “We are in the first quarter on higher energy prices!

6. The Kraft Heinz Company (NASDAQ:KHC)

Berkshire Hathaway Stake: $12,419,712,000

Percentage of Berkshire Hathaway’s Portfolio: 4.13%

Number of Hedge Fund Holders: 41

The Kraft Heinz Company (NASDAQ:KHC) was founded in 2015 following the merger of Kraft Foods and Heinz. The company’s diverse product portfolio includes dairy, frozen meals, infant and nutrition. Warren Buffett did not make any change to his holding of The Kraft Heinz Company (NASDAQ:KHC) during Q2 2022, and his fund held 325,634,818 shares of the company at the end of the quarter.

On October 14, 2022, Pamela Kaufman, an analyst at Morgan Stanley, reduced her price target on The Kraft Heinz Company (NASDAQ:KHC) to $37. The analyst currently has an Equal Weight rating on the stock, as she expects the outlook for the packaged food sector to improve as companies raise their full-year guidance. However, she remains skeptical because of the rising interest rates and a strong dollar.

Berkshire Hathaway held the highest stake in The Kraft Heinz Company (NASDAQ:KHC) at the end of the June quarter, with an investment value of approximately $12 billion in the company. 41 hedge funds are currently bullish on The Kraft Heinz Company (NASDAQ:KHC) as per Insider’s Monkey database.

Click to continue reading and see 5 Best Value Stocks To Buy According To Warren Buffett.

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