In this article, we will discuss the 10 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. 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.. 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. 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., 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 5th 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 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 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, 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 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. 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 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 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 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 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 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 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 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 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 as per Insider’s Monkey database.
5. American Express Company (NYSE:AXP)
Berkshire Hathaway Stake: $21,016,276,000
Percentage of Berkshire Hathaway’s Portfolio: 7%
Number of Hedge Fund Holders: 67
Founded in 1850 and headquartered in New York, American Express Company (NYSE:AXP) is a provider of financial and travel services. Its key offerings include credit cards, charge cards, co-branded credit cards, and personal and corporate travel planning services. The company holds several strategic partnerships with airlines, banks, restaurants, hotels, retailers, entertainment venues, and digital players such as Apple and Google. Berkshire Hathaway kept its stake in American Express Company unchanged during the second quarter, and the fund had an investment value of over $12.4 billion in the company at the end of Q2 2022.
On October 24, 2022, James Fotheringham, an analyst at BMO Capital, increased his price target on American Express Company to $166 after the company posted a strong result for Q3 2022, beating market expectations. The analyst keeps a Market Perform rating on the stock and, in a research note, stated that the company has remained immune to the negative consequences of the current rate hikes.
At the end of the quarter ending June 2022, Berkshire Hathaway was the most bullish on American Express Company, with a holding of 151,610,700 shares of the company. As per Insider’s Monkey database, 67 hedge funds owned stakes in American Express Company at the end of Q2 2022.
In its Q2 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks, and American Express Company was one of them. Here is what the fund said:
In financials, American Express Company has done an excellent job demonstrating the resiliency of its franchise in the midst of a global pandemic that drove a 60% decline in its core travel and entertainment business. The company’s spend-centric model has been helped by fiscal stimulus, ensuring a flush consumer, while management continues to execute well by adding millions of new consumer and small and medium business accounts, which should benefit the franchise over the medium to long term. We remain optimistic regarding the company’s prospects as travel and entertainment activity rebounds, adding to our position in the quarter.
4. Chevron Corporation (NYSE:CVX)
Berkshire Hathaway Stake: $23,373,304,000
Percentage of Berkshire Hathaway’s Portfolio: 7.78%
Number of Hedge Fund Holders: 59
Chevron Corporation is based in San Ramon, California, with a presence across 180 countries. It is involved in the exploration, production, refining, upstream activities concerning energy resources, manufacturing and sales of chemicals, and power generation. The company has investments in low-carbon technologies allowing for commercial solutions for the energy sector. Warren Buffett increased his stake in Chevron Corporation by 2% during Q2 2022. Berkshire Hathaway owned 161,440,149 shares of the company at the end of the quarter.
Chevron Corporation stock has performed well in 2022 despite the downturn in the market and has given a return of 45.1% YTD as of October 25, 2022, as compared with the S&P 500’s decline of 20.8%.
On October 19, 2022, Lloyd Byrne, an analyst at Jefferies, started his coverage of Chevron Corporation with a Hold rating and a price target of $171. The analyst believes that energy’s “Option Value” can stay at elevated levels for a longer period which will drive upside in the stock price.
In its Q1 2022 investor letter, ClearBridge Investments shared its outlook on Chevron Corporation. Here’s what the firm said:
The energy sector, which led a strong market in 2021, generated even more dramatic relative performance in the quarter, advancing 39% and leading the benchmark Russell 1000 Value Index. Years of restrained investment in the energy sector, combined with a strong post-pandemic recovery, contributed to the higher commodity prices. The upward pressure escalated with the Russian invasion of Ukraine. Our energy holding Chevron (NYSE:CVX) benefited from higher commodity prices and was among the top contributors to first-quarter performance.
3. The Coca-Cola Company (NYSE:KO)
Berkshire Hathaway Stake: $25,164,000,000
Percentage of Berkshire Hathaway’s Portfolio: 8.38%
Number of Hedge Fund Holders: 60
Founded in 1892, The Coca-Cola Company is a beverage manufacturer with a brand portfolio of 200 brands of soft drinks, coffee, teas, and water across more than 200 countries and regions. Berkshire Hathaway’s holding of The Coca-Cola Company remained unchanged during the second quarter of 2022, and the fund had an investment value of approximately $25 billion in the company at the end of Q2 2022.
On October 10, 2022, Gerald Pascarelli, an analyst at Wedbush, initiated coverage of The Coca-Cola Company with a price target of $63 and an Outperform rating. The analyst’s liking for the company is based on the fact that it is the market leader in the soft drinks category and exudes high pricing power, which will protect it from inflationary headwinds.
At the end of Q2 2022, Berkshire Hathaway came out to be the fund with the largest holding in the company. The fund owned 400,000,000 shares of The Coca-Cola Company with an investment value of over $25 billion in the company. As per Insider’s Monkey database, 60 hedge funds owned stakes in The Coca-Cola Company at the end of the second quarter.
Aristotle Capital Management, LLC mentioned The Coca-Cola Company in its Q2 2022 investor letter. Here is what the firm has to say:
The Coca-Cola Company, the global beverage business, was a leading contributor for the period. Coca-Cola continues to benefit from the refranchising of its bottling operations and realignment of incentives, catalysts we previously identified. These initiatives are demonstrating their strength in an inflationary and supply-chain-challenged environment. Additionally, the company has focused on evolving its customer engagement practices by leveraging digital and social medias for targeted campaigns, such as the design and launch of Coke Byte in the metaverse. Lastly, Coca-Cola has furthered its transformation into a total beverage company, as it debuted its new Jack Daniel’s Tennessee Whiskey and Coca-Cola ready-to-drink premixed cocktail. Although uncertainties surrounding cost pressures, lockdowns and geopolitical conflicts remain, we believe Coca-Cola is uniquely positioned to successfully continue its transition toward a total beverage business.
2. Bank of America Corporation (NYSE:BAC)
Berkshire Hathaway Stake: $31,444,432,000
Percentage of Berkshire Hathaway’s Portfolio: 10.47%
Number of Hedge Fund Holders: 99
Bank of America Corporation is a leading global wealth management company serving a consumer base of approximately 67 million consumer and small business relationships in the U.S. It offers a complete range of banking and is the 2nd largest bank in the U.S, holding $1.4 trillion in consumer deposits and 55 million verified digital users. Warren Buffett did not make any changes to his holding of Bank of America Corporation stock during Q2 2022. The bank’s stock comprised 10.47% of the fund’s portfolio at the end of the quarter.
The bank had a good Q3 2022 and recently announced its Q3 2022 results posting revenue of $24.5 billion, beating market estimates by $1.04 billion. Bank of America Corporation posted a normalized EPS for the quarter of $0.81, beating market consensus estimates by $0.03.
As per Insider’s Monkey database, 99 hedge funds had stakes in Bank of America Corporation at the end of the June quarter. Berkshire Hathaway was the most bullish fund on the company’s stock, with a total holding of 1,010,100,606 company stocks at the end of Q2 2022.
Here’s what ClearBridge Investments said about Bank of America Corporation in its Q2 2022 investor letter:
In the second quarter we made a sizable add to our position in Bank of America (NYSE:BAC) as our bank holdings have significant leverage to rising interest rates. The Fed, unfortunately, was late to realize inflation’s magnitude, maintaining for far too long that inflationary pressures were merely transitory. This mistake caused inflation to accelerate, necessitating a larger intervention than if the Fed had moved sooner.
1. Apple Inc. (NASDAQ:AAPL)
Berkshire Hathaway Stake: $122,337,373,000
Percentage of Berkshire Hathaway’s Portfolio: 40.76%
Number of Hedge Fund Holders: 128
Apple Inc. is an American multinational company operating in the consumer electronics business and engaged in the designing, manufacturing, marketing, and selling of smartphones, personal computers, phone accessories, and tablets. The company has its headquarters in Cupertino, California, with a global employee base of 154,000 individuals. Warren Buffett increased his holding of Apple Inc. by 1% during Q2 2022, and at the end of the quarter, his investment value in the company amounted to over $122 billion.
On October 17, 2022, Erik Woodring, an analyst at Morgan Stanley, reduced his price target on Apple Inc. to $177. The analyst currently has an Overweight rating on the stock but believes that valuation multiples for consumer stocks can reach trough levels which will cause some price downside. The analyst believes that Apple Inc. is a quality stock and will come out of the current challenging environment unscathed.
At the end of the quarter ending June 2022, Berkshire Hathaway was the leading holder of the company’s stock, with a holding of 894,802,319 shares. As per Insider’s Monkey database, 128 hedge funds owned stakes in Apple Inc. at the end of Q2 2022.
Wedgewood Partners mentioned Apple Inc. in its Q3 2022 investor letter. Here is what the firm has to say:
Apple Inc. (NASDAQ:AAPL) grew revenues +5% (foreign exchange adjusted and excluding Russia) driven by record iPhone revenues that were up about +3% on an exceptional year ago comparison of +50%. Apple’s installed base is over 1.8 billion devices which helps drive a software and services business that has generated almost $80 billion of revenue over the past 4 quarters. As we have highlighted in the past, Apple’s relentless focus on the development and integration between hardware (especially ICs) as well as software, continues to add significant value for customers of its products and services. We expect this favorable competitive dynamic to continue for the foreseeable future.
You can also take a look at 10 Best Used Car Stocks To Buy Now and 5 Best REIT Stocks to Buy Right Now.
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This article is originally published at Insider Monkey.
