Take note of these two stocks, which have underperformed on Wall Street but show strong fundamentals and significant upside potential.
Take note of these two Wall Street stocks, in which Warren Buffett has been investing heavily and which, according to analysts, have the potential to rise by approximately 20%.
These two stocks are part of Berkshire Hathaway’s portfolio, the investment holding founded and managed by the Oracle of Omaha. While they have lagged behind the S&P 500, which surged 36% over the past year, Buffett believes they still have considerable upside potential.
And these are stocks that, according to him, have room to aim upwards.
Moreover, Berkshire Hathaway has bet a good $98.6 billion dollars on them: this is the value of the two holdings, according to the surveys that were carried out at the end of September.
The two stocks that Buffett is betting on and that Wall Street likes: Apple and Coca-Cola
The two stocks that Warren Buffett is betting on are Apple (AAPL) and Coca-Cola (KO): both stocks, in addition to doing worse than the S&P 500 index, have reported a performance lower than the expectations of Wall Street analysts. And yet, the business models of the giants to which they refer are such that they can bring joy to those who hold them in their portfolio.
In particular, Apple (AAPL), the iPhone giant, remains one of Buffett’s biggest investments, despite the conglomerate Berkshire Hathaway having reduced its stake in its capital.
At the end of September, the holding company founded by the billionaire investor actually held Apple shares valued at $69.9 billion, down sharply from its $174.3 billion stake at the end of 2023.
Apple has clearly performed worse than the Wall Street benchmark S&P 500, up just 25% in the 12 months ended November 8, 2024.
Analysts note that further gains have been limited due to the lack of a groundbreaking new product to significantly drive sales.
Morgan Stanley positive on Apple stock. The target price
Morgan Stanley analyst Erik Woodring believes AAPL has potential for around 20% upside from current levels. Woodring has in fact raised the target price on the stock to $273, a value that implies the forecast of a gain of that magnitude.
On the other hand, if it is true that sales of Apple products and accessories, such as iPhones, Macs and other physical goods, have marked a decline in the 2024 fiscal year, which ended on September 30, compared to the levels of 2022, Wall Street does not yet feel like turning its back on the American giant, which boasts a strong point that is not disappointing at all: the turnover of the services division.
Suffice it to say that, over the same two years, the revenues of Apple’s App Store, streaming and cloud services divisions have jumped by 23%, to $96.2 billion.
It is precisely the composition of the revenue oriented more towards services that has allowed Apple to see a growth in the gross profit margin from 43.3% in 2022 to 46.2%.
The stock offers a dividend yield of just 0.4%, at current prices, but the giant has managed to raise the quarterly payout by as much as 29.9% over the last five years.
Why Buffett and the markets like Coca-Cola. The outlook
The other stock on which Buffett is betting and which would have a growth margin of around 20% is Coca-Cola: at the end of September, the value of Berkshire Hathaway’s stake in the soft drink giant was equal to $28.7 billion.
Overall, Coca-Cola’s iconic brands continue to show positive sales growth. The point is that the impact of revenues on the trend of the stock has not been particularly incisive. Quite the opposite. So much so that the shares, last November 8, were traveling at a value lower than the record tested in September of about 12%.
Wall Street remains bullish on Coca-Cola, which, despite its age as a century-old brand, has shown steady performance in recent years.
It should be remembered, according to what emerged from the accounts of the blue chip that, in the first nine months of 2024, the giant’s sales rose by 2%, and that a further strengthening of the trend is not excluded.
The top management firstly declared that they are aiming for organic sales growth, in 2024, equal to +10% on an annual basis. But be careful about the stock, which has shown higher volatility than usual in the last period: it is true, at the same time, that the group’s dividend plan remains decidedly reliable.
Furthermore, it cannot be ignored that, in February, Coca-Cola raised its quarterly payout for the 62nd consecutive time and that, at current prices, its dividend yield is equal to 3%, compared to a valuation considered reasonable, of 22.4 times the estimates on future earnings.
Buffett is not alone in his confidence in Coca-Cola; he continues to hold a substantial stake in the company within Berkshire Hathaway’s portfolio.
Recently, Morgan Stanley analyst Dara Mohsenian lowered the target price on the stock to $76 per share, reiterating his overweight recommendation. The target price still implies a gain of about 19% compared to recent prices.
Original article published on Money.it Italy 2024-11-12 07:45:00. Original title: Buffett ha investito $99 miliardi su 2 titoli (che possono salire del 20%)
