They are all undervalued stocks, featured in the investment portfolio of Berkshire Hathaway, the conglomerate helmed by Warren Buffett
Warren Buffett continued to reduce his stock holdings during the third quarter of 2024, as revealed in Berkshire Hathaway’s latest filings with regulatory authorities.
Through his conglomerate, the Oracle of Omaha sold off several long-held stocks, including some that have been notable components of his portfolio in recent years.
However, key stocks remain pillars of Berkshire Hathaway’s portfolio, offering potential opportunities for savvy investors. These stocks stand out for their attractive valuations and potential for long-term growth.
Analysts at Morningstar highlight three stocks in Buffett’s portfolio that are worth close attention. The stocks include:
- Ally Financial (ALLY)
- Kraft Heinz (KHC)
- Verisign (VRSN)
According to Morningstar, most of Berkshire Hathaway’s holdings are either fairly valued or overvalued based on their metrics. However, these three stocks are exceptions, appearing undervalued by Morningstar’s standards. Analysts have provided detailed insights into each, at a time when Buffett’s moves continue to captivate Wall Street.
Ally Financial (ALLY)
Ally Financial holds a Morningstar rating of 4 stars out of 5, where 5 stars indicate an “excellent investment opportunity” and 4 stars signify a “superior rating.” The stock, however, lacks an Economic Moat rating, which Morningstar defines as “sources of a company’s competitive advantage, enabling it to consistently generate above-average returns on capital.”
In Ally Financial’s case, the absence of a moat signals a lack of significant competitive advantage. Despite this, Berkshire Hathaway owns more than 9% of the company, which is one of the largest automotive financing firms in the U.S., with most of its revenue derived from auto sector financing.
Morningstar analyst Michael Miller noted that Ally’s latest quarterly earnings were weaker than anticipated due to higher expenses and a reduced net interest margin. However, these challenges were partly offset by tax credits, which contributed $179 million to the company’s results.
Ally’s EPS increased from $0.83 a year ago but dipped slightly from $0.97 in Q2 2024 to $0.95 in Q3. Despite headwinds from a weaker auto market and higher credit costs, Miller expressed confidence that Ally would surpass its pre-pandemic performance levels. With shares trading at a 20% discount to Morningstar’s fair value estimate of $46, Ally Financial is seen as an undervalued opportunity.
Kraft Heinz (KHC)
Kraft Heinz stands out with a 5-star Morningstar rating, reflecting a highly attractive investment opportunity. Unlike Ally, the stock boasts a “narrow” Economic Moat, indicating a moderate competitive advantage.
Morningstar analyst Erin Lash values Kraft Heinz at $56 per share, representing a 43% discount to its current market price. Lash highlighted the company’s steady profitability growth as a key driver of this optimism.
Berkshire Hathaway owns over 26% of Kraft Heinz, underscoring Buffett’s long-term confidence in this food and beverage giant.
Verisign (VRSN)
Verisign rounds out the list with a 4-star Morningstar rating and a “wide” Economic Moat, indicating a significant competitive advantage. According to Morningstar analyst Dan Romanoff, Verisign’s monopoly position in managing .com and .net domain registrations gives it a unique edge, allowing it to maintain stable pricing power.
Romanoff assigns Verisign a fair value of $195 per share, with its current trading price reflecting a 5% discount to this target. Buffett’s Berkshire Hathaway owns 13% of the company, signaling confidence in its strategic position within IT services.
Buffett’s Recent Moves
While Buffett’s recent activity on Wall Street has centered on divestments rather than new acquisitions, it’s worth noting the context. His strategy has significantly boosted Berkshire Hathaway’s cash reserves, which reached a record $325.2 billion in Q3 2024, up sharply from $276.9 billion in June.
This cautious, cash-heavy approach remains a hallmark of Buffett’s investment philosophy, where patience often outweighs the urge to chase immediate returns. As always, his decisions continue to serve as a guidepost for investors navigating the markets.
Original article published on Money.it Italy 2024-11-18 16:07:51. Original title: Quali azioni (su cui punta Warren Buffett) conviene comprare oggi?
