Warren Buffett has transformed his equity portfolio in the last few years. The “Oracle of Omaha” is known for holding stocks for a lengthy period of time. However, for several quarters now, he has trimmed holdings of so-called “Buffett stocks” to shed non-performers while also picking up a reputation for investing in growth plays.
Kraft Heinz (NASDAQ:KHC) and Goldman Sachs (NYSE:GS) still feature prominently in the Berkshire Hathaway (NYSE:BRK-B) portfolio. But Buffett stocks now include growth plays like cloud computing-based data warehousing company Snowflake (NYSE:SNOW) and Brazilian fintech company StoneCo (NASDAQ:STNE) in the mix as well.
However, we are in a bull run of epic proportions. The U.S. stock market is on fire at the moment. And even though consumer incomes are rising once again, they are still off pre-pandemic levels. Hence, everyone is looking for a discount. That’s where this list comes in; several Buffett stocks are incredibly well priced at the moment.
Markets seem to be far more interested in growth stocks, and risky SPAC plays right now. Everyone wants to have a multi-bagger like Tesla (NASDAQ:TSLA). That means stable and mature companies have lost a bit of luster in the last year. Which makes it the ideal time to invest in these seven stocks. Not only do they get a lot of love from Buffett, but they are also trading at a sizeable discount:
- Wells Fargo (NYSE:WFC)
- Chevron (NYSE:CVX)
- U.S. Bancorp (NYSE:USB)
- Verizon (NYSE:VZ)
- American Express (NYSE:AXP)
- Coca-Cola (NYSE:KO)
- General Motors (NYSE:GM)
Buffett Stocks to Watch: Wells Fargo (WFC)
TipRanks 12-Month Consensus Price Target: $49.90 (7.14% upside potential)
Wells Fargo has been part of the Berkshire portfolio since 2001. Although once considered a solid investment, it started to give the “Oracle” some trouble back in 2016 as several scandals emerged. Needless to say, they had a colossal impact on the stock price.
Since the scandals, Wells Fargo has been trying its level best to make amends, a process that has claimed two CEOs. Meanwhile, WFC stock has not been doing so well. Shares have a negative five-year return of 12.6%. The positive thing is that this trend reversed last year. The reason is strong operating performance during a crisis.
It’s worth noting that Berkshire has sold off WFC stock quite regularly in recent quarters. But these disposals seem to be in line with the policy to keep the position below the 10% maximum ownership threshold for banks.
TipRanks 12-Month Consensus Price Target: $125.07 (29.3% upside potential)
Chevron is a relatively new position in the Berkshire Hathaway portfolio. Buffett purchased over 48 million shares in the energy giant in the fourth quarter of 2020. The position now stands at 23.1 million shares, after Buffett trimmed it in Q1 2021 and Q2.
The purchase is interesting because oil and gas prices are not at pre-pandemic levels. Nevertheless, the outlook stands much improved considering the global economy is now well on its way on the path to recovery.
Chevron is a bellwether of the industry, so it was naturally in a better position to weather the crisis than some of the major peers out there. In addition, Chevron chose to play offense last year by purchasing Noble Energy in a $5 billion all-stock deal, which will result in run-rate operating and other cost synergies of $300 million inside a year of merger close.
Apart from the merger, the company’s impeccable 5.5% yield at current prices is worth noting. Despite the situation last year, the energy giant hiked its distribution. CHV stock is a member of the exclusive Dividend Aristocrats, which means the S&P 500 index constituent has paid and hiked its dividend for a minimum of 25 consecutive years. Considering the immense pressure on oil and gas companies to slash the dividend last year, this was a great achievement.
Buffett Stocks to Watch: U.S. Bancorp (USB)
TipRanks 12-Month Consensus Price Target: $63.80 (11.9% upside potential)
Berkshire Hathaway first invested in U.S. Bancorp way back in the first quarter of 2006. It has proven to be a solid investment, especially in the last year. Shares have a one-year return of 47.6%. Nevertheless, it is a position that Buffett has nevertheless trimmed its position by 0.6%, or 798,178 shares, in the second quarter of 2021, 1.1% in Q1, and 0.6% in Q4 2020.
Still, this spring cleaning needs to be put into context. Buffett did away with several bank stocks last year. All things considered, USB stock is not a bad choice; it’s just a difficult time for the banking sector, and that’s why its role in the Berkshire portfolio has been rightsized.
Overall, U.S. Bancorp remains a very healthy financial enterprise, ranked fifth among its big-bank peers. Despite the pandemic, the commercial bank finished 2020 with revenues of $23.2 billion, marginally beating the year-ago figure. More recently, it beat the revenue and earnings estimates in reporting its second-quarter 2021 results.
TipRanks 12-Month Consensus Price Target: $61.78 (13.8% upside potential)
Buffett bought into Verizon in Q4 2020, purchasing nearly 146.7 million shares valued at $8.69 billion. Berkshire strengthened the position in Q1 2021, acquiring over 12 million shares, raising the stake by 8%.
There are several reasons why Verizon is attractive to dividend and value investors alike considering its growth prospects in the era of 5G networking, its defensive characteristics, low leverage, and the steady income stream.
Plus, VZ stock is seemingly recession resistant; no matter whether the economy is expanding or contracting, internet and mobile plans are the last thing people will forego.
Buffett Stocks to Watch: American Express (AXP)
TipRanks 12-Month Consensus Price Target: $179.72 (9.6% upside potential)
Buffett has never believed in diversification. He is one of the most famous buy-and-hold investors in history. American Express is a classic example of what happens when he backs a stock to the fullest.
Berkshire initiated a position in the credit card company in 1963, essentially rescuing the multinational financial services corporation. In return, Buffett picked up a sizable stake at a discount. During the 2008 financial crisis, he did this again, purchasing AXP stock when everyone was abandoning ship.
He has remained steadfast in his support for the payment processor. Although Berkshire dumped financial stocks all year last year, AXP remained intact. Berkshire Hathaway, which owns 18.9% of American Express’ outstanding shares, is AXP’s largest shareholder. Shares have a five-year return of 144.4%.
TipRanks 12-Month Consensus Price Target: $62.13 (14.1% upside potential)
The Oracle of Omaha is one of the biggest cheerleaders of Coca-Cola out there. He invested in the beverage giant soon after the Black Monday stock market crash of 1987. Through thick and thin, Buffett had held onto this investment, and he has a personal affinity for the brand.
The KO stock performance, though, has left a lot to be desired. In the last five years, shares have jumped just 27.6%, while the return on the S&P 500 is 102.2% during the same period. That seems strange, considering the solid earnings performance of the company over the last several years.
The trend continued in the latest earnings report. Fiscal second-quarter net income of $2.64 billion, or 61 cents per share, representing an increase of 48.31% from $1.78 billion, or 41 cents per share, a year earlier. Net sales increased 42% to $10.13 billion, surpassing estimates of $9.32 billion. Investor sentiment, however, remains muted.
Undoubtedly, Coca-Cola investors will not be happy with the price momentum, but the dividend payout history has been rock solid. It has hiked its dividend annually for 59 years and counting. Since shares have seen sluggish growth, now is the ideal time to invest in this stable performer.
Buffett Stocks to Watch: General Motors (GM)
TipRanks 12-Month Consensus Price Target: $73.36 (42.9% Upside Potential)
You will seldom come across a brand more iconic than GM. It’s as American as apple pie. Even though companies like Tesla have nabbed most headlines in the auto space recently, despite selling a small fraction of the volume of cars GM does. Just to put things in perspective, Tesla produced and delivered just under 500,000 units. In comparison, last year, General Motors sold approximately 6.8 million vehicles.
And for investors worried about Tesla, do not fret. General Motors will spend $35 billion on electric and autonomous vehicles through 2025, a 30% increase from last year’s plans. GM plans to sell more than 1 million EVs yearly by 2025 and roll out 30 new EVs by 2025.
General Motors is exactly the type of company you will find in the Berkshire portfolio. It is an iconic brand with a mature business line that has been around for several decades. Yet, it was in 2012 when Warren Buffett initiated a stake in GM stock. Nevertheless, Buffett made up for a lost time by regularly adding to the stake.
However, since the last quarter of 2020, Buffett has pulled back his support a bit, trimming holdings in each successive quarter. The cuts to the stake are massive and are worth noting.
Nevertheless, GM stock is a solid performer. Shares have grown in value by 62.7%, yet they still trade at just 9.0 times forward price-to-earnings, making it an excellent value stock.
On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.