Traders who aspire to succeed, like Warren Buffett, might want to concentrate on inexpensive stocks in Berkshire Hathaway’s (NYSE:BRK-B) shareholdings. These stocks, chosen by the legendary investor, have the potential to generate above-average returns.
Let’s examine three notable undervalued Warren Buffett stocks, including both high-profile and lesser-known options.
Coca-Cola (KO)
Despite being considered a less exciting choice than tech stocks, Coca-Cola (NYSE:KO) has delivered consistent returns with an average of 7.83% over the past decade. This steady growth has the potential to double investments in 10 years, unlike many trendy stocks that have experienced boom and bust cycles. Additionally, Coca-Cola offers a reliable dividend that further enhances overall returns.
While Coca-Cola has produced steady profits, perhaps it’s not as fascinating as stocks in technology. Still, the company maintains consistent growth and exceeds historical profit averages — despite inflation concerns. With ventures into the alcoholic beverages sector and strategic acquisitions like Finlandia vodka and ready-to-drink collaborations, Coca-Cola is making a noteworthy presence in the premium spirits market.
Occidental Petroleum (OXY)
With its largest shareholder being Berkshire Hathaway, Occidental Petroleum (NYSE:OXY) possesses a valuable advantage. The investment firm led by Warren Buffet has been consistently increasing its stake in the company since 2019, fueling speculation of a potential takeover following a recent expansion of Berkshire’s position. Buffett denies the speculation.
Still, the investment guru controls a quarter of Occidental, and the stock now trades at about $60 per share — a bit more than Buffett paid for it. Investing in Occidental is enticing due to persistent fossil fuel demand, sustained crude oil prices and Europe’s energy crisis. Factors like the war in Ukraine and short-sighted energy policies contribute to the current energy shortage, while drilling restrictions in the U.S. have also driven up prices.
Beyond the potential ownership changes, OXY has shown impressive growth and profitability. It has consistently delivered double-digit gains across key metrics and successfully diversified its operations, exemplified by the success of OxyChem — its chemicals division. OxyChem achieved a record EBIT of $2.5 billion in 2022, highlighting the strength of OXY’s diverse operations and its potential for further growth.
Berkshire Hathaway (BRK-B)
There’s no better way to invest like Warren Buffett than to invest in the company where he holds the vast majority of his wealth.
Indeed, Berkshire Hathaway is not typically considered a Warren Buffett stock selection. However, this is an amalgam of all the stocks he owns. Thus, those looking to buy Buffett’s portfolio can do so (with the lower-priced B-class shares) and ride the coattails of this investing genius.
Notably, Berkshire has been aggressively buying back its own shares. Buffett authorized the repurchase of Class A and Class B shares totaling $4.4 billion solely in the first quarter. That is significant because the ability to repurchase Berkshire stock was limited until recently.
Previously, the stock could only be bought back if it fell to 120% of its book value, making it a challenging threshold. However, starting in 2017, the board allowed repurchases if Buffett and Munger believed the stock was trading below its intrinsic value. With Berkshire holding substantial cash reserves exceeding $25 billion, they have the means to repurchase shares.
Berkshire Hathaway, led by Charlie Munger and Warren Buffett, has established itself as a robust conglomerate. With a diverse portfolio that includes railways, insurance companies, aerospace, candies, and desserts, Berkshire Hathaway stands out with its unique combination of holdings. Additionally, its exclusive banking deals and substantial positions in successful companies make the company an attractive option for investors. That’s especially true considering the significant declines seen in other stocks.
On the date of publication, Chris MacDonald held a long position in KO, BRK-B. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
