Warren Buffett’s Berkshire Hathaway BRK.A BRK.B has released its 13F for the first quarter of 2024. The report indicates that Berkshire was a net seller of stocks last quarter. That’s not surprising, given that stocks skyrocketed during the period: The Morningstar US Market Index was up more than 10% during the first quarter.
The big news in Berkshire’s new 13F: Insurer Chubb CB is the “mystery stock” that Berkshire had been accumulating shares of beginning in the third quarter of 2023. By the end of the first quarter of 2024, the stock was among the top 10 holdings in Berkshire’s portfolio.
Several months ago, Morningstar strategist Greggory Warren explained why he thought Chubb might be the mystery stock:
“[The company is] large enough to provide liquidity. The property-casualty insurance firm is a direct competitor with BHRG [Berkshire Hathaway Reinsurance Group] and BHPG [Berkshire Hathaway Primary Group] that Buffett (and Ajit Jain) have praised from time to time over the years. I wouldn’t put it past them to invest in Chubb, given the quality of the business.”
Chubb stock looks fairly valued today according to Morningstar.
Here’s a look at some of the stocks that Warren Buffett and his team bought and sold during the first quarter, as well as several of the most undervalued Buffett stocks to buy in Berkshire Hathaway’s portfolio today.
What Stocks Berkshire Hathaway Bought Last Quarter
| Stock | New Position or Add to Existing? | Morningstar Rating (as of May 14, 2024) |
|---|---|---|
| Occidental Petroleum OXY | Add to Existing | 3 stars |
| Liberty SiriusXM LSXMA | Add to Existing | 5 stars (quantitative rating) |
| Liberty SiriusXM LSXMK | Add to Existing | 5 stars (quantitative rating) |
Berkshire Hathaway’s new 13F indicates that the company added to existing positions in Occidental Petroleum OXY, and Liberty SiriusXM LSXMA LSXMK during the first quarter.
What Stocks Berkshire Hathaway Sold Last Quarter
| Stock | Scaled Back or Sold Entirely? | Morningstar Rating (as of May 14, 2024) |
|---|---|---|
| Apple AAPL | Scaled back | 3 stars |
| Paramount Global PARA | Scaled back | 4 stars |
| Chevron CVX | Scaled back | 3 stars |
| Louisiana-Pacific LPX | Scaled back | 2 stars |
| Sirius XM Holdings SIRI | Scaled back | 5 stars |
| HP Inc HPQ | Sold entirely | 3 stars |
As Buffett noted during this year’s annual meeting, Berkshire reduced its position in Apple AAPL by about 13% during the first quarter. But despite the cut, Apple stock remains Berkshire’s top holding. Berkshire cut its position in Paramount Global PARA during the first quarter, and during Berkshire Hathaway’s annual meeting in early May, Buffett revealed that Berkshire had exited the position entirely; he also took responsibility for the purchase.
Though Berkshire did scale back in a few other stocks, it completely sold its position in HP HPQ.
3 Warren Buffett Stocks to Buy Now
Many of the publicly traded stocks held by Berkshire Hathaway are fairly valued or overvalued today, according to Morningstar’s metrics. Here are the three stocks among its holdings in the latest quarter that looked significantly undervalued according to Morningstar’s analysts as of May 14, 2024.
- Charter Communications CHTR
- Kraft Heinz KHC
- Sirius XM Holdings SIRI
Here’s a little bit about why we like each of these stocks at these prices, along with some key metrics for each. All data is as of May 14.
Charter Communications
- Morningstar Rating: 5 stars
- Morningstar Economic Moat Rating: Narrow
- Morningstar Capital Allocation Rating: Standard
- Industry: Telecom Services
Berkshire Hathaway owns about 2.7% of Charter Communications’ stock. The company is the result of a 2016 merger of three cable companies: legacy Charter, Time Warner Cable, and Bright House Networks. We think the company has carved out a narrow economic moat, thanks to its efficient scale and cost advantage. Charter Communications stock currently trades a whopping 43% below our $490 fair value estimate.
Here’s what Morningstar director Mike Hodel had to say about the stock after the company’s first-quarter earnings release:
While the end of the federal Affordable Connectivity Program remains an issue for Charter and customer metrics remain weak, profitability was a notable positive in the firm’s first-quarter results. Charter has been the biggest beneficiary of the ACP, with 5 million (about 16%) of its broadband customers receiving the subsidy. Management expects weak customer growth over the next couple of quarters, but it believes EBITDA will grow in 2024 despite the program’s end. After trimming our fair value estimate to $500 recently to include an estimate of the ACP impact, we are dropping our estimate to $490, primarily on expectations for slower business customer growth. We still believe Charter shares are deeply undervalued, but we caution that uncertainty is higher than with cable peer Comcast.
Charter lost 72,000 net broadband customers during the quarter, worse than the 76,000 added a year ago. We suspect losses to the fixed-wireless providers have slowed, but so has industry growth, and Charter stopped accepting new ACP customers in February. Management claims the pace of customer churn declined year over year in both the broadband and wireless businesses, which is remarkable given that customers are rolling off the Spectrum One promotional discount. Charter also appears to have begun disconnecting nonpaying ACP customers.
Average revenue per residential broadband customer increased only 1.7% year over year, but the impact from Spectrum One discounts narrowed, and this metric has shown nice sequential growth over the past three quarters. Service revenue per wireless customer appears to have bottomed, growing sequentially after two years of persistent decline.
Total revenue increased 0.2% on roughly flat residential revenue and a rebound in advertising sales. The EBITDA margin expanded 1 percentage point versus a year ago, the best performance in two years as Charter laps investments in customer service, and the low-margin television business continues to decline.
Kraft Heinz
- Morningstar Rating: 5 stars
- Morningstar Economic Moat Rating: None
- Morningstar Capital Allocation Rating: Standard
- Industry: Packaged Foods
Berkshire Hathaway owns more than 26% of Kraft Heinz’s stock. The packaged-foods manufacturer has revamped its road map and is now focused on consistently driving profitable growth. We think Kraft Heinz stock is worth $54 per share, and shares are trading at a 33% discount to that fair value today.
Here’s what Morningstar director Erin Lash thinks of Kraft Heinz’s first-quarter results:
We saw promising features in Kraft Heinz’s first-quarter results despite the market’s displeasure (with the shares down by a mid- to high-single-digit percentage intraday). Even as it navigates a challenging landscape, management stuck to its 2024 forecast for flat to 2% organic sales growth and $3.01-$3.07 in adjusted earnings per share, which squares with our outlook. As such, we see little impetus to change our $54 fair value estimate, outside of time value. With the shares trading about 35% below our intrinsic valuation, we think investors should consider stocking up on this no-moat name.
The bright spot was the fruits of the company's efforts to rebuild margins, with adjusted gross margin up 170 basis points in the quarter to 34.5%, in line with the fiscal 2016-18 average. Although sales continued to languish, down 50 basis points on an organic basis, we see some green shoots. For one, volume was off only 3.2% in the aggregate, 120 basis points ahead of the 4.4% decline in the fourth quarter of fiscal 2023 and the fourth consecutive quarter of improvement in this metric.
We expect Kraft Heinz will gain more traction here, given its commitment to investing to support the business over the long haul. This was evidenced in stepped-up marketing (up 13%), research and development (25%), and technology (20%) spending, even as the company faces unrelenting inflationary headwinds around coffee, dairy, and meats. We view brand support as central to damping intense competitive pressures, particularly given consumers’ increasing financial constraints. We expect the firm will continue these efforts; we forecast it to direct more than 6% of sales each year to its brands and spend 3% to 4% of sales to enrich its fixed-asset base and digital prowess. To fuel these investments, we think Kraft Heinz will adroitly pursue opportunities for further cost savings, a core component of its strategic playbook since mid-2019.
Sirius XM Holdings
- Morningstar Rating: 5 stars
- Morningstar Economic Moat Rating: Narrow
- Morningstar Capital Allocation Rating: Exemplary
- Industry: Entertainment
Berkshire trimmed his position in Sirius XM Holdings’ stock during the first quarter, but the firm was a buyer of Liberty SiriusXM, the tracking stock offered by parent company Liberty Media, which owns more than 80% of Sirius XM. Liberty Media announced in late 2023 that it had reached a deal with Sirius XM Holdings to combine their stocks and create a new public company at some point in 2024.
Sirius XM Holdings includes two businesses: satellite radio network SiriusXM and streaming music platform Pandora. Here’s what Morningstar senior analyst Matthew Dolgin thinks of Sirius XM Holdings’ first-quarter results:
SiriusXM’s first quarter was not bad, but revenue remains stagnant, and the SiriusXM subscriber base has continued to contract. With investment in content and technology to improve the SiriusXM streaming app and integration into vehicles, management expects subscriber growth to pick up. However, we are now forecasting slower long-term growth, and we’re reducing our fair value estimate from $7.50 to $5.00 per share.
Total revenue was up 1% year over year, as 7% growth at Pandora—driven by a jump in advertising revenue—was mostly offset by a slight decline in subscriber revenue in the much larger SiriusXM segment. Adjusted EBITDA grew by 4% year over year, with lower fixed costs leading to about 1 percentage point of margin expansion.
SiriusXM revenue declined 1% year over year, as the service lost a net of 359,000 self-paying subscribers during the first quarter and revenue per customer increased only $0.07. Customer defections are typically higher in the first quarter, and a lower level of trial starts at the end of 2023 reduced the funnel for potential gross additions this quarter. With a trial funnel now at 7.5 million, up from 7.2 million a year ago, a recently rebuilt SiriusXM app, and traction with car manufacturers with the 360L platform, which integrates the Sirius app into vehicles, management expects higher levels of trial conversions and an improvement in subscriber results in the second half.
Podcasts, with associated revenue up 16% year over year, were a big driver of the ad revenue growth. Management said its biggest incremental investments are now in podcasting, and the firm is focusing on podcasts for the SiriusXM subscriber base. The firm will add an exclusive podcast library to other programming that is exclusive for SiriusXM subscribers, which should also underpin subscriber stability.
3 Stocks With High Dividend Yields That Warren Buffett Likes
The dividend yields on these stocks in Berkshire Hathway’s portfolio are twice that of the market.
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More About Warren Buffett Stock Picks
Warren Buffett has said that he doesn’t consider himself to be a stock-picker; instead, he’s a company-picker. That comment pretty much encapsulates how he thinks about stocks: They’re parts of businesses. Learn more about how the Oracle of Omaha chooses companies to buy in How to Invest Like Warren Buffett. And read about his influence on how Morningstar evaluates companies and rates stocks in What We’ve Learned From Warren Buffett and Charlie Munger.
The author or authors do not own shares in any securities mentioned in this article.Find out about Morningstar’s editorial policies.
