If you’re among the millions of investors concerned about where to put your money to work, undervalued Warren Buffett stocks to buy may be the place to focus on. Specifically, by aligning your portfolio with certain compelling individual holdings of Berkshire Hathaway (NYSE:BRK-B), you might be able to get a leg up on market vagaries.
Frankly, there’s no one that does it better than the Oracle of Omaha. Primarily, that’s because the man has seen it all and has profited in both good times and bad. For example, the main focus right now centers on inflation. Despite the Federal Reserve’s best efforts, consumer prices remain stubbornly high. While some of us may be facing inflationary conditions for the first time, that’s obviously not the case for Buffett.
Second, the legendary investor has a knack for understanding true value rather than chasing the latest fad. By logical deduction, if you can acquire undervalued Warren Buffett stocks, you’ll probably end up the winner over the long haul. With that, below are the key discounts from Berkshire to consider.
Cellphone with logo of US chemicals company Celanese Corporation (CE) on screen in front of business website Focus on center-left of phone display
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Based in Irving, Texas, Celanese (NYSE:CE) is a technology and specialty materials firm. Per its public profile, Celanese is the world’s leading producer of acetic acid, producing about 1.95 million tonnes per year. Per CNBC, Berkshire has a 4.9% stake in the enterprise, representing 0.2% of Berkshire’s portfolio. Since the start of the year, CE gained 26% of its equity value.
While it’s not exactly the most stirring examples of Warren Buffett stocks to buy, it makes for a solid investment. For example, the company prints a three-year revenue growth rate (per-share basis) of 20.6%, above 76.78% of its peers. Also, it’s consistently profitable, featuring a trailing-year net margin of 12.32%.
As for the discount, CE trades at a forward multiple of only 9.66x. In contrast, the sector median stands at a loftier 12.73x. Finally, Wall Street analysts peg CE a moderate buy. Overall, their average price target comes in at $133.13, implying over 3% upside potential.
Charter Communications (CHTR)
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An intriguing idea among undervalued Warren Buffett stocks to buy, Charter Communications (NASDAQ:CHTR) recently made news for its carriage fee beef with Disney (NYSE:DIS). Just in time for Monday Night Football, the bitter standoff found resolution. And with it, CHTR could be worth investigating. Presently, Berkshire has a 2.6% stake in CHTR, representing 0.5% of its portfolio.
As I told CGTN America anchor Phillip Yin, ultimately, the negotiated agreement should be a win-win for both parties. In such a competitive and evolving media landscape, there’s really no reason to incur longstanding disputes between programmers and distributors. CHTR has gained almost 32% since the start of the year. It could be more of the same moving forward.
Further, CE offers an attractive valuation, trading at only 10.33x forward earnings. In contrast, the sector median value comes in at 12.41x. Lastly, analysts peg CHTR a moderate buy. Overall, the average price target lands at $481.38, implying over 7% upside potential.
Warren Buffett Stocks: Capital One Financial (COF)
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One of the trickiest ideas to decipher regarding Warren Buffett stocks, Capital One Financial (NYSE:COF) carries both relevancy and risk. As a bank holding company specializing in credit cards, Capital One basically undergirds the spending behavior of millions of households. With total credit card debt among Americans soaring above $1 trillion, business should be good.
However, the challenge is that Americans have over $1 trillion in credit card debt. If something happens to the broader economy – such as mass layoffs – circumstances could get ugly. Still, the Oracle likes COF, with Berkshire owning a 3.3% stake in the financial giant.
Speaking of which, Capital One does benefit from attractive financials. Despite its solid revenue growth and consistent profitability, COF trades at a sales multiple of 1.09X. In contrast, the sector median stands at a stratospheric 3.32x. In closing, analysts peg COF as a consensus hold, reflecting the aforementioned concerns. Still, the average price target is $118.33, implying almost 16% upside potential.
Ally Financial (ALLY)
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Another bank holding company, Ally Financial (NYSE:ALLY) provides various financial services. These include car loans, online banking via a direct bank, corporate lending, vehicle insurance and mortgage loans, among others. However, the main concern about Ally is the rising interest rate environment and its impact to consumer sentiment.
For now, ALLY seems unperturbed, with shares gaining nearly 17% since the January opener. It’s also one of the undervalued Warren Buffett stocks (some might say for good reason). Per CNBC, Berkshire has a 9.6% stake in Ally, translating to 0.2% of the conglomerate’s portfolio.
While questions exist, Ally is so far doing a good job. For example, its three-year revenue growth rate is 16.2%, above 71.75% of its rivals. Just as well, ALLY trades at a revenue multiple of only 0.94x. Again, the sector median is 3.32x. Just like Capital One, analysts peg ALLY as a hold. However, the average price target clocks in at $33.08, implying just over 16% upside potential.
Warren Buffett Stocks: Kraft Heinz (KHC)
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An idea among Warren Buffett stocks to buy that aligns with the Oracle’s interests – basically junk food – Kraft Heinz (NASDAQ:KHC) presents a possibly delectable addition to your portfolio. Especially with the present economic environment, Kraft Heinz makes plenty of sense. Representing a food and beverage company, Kraft can bank on the trade-down effect as more consumers eschew restaurants for cooking at home and eating in.
Obviously, I can’t tell if that’s what the Oracle was thinking. But whatever the reasoning, Buffett loves KHC. Through Berkshire, the Oracle has a 26.5% stake in Kraft Heinz, translating to 3.1% of the conglomerate’s portfolio.
As for its financials, its long-term revenue growth could use some work. However, KHC benefits from strong profit margins along with consistent printing of annual net income. Currently, shares trade at a forward multiple of 11.36x, favorably lower than 75% of its peers. Turning to Wall Street, analysts peg KHC as a moderate buy with a $40.47 price target, implying nearly 20% growth.
BYD (BYDDF)
Close-up of BYD (BYDDY) logo on red car, symbolizing BYDDY stock
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One of the most enticing and forward-looking ideas among undervalued Warren Buffett stocks, BYD (OTCMKTS:BYDDF) is a Chinese conglomerate manufacturing firm. Most of the attention BYD generates stems from its manufacturing of automobiles, particularly its electric vehicles. It’s an interesting choice because Buffett once said to never bet against America. I suppose that also means betting on China.
Needless to say, BYD has been a solid investment. Since the start of the year, BYDDF gained just under 23% of equity value. Over the past five years, shares are up more than 351%. Per CNBC, Berkshire has a 9% stake in BYD, representing 0.9% of the former entity’s portfolio.
Financially, BYD banks on stellar growth. For example, its three-year revenue growth rate comes in at 54.4%, above nearly 97% of its rivals. So, it’s not particularly discounted. However, it does trade at 3.89x operating cash flow. In contrast, the sector median is 8.83x. Looking to the Street, Barclays’ Jiong Shao rates BYDDF as a buy with a $40 price target, implying over 27% upside.
General Motors (GM)
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Speaking about not betting against America, it doesn’t get more patriotic than investing in auto giant General Motors (NYSE:GM). While the company has endured many market cycles – some of them not being particularly pleasant – it’s still standing. It hasn’t been the best performer, slipping just under parity for the year. However, it could be one of the best Warren Buffett stocks to buy.
Fundamentally, I appreciate the smart pivot management has made regarding electrification. Thanks to its rich history, GM commands a wealth of iconic auto models. By electrifying them, GM can open its addressable market to new-generation car buyers while not alienating its faithful following. For instance, I believe Chevrolet’s electric Corvette should be a massive winner.
I could go on for days about why it’s such an amazing idea. However, we must get to the value proposition. At the moment, shares trade at only 4.36X forward earnings, favorably below 92.94% of its rivals. On a final note, analysts peg GM as a moderate buy with a $50.53 price target, implying over 50% upside potential.
On the date of publication, Josh Enomoto 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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.
