Last week brought the latest full equity holdings of Warren Buffett and Berkshire Hathaway Inc. (BRK-B). While several key changes were made in the stakes, actually very few changes were made when it came down to new positions and deletions from the portfolio.
Now that interest rates have started to rise, and with stocks within a few percent of all-time highs, investors are concerned about where they should be putting their money. Since Buffett and team generally look at many holdings as "forever," 24/7 Wall St. wanted to evaluate which of Warren Buffett's stock picks have the most implied upside ahead relative to the Thomson Reuters consensus analyst price target.
In order to avoid keeping this list consistent with prior reports, we have screened out the American Depository Receipts of foreign shares. We also included items such as their dividend yields and added color if applicable. Portfolio managers Todd Combs and Ted Weschler are getting even more entrenched as far as their ability to add to positions.
Investors need to be aware that many companies in the full Buffett portfolio are trading close to or even above what the analyst community might refer to as fair value. Another consideration is that Buffett himself will not care at all what Wall Street values something at for a year out, as he is willing to pay up for solid quality companies that he knows are going to be present and remain attractive through good times and bad times.
These are the 10 recent and past Warren Buffett stocks with the most implied upside.
The Coca-Cola Co. (KO) was surprising to see on the upside list. After all, how exciting is the soft drink industry? At $39.05, its 52-week range is $35.58 to $43.43, and the $45.53 consensus price target from analysts generates an implied upside of 16.5%. Coca-Cola also pays a 2.9% dividend yield. Buffet's stake in Coca-Cola was the same at 400 million shares, worth some $15.6 billion as of now.
DaVita HealthCare Partners Inc. (DVA) is the kidney dialysis giant, and Buffett has even entered into an agreement with the company not to keep growing his stake above and beyond a certain point. With shares at $112.10, the consensus price target of $126.30 generates an implied upside of 12.6%. This stock "went on sale" over the summer after earnings failed to impress because the stock had risen so much. DaVita pays no dividend, and the 52-week range is $95.17 to $131.33. The position of almost 15 million shares in DaVita is worth almost $1.7 billion today, against a market cap of almost $12 billion.
Dollar General Corp. (DG) is a former holding but one that investors might want to keep paying attention to whether or not Buffett's portfolio managers sold out. It has seen a bit of a stall in its appreciation wave, but if the consumer demographics are changing for the worst in America, then Dollar General likely will be the beneficiary. With shares at $52.47, the consensus price target of $58.29 implies upside of 11%. There is no dividend here, and the 52-week trading range is $39.73 to $55.82.
General Motors Co. (GM), aka Government Motors, has a lot of room to run up if the analyst community is correct. The car maker is enjoying a climate in which the U.S. public's car fleet is so old that old cars almost have to be replaced with new ones. At $34.38, the consensus price target of $44.73 implies an upside of a whopping 30%. GM has traded in a 52-week range of $20.86 to $37.71. GM pays no dividend and likely will not until its stakes are dealt with. GM's position was raised to 40 million shares, worth some $1.37 billion in today's prices, but this is still small compared to a $47 billion market cap for the whole company.
International Business Machines Corp. (IBM) is interesting to see on the list of Buffett upside stocks. It seems that the sell-off is the reason that this one appears to be cheap. We have been critical of its pursuit of $20 in earnings per share at all costs, since the stock was above $200. Now at $185.34, the consensus price target of $217.80 brings implied upside of 17.5%. IBM is basically at a year low now, as its 52-week trading range is $184.78 to $215.90. The DJIA component has a dividend yield of 2.1%, now that shares have sold off this much. IBM's position of 68.1 million shares would be worth some $12.6 billion, and that is lower than before now that shares have slid.
National Oilwell Varco Inc. (NOV) is still relatively new as a holding for Team Buffett. The oil rig platform maker and heavy equipment maker traded as $72.73, against a 52-week range of $63.08 to $89.95. The consensus price target of $83.15 is not even a 52-week high and implies upside of about 14.3%. National Oilwell Varco has a dividend yield of 1.4%. The NOV position was grown to 8.88 million shares, worth almost $650 million in today's prices. While this stake has been raised twice by one of the new portfolio managers, this is still small as a percentage because the market cap is $31 billion.
Precision Castparts Corp. (PCP) manufactures metal components and products and caters to many industries, and frankly is a manufacturing outfit that Buffett probably would love to own outright if the chance ever came up. Shares trade at $216.94, and the consensus price target of $255.33 generates an implied upside of about 17.7%. The dividend here is almost too small to even mention at 0.1%, and shares have traded in a 52-week range of $157.51 to $254.14. The company was the same stake of roughly 2 million shares, worth almost $434 million today versus a market cap of $31.5 billion.
Phillips 66 (PSX) remains a holdover position from the Conoco spin-off. Its share price of $56.30 comes with a consensus price target of $70.85, implying upside of almost 26%. Phillips 66 pays a dividend of 2.2%, and its 52-week range is $40.42 to $70.52. The stake was the same 27.16 million shares as previously shown, worth some $1.53 billion today. Its market cap is more than $34 billion.
USG Corp. (USG) is a very long-term holding of Berkshire Hathaway and is in the home-building products industry. At $24.34, there is an implied upside of 23.5%, if the consensus analyst price target of $30.50 is seen again. USG pays no dividend, but the consensus target seems reasonable when you consider that the 52-week range is $18.59 to $30.97. The USG stake is $413 million now, but this is believed still to be much higher if you include debt or convertible debt.
Visa Inc. (NYSE: V) finally has seen its shares pull back after what feels like years and years of running. The credit card processing giant trades at $173.13, against a 52-week range of $125.81 to $196.00. Its consensus price target of $208.09 implies upside of about 20.2%. The dividend yield here is only 0.8%. Buffett's Visa stake, likely taken by one of the newer portfolio managers, is worth some $268 million today. That is rather small and of little influence over the company with a market cap of more than $100 billion.
Suncor Energy Inc. (SU) was not included in these "top ten" because technically it is not a U.S. company. That being said, its $34.00 share price compares to a consensus price target of $42.01 and implies an upside of almost 23%. Be advised, we also believe that Buffett is signaling a favorable trend for Canadian oil sands. His stake was close to $600 million in current terms.