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Warren Buffett's Predictable Stocks Outperforming on Market Weakness

U.S. equity markets have seen a turbulent month since the end of February, when the S&P 500 peaked on Feb. 19 before beginning a sharp correction. As of March 25, the S&P 500 is down approximately 25% from Feb. 19 and 9% over the past 12 months.

In times like these, it can be helpful to look at the strategies and holdings of investors who are famous for finding value while mitigating risk.


For example, one of the most famous investors of all time, Warren Buffett (Trades, Portfolio), was largely criticized for having a $100 billion-plus cash pile at the height of the bull market. However, the basic principle of investing is buying low and selling high. This is how Buffett earned his fortune, and it also means that the ideal time to buy quality companies is when their shares are trading low.

"There will be interruptions, and I don't know when they will occur, and I don't how deep they will occur," Buffett said in an interview with Yahoo Finance earlier this month. "I do know they will occur from time to time, and I also know that we'll come out better on the other end."

Thus, in order to find potential bargains in the market, let's take a look at the Buffett holdings that have outperformed the S&P 500 significantly over the past year through March 25, despite recent declines.

DaVita

DaVita Inc. (NYSE:DVA) is a health care company with a concentrated focus on kidney care. Based in Denver, the company provides outpatient kidney dialysis services primarily to patients in the U.S., though it does have some operations in other countries.

Buffett's Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) has owned shares of the company since the fourth quarter of 2011. According to GuruFocus calculations, the investment has returned approximately 45%. The share price is up 23% over the past 12 months and down 23% since Feb. 19.

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On March 25, shares traded around $72.60 for a market cap of $9.17 billion and a price-earnings ratio of 13.61. GuruFocus assigns the company a business predictability rating of 3.5 out of 5 stars, a financial strength rating of 3 out of 10 and a profitability rating of 8 out of 10.

According to the Peter Lynch chart, the stock may be undervalued.

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Charter Communications

Charter Communications Inc. (NASDAQ:CHTR) is a telecommunications company based in Stamford, Connecticut. It provides services to consumers and business under the Spectrum brand name.

Buffett's conglomerate first invested in Charter shares in the second quarter of 2014, and the investment has returned approximately 114% by GuruFocus calculations. The share price is up 6% over the past 12 months and down 29% since Feb. 19.

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On March 25, shares traded around $439.66 for a market cap of $102.87 billion and a price-earnings ratio of 58.42. GuruFocus assigns the company a business predictability rating of 1 out of 5 stars, a financial strength rating of 3 out of 10 and a profitability rating of 7 out of 10.

The Peter Lynch chart suggests that the stock is overvalued.

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Costco Wholesale

Based in Issaquah, Washington, Costco Wholesale Corp. (NASDAQ:COST) operates a membership-only chain of warehouse stores, which allow paying members to buy bulk groceries and other items at a discount.

Buffett's long-held investment in Costco has returned approximately 385% over the past decade, according to GuruFocus estimates. The share price of the company is up 20% over the past 12 months and down 11% since Feb. 19.

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On March 25, shares traded around $287.76 for a market cap of $128.02 billion and a price-earnings ratio of 34.03. GuruFocus assigns the company a business predictability rating of 5 out of 5 stars, a financial strength rating of 7 out of 10 and a profitability rating of 8 out of 10.

The Peter Lynch chart indicates that the stock may be overpriced at current levels.

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Kroger

The Kroger Co. (NYSE:KR) is a U.S. supermarket chain based in Cincinnati. By revenue, it is the largest supermarket chain in the country.

The company is a recent addition to Buffett's portfolio, as Berkshire initially bought shares in the fourth quarter of 2019. According to GuruFocus estimates, the investment has returned approximately 7%. The share price is up 5% since Feb. 19.

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On March 25, shares traded around $28.86 for a market cap of $22.59 billion and a price-earnings ratio of 14.05. GuruFocus assigns the company a business predictability rating of 3.5 out of 5 stars, a financial strength rating of 5 out of 10 and a profitability rating of 8 out of 10.

According to the Peter Lynch chart, the stock is trading near its intrinsic value.

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Biogen

Biogen Inc. (NASDAQ:BIIB) is a biotechnology company that develops pharmaceutical treatments for neurological and neurodegenerative diseases. It is based in Cambridge, Massachusetts.

Another new addition, Buffett's conglomerate established a position in Biogen in the fourth quarter of 2019. GuruFocus estimates that the investment has returned 5%. The share price is down 21% since Feb. 19.

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On March 25, shares traded around $295.17 for a market cap of $51.37 billion and a price-earnings ratio of 9.38. GuruFocus assigns the company a business predictability rating of 5 out of 5 stars, a financial strength rating of 7 out of 10 and a profitability rating of 10 out of 10.

The Peter Lynch chart indicates that the stock is trading below its intrinsic value.

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Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Investors should always conduct their own careful research or consult registered investment advisors before taking action in the stock market.

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This article first appeared on GuruFocus.