In this article, we discuss the 5 best value stocks in Warren Buffett’s portfolio. If you want our detailed analysis of Buffett’s history, investment philosophy, and hedge fund performance, go directly to 10 Best Value Stocks in Warren Buffett’s Portfolio.
5. DaVita Inc. (NYSE:DVA)
Berkshire Hathaway’s Stake Value: $4,196,471,000
Percentage of Berkshire Hathaway’s 13F Portfolio: 1.43%
Number of Hedge Fund Holders: 39
P/E Ratio: 12.37
DaVita Inc. (NYSE:DVA) made it to our list of the best value stocks in Warren Buffett’s portfolio, with the company announcing solid Q3 earnings on October 28, posting an EPS of $2.36, beating estimates by $0.10. Revenue over the period also outperformed estimates by $23.55 million.
Deutsche Bank analyst Pito Chickering on November 17 lowered the price target on DaVita Inc. (NYSE:DVA) to $150 from $164 and kept a Buy rating on the shares after the capital markets day, stating that the company offers a longer term investment horizon than many investors can be comfortable with.
DaVita Inc. (NYSE:DVA) is a healthcare company primarily focusing on kidney diseases and dialysis support, operating in nine countries in addition to the United States. Warren Buffett holds a $4.19 billion position in DaVita Inc. (NYSE:DVA) as of September this year, with DaVita Inc. (NYSE:DVA) stock accounting for 1.43% of the billionaire’s total investments.
At the end of the third quarter, 39 hedge funds tracked by Insider Monkey reported owning stakes worth $4.81 billion in DaVita Inc. (NYSE:DVA). This is compared to the same number of funds holding the DaVita Inc. (NYSE:DVA) stock in the preceding quarter, with a total stake value of approximately $5.13 billion.
Gates Capital Management increased its stake in DaVita Inc. (NYSE:DVA) by 5% in the third quarter, and is one of the leading stakeholders of the company, with a $174.1 million position.
4. U.S. Bancorp (NYSE:USB)
Berkshire Hathaway’s Stake Value: $7,514,279,000
Percentage of Berkshire Hathaway’s 13F Portfolio: 2.52%
Number of Hedge Fund Holders: 42
P/E Ratio: 11.60
U.S. Bancorp (NYSE:USB) is a Minnesota-based bank holding company that operates via its wholly owned subsidiary, U.S. Bank National Association, and offers banking, investment, mortgage, trust, and payment services to customers. As one of the best value stocks in Warren Buffett’s Q3 portfolio, U.S. Bancorp (NYSE:USB) represents 2.52% of the billionaire’s total investments. Berkshire Hathaway owns over 126 million U.S. Bancorp (NYSE:USB) shares, worth $7.51 billion.
On December 9, UBS analyst Erika Najarian initiated coverage of U.S. Bancorp (NYSE:USB) with a Buy rating and a $70 price target, after the 300 basis points of ROTCE outperformance by the company.
U.S. Bancorp (NYSE:USB), on October 14, reported its Q3 results, posting an EPS of $1.30, beating estimates by $0.14. The $5.86 billion revenue also exceeded estimates by $105.32 million.
In Q3 2021, 42 hedge funds in the database of Insider Monkey were long U.S. Bancorp (NYSE:USB), up from 41 funds in the preceding quarter. Yacktman Asset Management is one of the leading stakeholders of U.S. Bancorp (NYSE:USB), holding a $279.3 million stake in the bank holding company.
Here is what Mairs & Power has to say about U.S. Bancorp (NYSE:USB) in their Q4 2020 investor letter:
“On the negative side, one of the Fund’s biggest detractor in 2020 was U.S. Bancorp (USB). Like all banks, U.S. Bank was hurt by the difficult interest rate environment and credit cycle concerns. We believe banks are strong enough to survive the current sector doldrums, and they remain some of the market’s most attractive opportunities.”
3. Verizon Communications Inc. (NYSE:VZ)
Berkshire Hathaway’s Stake Value: $8,578,115,000
Percentage of Berkshire Hathaway’s 13F Portfolio: 2.92%
Number of Hedge Fund Holders: 57
P/E Ratio: 9.43
With a price to earnings ratio of 9.43, Verizon Communications Inc. (NYSE:VZ) is one of Warren Buffett’s top value stock picks from the third quarter, with the billionaire holding an $8.57 billion position in the company. Verizon Communications Inc. (NYSE:VZ), an American multinational telecommunications conglomerate, announced a quarterly dividend of $0.64 per share on December 2, payable on February 1 to shareholders of record on January 10. Verizon Communications Inc. (NYSE:VZ) offers a forward dividend yield of 5.10%.
On October 20, Verizon Communications Inc. (NYSE:VZ) announced Q3 results, posting an EPS of $1.41, beating estimates by $0.05. The quarterly revenue amounted to $32.92 billion, missing estimates by $301.93 million. Following the Q3 performance, Cowen analyst Colby Synesael raised the price target on Verizon Communications Inc. (NYSE:VZ) to $71 from $68 and kept an Outperform rating on the shares.
Verizon Communications Inc. (NYSE:VZ) was awarded two contracts worth $34.6 million by the U.S. Department of Energy. The task orders were awarded through the federal government’s Enterprise Infrastructure Solutions contract vehicle on December 1.
By the end of the third quarter, 57 hedge funds were bullish on Verizon Communications Inc. (NYSE:VZ), down from 63 funds in the preceding quarter. Jaime Sterne’s Skye Global Management is one of the leading Verizon Communications Inc. (NYSE:VZ) stakeholders from Q3, holding a $282.3 million position in the company.
Here is what Miller/Howard Investments has to say about Verizon Communications Inc. (NYSE:VZ) in its Q1 2021 investor letter:
“We sold Verizon (VZ) based on concerns over how much they might spend in ongoing spectrum auctions. Management may legitimately view spending billions of dollars to expand their spectrum holdings as necessary, but we believe the payoff will be slow and will make it challenging to grow the dividend at a good pace.”
2. American Express Company (NYSE:AXP)
Berkshire Hathaway’s Stake Value: $25,399,340,000
Percentage of Berkshire Hathaway’s 13F Portfolio: 8.65%
Number of Hedge Fund Holders: 57
P/E Ratio: 17.45
American Express Company (NYSE:AXP), a multinational payment card services company, posted on October 22 its Q3 results. EPS for the period came in at $2.27, exceeding estimates by $0.52. The revenue amounted to $10.93 billion, up 24.88% year-over-year, outperforming estimates by $382.39 million.
8.65% of Berkshire Hathaway’s Q3 investments are represented by American Express Company (NYSE:AXP) stock, with Warren Buffett holding 151.6 million shares of the company, worth $25.39 billion at the end of September this year. American Express Company (NYSE:AXP) is one of the best value stocks in Warren Buffett’s portfolio.
The smart money took a greater interest in American Express Company (NYSE:AXP) in the third quarter, with 57 hedge funds being bullish on the stock at September end, up from 52 funds holding stakes in American Express Company (NYSE:AXP) in the preceding quarter. Fisher Asset Management is a notable stakeholder of American Express Company (NYSE:AXP) in Q3, with 15.6 million shares valued at $2.61 billion.
After the Q3 earnings beat, BMO Capital analyst James Fotheringham on October 25 raised the price target on American Express Company (NYSE:AXP) to $151 from $147 but kept a Market Perform rating on the shares. In addition to the strong Q3 earnings, the analyst revised his model for American Express Company (NYSE:AXP) to forecast higher net interest income, lower loan loss provisions, and lower share counts.
Here is what ClearBridge Investments has to say about American Express Company (NYSE:AXP) in its Q2 2021 investor letter:
“In financials, American Express has done an excellent job demonstrating the resiliency of its franchise in the midst of a global pandemic that drove a 60% decline in its core travel and entertainment business. The company’s spend-centric model has been helped by fiscal stimulus ensuring a flush consumer, while management continues to execute well by adding millions of new consumer and small and medium business accounts, which should benefit the franchise over the medium to long term. We remain optimistic regarding the company’s prospects as travel and entertainment activity rebounds, adding to our position in the quarter.”
1. Bank of America Corporation (NYSE:BAC)
Berkshire Hathaway’s Stake Value: $42,878,771,000
Percentage of Berkshire Hathaway’s 13F Portfolio: 14.61%
Number of Hedge Fund Holders: 72
P/E Ratio: 13.32
Ranking first on our list of the best value stocks in Warren Buffett’s portfolio is Bank of America Corporation (NYSE:BAC), with the billionaire holding more than 1 billion shares worth $42.8 billion by the end of September. Bank of America Corporation (NYSE:BAC) stock represents 14.61% of Warren Buffett’s total Q3 securities.
UBS analyst Erika Najarian assumed coverage of Bank of America Corporation (NYSE:BAC) with a Buy rating and a $64 price target on December 9. The analyst named Bank of America Corporation (NYSE:BAC) her top pick among the U.S. large cap banks.
Bank of America Corporation (NYSE:BAC), on October 14, announced earnings for the third quarter, posting an EPS of $0.85, beating estimates by $0.15. The revenue was up 11.33% year-over-year, amounting to $22.77 billion, exceeding estimates by $1.16 billion.
In the third quarter, 72 hedge funds were bullish on Bank of America Corporation (NYSE:BAC), holding total stakes valued at $46.48 billion. One of the leading Bank of America Corporation (NYSE:BAC) stakeholders from Q3 is Harris Associates, with a $2.52 billion position in the company.
Here is what Oakmark Funds has to say about Bank of America Corporation (NYSE:BAC) in its Q3 2021 investor letter:
“Earlier this year, one of our holdings, Bank of America, announced that it was raising its minimum hourly wage from $15 to $20 and would increase it to $25 by 2025. The company received great press for placing the well-being of its employees above profits. But was it really either/or? Bank of America’s chief human resources officer spoke to the bigger picture: “A core tenet of responsible growth is our commitment to being a great place to work…that includes providing strong pay and competitive benefits to help them and their families, so that we continue to attract and retain the best talent.” Bank of America understood that engaged, high-caliber employees are more productive, less prone to turnover and, therefore, less expensive in the long run. Increasing the pay for employees wasn’t elevating employees above shareholders; it was the right thing to do for employees and for shareholders.
If an increase to $20 was good, why stop there? Why not $50 per hour? Because the benefits the business receives at $50 don’t justify the expense. The bank would no longer be able to price its products competitively and would lose business. The employees would “win” in the short term, but eventually the lost business would lead to job cuts, meaning both employees and shareholders would lose. The negative effects of stakeholder overreach are no different than when CEOs overreach to inflate short-term profits. Both hurt shareholders and stakeholders.”
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