2024 will go down in history as the year that legendary investor Warren Buffett started showing signs of slowing down after an illustrious career in the investment world. After losing his best friend and longtime partner, Charlie Munger, the Oracle of Omaha increasingly shows signs of relinquishing control of his investment empire.
Even with his investment company becoming the first non-tech giant to hit the $1 trillion mark on market cap, Buffett is slowly relinquishing control after years of tremendous success. Handpicked Greg Abel is now responsible for taking over the Buffett Empire after more than 60 years in the limelight.
READ ALSO: Carl Icahn Stock Portfolio: 7 Best Stocks to Buy and 10 Best Performing Warren Buffett Stocks in 2024.
As Abel assumes control in making key investment decisions, Buffett continues sending shockwaves. Nevertheless, he has become a net seller, having trimmed stakes in some high-profile holdings, all but raising concerns about the market outlook.
At 94, Buffett has seen it all, having outperformed the S&P 500 over the years and generated significant returns for his investors. Since 1965, the billionaire investor has averaged returns of 19.8% through his investment firm, nearly double the 10.2% return of the S&P 500 over the same period. Nevertheless, he appears to have hit the peak of his investment career as he became a net seller after one of the longest bull runs.
The recent sales have taken Buffett’s cash haul to the $300 billion mark, which he can use to purchase a good chunk of the S&P 500 companies. Nevertheless, the billionaire investor has shown reluctance to invest in the cash-sitting valuations that have gotten out of hand.
Since Buffett has yet to carry out a massive investment this year, it does not come as a surprise. The advocate of value investing, which involves analyzing the market for undervalued stocks likely to generate long-term value, has been skeptical about valuations.
His reluctance also comes on outperformance in recent years, becoming extremely difficult due to the sheer size of Buffett’s investment portfolio. “We have no possibility of eye-popping performance” given that “there remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others,” Buffett is quoted as saying in an interview with CNBC.
With the S&P 500 up by more than 20% for the year, Buffett has indicated that the market might be too expensive to pursue opportunities at current levels. Consequently, he has opted to stay in cash while locking in profits through buybacks and dividends in some of his top investment plays.
Nevertheless, the market is still full of some of the best Warren Buffett stocks that analysts see material upside to. In the aftermath of the US Federal Reserve cutting interest rate by 50 basis points and indicating the prospects of further cuts before year-end, opportunities are increasingly emerging around some of Buffett’s top investment plays
Even as Buffett waits for the market to correct to deploy the more than $300 billion at his disposal, there are still opportunities to pursue as interest rates trend down. With that, let’s look at the 8 best Warren Buffett stocks to buy according to analysts.
Our Methodology
To compile the list of the best Warren Buffett stocks to buy according to analysts, we sifted through Berkshire Hathaway’s Q2 2024 13F portfolio. We scanned all the 13F holdings and picked the 8 stocks that had the highest upside potential, as of September 24. We have ranked the stocks in ascending order based on their upside potential.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
8 Best Warren Buffett Stocks to Buy According to Analysts
8. VeriSign, Inc. (NASDAQ:VRSN)
Warren Buffett’s Q2 2024 Stake: $2.28 Billion
Analyst Upside Potential, as of September 24: 13.74%
Number of Hedge Fund Holders: 36
VeriSign, Inc. (NASDAQ:VRSN) is one of Warren Buffett’s technology investment plays, focusing on providing domain name registry services and internet infrastructure that enable internet navigation.
The company is experiencing little growth as in the past, as the World Wide Web is slowing due to the increase in existing sites’ content rather than new ones. Despite this, VeriSign, Inc. (NASDAQ:VRSN) remains a dependable, high-profit business that’s here to stay.
Over half of its revenue from last year was converted to net profit, almost matching the profits from the previous year. Both the company’s income and expenses also saw continuous growth.
It ended the second quarter with 351.5 million in domain name registrations, all of which pay a fee to it and are expected to safeguard its revenue base. VeriSign, Inc. (NASDAQ:VRSN)’s revenue base should remain intact because the internet will not likely go anywhere.
While Verisign does not offer dividends, as with most stocks that Buffett invests in, it has made a name for itself in returning value to shareholders through buybacks. Its share count has declined significantly, allowing investors to generate optimum returns on the shares they hold. Analysts on Wall Street rate VeriSign as a Buy with an average price target of $207.50, implying a 13.74% upside potential.
By the second quarter of 2024, 36 out of the 912 hedge funds tracked by Insider Monkey were shareholders of VeriSign, Inc. (NASDAQ:VRSN). The largest hedge fund shareholder was Warren Buffett’s Berkshire Hathaway, holding a stake of $2.28 billion.
In its Q1 2024 investor letter, Baron Asset Fund provided insights on VeriSign, Inc. (NASDAQ:VRSN):
“VeriSign, Inc. (NASDAQ:VRSN), a global provider of internet infrastructure and domain name registry services, manages the .com and .net domains. Shares of VeriSign declined because of continued weakness in new domain registrations, stemming largely from weaker demand in China. We believe that VeriSign maintains an exceptional competitive position and the contractual ability to raise prices. Longer term, we are encouraged by VeriSign’s opportunity to win the rights to administer the “.web” domain, produce substantial free cash flow, and generate attractive capital returns as it continues to prioritize share buybacks.”
7. Bank of America Corporation (NYSE:BAC)
Warren Buffett’s Q2 2024 Stake: $41.08 Billion
Analyst Upside Potential, as of September 26: 15.69%
Number of Hedge Fund Holders: 92
Bank of America Corporation (NYSE:BAC) is arguably one of the best Warren Buffett stocks to buy, according to analysts, to gain exposure in the US banking sector. Best known for offering an array of banking services and investment products, it holds over $2 trillion in customer deposits, affirming its stability and credibility.
The nation’s second-largest bank in terms of assets has always been Buffett’s go-to banking stock owing to its solid growth metrics and ability to return value through dividends. However, Buffett has made significant divestments in his portfolio in recent times. Berkshire Hathaway disclosed that it had offloaded 5.8 million Bank of America Corporation (NYSE:BAC) shares, resulting in net proceeds of $230 million.
The sale of Bank of America Corporation (NYSE:BAC) does not imply Buffett is losing confidence in the bank’s long-term prospects. Instead, it may be part of a strategy of locking profits, given that the stock accounts for a significant chunk of the portfolio.
While its revenue remained unchanged in Q2 2024, marking a 1% increase to $25.4 billion, its net interest income decreased by 3% to $13.7 billion. Additionally, its earnings per share dropped from $0.88 to $0.83.
It is one of the banks well poised to feel the impact of the Federal Reserve’s moves to cut interest rates by 50 basis points while planning to cut further before year end. The reduction in credit spreads due to lower interest rates is expected to lead to a decrease in net interest income.
Nonetheless, a more robust economy benefits Bank of America Corporation (NYSE:BAC), potentially boosting credit card usage and consumer and business loans, reducing provisions for credit losses, and increasing demand for home refinancing and mortgages.
While Bank of America Corporation (NYSE:BAC) is up for the year, it is still trading at a discount at a price-to-earnings multiple of 10.91, backed by a 2.65% dividend yield. On the other hand, 18 analysts on Wall Street rate the stock as a buy with a $45.41 price target, implying a 15.69% upside potential.
In the second quarter of 2024, 92 hedge funds held positions in the stock, with total investments reaching $48.1 billion. By June 30, Berkshire Hathaway emerged as the largest shareholder, holding a stake valued at $41.1 billion.
ClearBridge Investments’ ClearBridge Value Equity Strategy stated the following regarding Bank of America Corporation (NYSE:BAC) in its first quarter 2024 investor letter:
“We added several new positions during the quarter. Our largest new addition was Bank of America Corporation (NYSE:BAC), one of the world’s leading financial institutions, serving some 66 million consumer and small business clients across the U.S. as well as large corporations, financial institutions and governments globally. We believe that the interest rate pressure that Bank of America faced in early 2023 has subsided, and risks surrounding deposit outflows have abated, which should allow the company to improve its book value and capital growth as well as benefit from a rebound of capital markets activity.”
