In this article, we discuss the 5 best cheap stocks to buy in Warren Buffett’s 13F portfolio. If you want to read our detailed analysis of the billionaire’s hedge fund, go directly to see Berkshire Hathaway Stock Portfolio: 10 Cheapest Stocks.
5. StoneCo Ltd. (NASDAQ:STNE)
Berkshire Hathaway’s Stake Value: $717,237,000
Percent of Berkshire Hathaway’s 13F Portfolio: 0.24%
Number of Hedge Fund Holders: 44
Share Price as of October 20: $38.77
StoneCo Ltd. (NASDAQ:STNE) is a financial technology company founded in 2000. This September, HSBC rated the stock as a Buy with a $65 price target. In Q2, Warren Buffett’s Berkshire Hathaway owns over 10.6 million shares in StoneCo Ltd. (NASDAQ:STNE), valued at $717.2 million. The company represents 0.24% of the hedge fund’s 13F portfolio.
Rishi Renjen’s ROAM Global Management is the leading shareholder of StoneCo Ltd. (NASDAQ:STNE), owning shares worth $9.9 billion. The number of hedge funds tracked by Insider Monkey reported having stakes in the company increased to 44 in Q2, from 39 in the previous quarter. The total value of these stakes is over $2.7 billion.
JDP Capital Management mentioned StoneCo Ltd. (NASDAQ:STNE) in its Q2 2021 investor letter. Here is what the firm has to say:
“StoneCo (NYSE: STNE) has been in our portfolio since early 2019 and has appreciated 225% since. In the first half of 2021 the stock was down nearly 20% and was a drag on the fund’s performance.
Stone is a leading fintec company in Brazil that provides back-office software, loans and other financial services to small and medium sized businesses (SMBs). We have discussed Stone in past letters and the company’s “ladder up” from a card processor to a supplier of enterprise software used to sell financial products on top of such as working capital loans.
The company generates a lot of cash that it reinvests to acquire or build new financial products for its customer base. Since we invested, the company has grown the number of SMB clients by 3x, revenue by 2.3x, and net income by 2.2×11.
The pandemic’s impact on SMBs in Brazil has been severe, especially for the many retailers who are only now adopting an e-commerce strategy. In the first half of 2021 Stone increased loss provisions on its lending product, and overall growth has slowed somewhat. The stock’s decline earlier this year was not surprising, but investors are now ignoring progress that has enhanced Stone’s position for coming out much stronger when the recovery begins.
StoneCo Q1 2021 Earnings Call: “Based on (i) our learnings with lockdowns last year, (ii) recent client transactional data and (iii) learnings from the dynamics of countries where vaccines are widespread, we expect that once vaccination scale (which we think will happen in the second half of 2021), the economic recovery will be fast and – although delayed – Brazil is moving in the right direction. For these reasons, we have made an informed decision to be ready for recovery by investing in growth…”
“…In the first quarter, we decided to increase our salesforce headcount by 24%, marketing investments by 33%, customer service and logistics headcount by 32% and technology headcount by 20% in order to be the fastest player when our economy comes back to normal levels.”
“I want to start our presentation by highlighting that Brazil went through a second wave of COVID in the first quarter of ’21, which imposed commerce restrictions in several cities throughout the country. Those restrictions were felt by our clients with average TVP reaching a low in the end of March…
…But similar to the behavior we saw in the comeback from the first lockdown in 2020, we already observed significant and quick recovery with average TPV in May achieving levels above January 2021. As Thiago mentioned, we expect that once vaccinations are scaled, the economy recovery of the country will be fast.”
In terms of COVID recovery opportunities within our portfolio, Stone might be the most “coiled” because the impact on Brazilian small businesses has been so traumatic. In addition, Stone is part of a much larger and fast-moving transition happening in Brazil around the digitalization of financial services. The speed of this transition is unique to Brazil because the Central Bank is actively trying to reduce the country’s previous dependency on a small handful of large banks. Important progress in the first half of 2021 included closing on the long-awaited acquisition of Linx, a mature provider of enterprise software with a large footprint across Brazil. The acquisition will provide Stone meaningful cross-selling opportunities and a more diversified customer base.”
4. STORE Capital Corporation (NYSE:STOR)
Berkshire Hathaway’s Stake Value: $842,568,000
Percent of Berkshire Hathaway’s 13F Portfolio: 0.28%
Number of Hedge Fund Holders: 13
Share Price as of October 20: $34.60
In Q2, Berkshire Hathaway owns 24.4 million shares in STORE Capital Corporation (NYSE:STOR), worth $842.5 million. The hedge fund did not make any changes to its position in the company, which accounts for 0.28% of the hedge fund’s 13F portfolio.
STORE Capital Corporation (NYSE:STOR) is an American real estate investment trust, mainly engaged in the investment of single-tenant real estate properties. On September 13, the company’s board announced a 7% increase in its quarterly dividend at $0.385 per share, yielding 4.41%. This June, Morgan Stanley raised its price target on STORE Capital Corporation (NYSE:STOR) to $37, with an Equal Weight rating on the shares.
Of the 873 hedge funds tracked by Insider Monkey, 13 hedge funds have stakes in STORE Capital Corporation (NYSE:STOR) in Q2, the same as in the previous quarter. These stakes are valued at over $899 million.
3. The Kroger Co. (NYSE:KR)
Berkshire Hathaway’s Stake Value: $2,367,097,000
Percent of Berkshire Hathaway’s 13F Portfolio: 0.8%
Number of Hedge Fund Holders: 39
Share Price as of October 20: $39.55
The Kroger Co. (NYSE:KR) reported solid earnings in Q2, with an EPS of $0.80, beating the estimates by $0.16. The company’s revenue stood at $31.6 billion, up 4% from the prior-year quarter.
This September, BMO Capital lifted its price target on The Kroger Co. (NYSE:KR) to $39, with a Market Perform rating on the shares. In Q2, 39 hedge funds tracked by Insider Monkey were bullish on The Kroger Co. (NYSE:KR), valued at over $3.5 billion. In the previous quarter, 35 hedge funds had stakes in the company, presenting a positive hedge fund sentiment.
In Q2, Berkshire Hathaway increased its position in The Kroger Co. (NYSE:KR) by 22% and now holds 61.7 million shares in the company, worth over $2.3 billion. The company represents 0.8% of the hedge fund’s 13F portfolio.
2. Verizon Communications Inc. (NYSE:VZ)
Berkshire Hathaway’s Stake Value: $8,898,941,000
Percent of Berkshire Hathaway’s 13F Portfolio: 3.03%
Number of Hedge Fund Holders: 63
Share Price as of October 20: $53.71
Verizon Communications Inc. (NYSE:VZ) reported its Q3 2021 results on October 20, posting an EPS of $1.41, which beat the market consensus by $0.05. The company’s revenue stood at $32.9 billion, up 4.4% from the same period last year.
Verizon Communications Inc. (NYSE:VZ) is an American multinational communications company. After Berkshire Hathaway, Kahn Brothers is the company’s leading shareholder, with shares worth over $900 million. In addition, 63 hedge funds tracked by Insider Monkey reported having stakes in Verizon Communications Inc. (NYSE:VZ), compared with 69 in the previous quarter. The total value of these stakes is roughly $11 billion.
Berkshire Hathaway owns over 158 million shares in Verizon Communications Inc. (NYSE:VZ) in Q2, valued at $8.89 billion. The company accounts for 3.03% of the hedge fund’s 13F portfolio.
Miller/Howard Investments mentioned Verizon Communications Inc. (NYSE:VZ) in its Q1 2021 investor letter. Here is what the firm has to say:
“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.”
1. The Kraft Heinz Company (NASDAQ:KHC)
Berkshire Hathaway’s Stake Value: $13,279,388,000
Percent of Berkshire Hathaway’s 13F Portfolio: 4.53%
Number of Hedge Fund Holders: 33
Share Price as of October 20: $36.81
The Kraft Heinz Company (NASDAQ:KHC) is a leading American food company and tops our list of the best cheap stocks to buy.
The Kraft Heinz Company (NASDAQ:KHC) is the fifth-largest holding of Berkshire Hathaway. The hedge fund did not make changes to its position in the company in Q2 and holds 325.6 million shares, valued at $13.2 billion. The Kraft Heinz Company (NASDAQ:KHC) represents 4.53% of the hedge fund’s 13F portfolio.
Of the 873 hedge funds tracked by Insider Monkey, 33 hedge funds reported having stakes in The Kraft Heinz Company (NASDAQ:KHC) in Q2, the same as in the previous quarter. The total value of these stakes is over $13.5 billion.
You can also take a look at 10 Stocks to Buy and Hold for Long Term According to Warren Buffett and 11 Best Value Stocks To Buy According To Warren Buffett
