Last week we identified the ten Warren Buffett investments with the most implied upside. But we also found that there were many Buffett investments in Berkshire Hathaway Inc. (NYSE:BRK.A) which may be overvalued.
These positions include ConocoPhillips (NYSE: COP), Costco Wholesale Corporation (NASDAQ: COST), Becton, Dickinson and Company (NYSE: BDX), Fiserv, Inc. (NASDAQ: FISV), Nalco Holding Company (NYSE: NLC), Torchmark Corporation (NYSE: TMK), and USG Corporation (NYSE: USG). A couple of these stocks were above their implied target prices, but some only had upside of 1% to 3%. This compares to Buffett’s largest implied upside picks which had more than a 10% hurdle.
We used the closing price as of December 6 for the analysis. We gave a percentage upside based on how much the stocks had to move to reach the Thomson Reuters consensus price target for a year from now. We reviewed the prospects of each company which includes a brief description of the firms, how the shares have performed versus a 52-week range, and analyzed the dividend yields of each corporation.
ConocoPhillips (NYSE: COP) closed Monday at $64.18, above the oil giant’s consensus price target of $62.81. Buffett kept his stake in the last quarter unchanged but that is after cutting his position over the past several quarters. He has indicated he might sell the stock for tax purposes but he has retained a modest ownership position. Conoco at least offers a 3.4% dividend yield. Buffett admitted that the timing of this investment was wrong, but the good news is that shares are up more than 50% from the lows in 2009.
Costco Wholesale Corporation’s (NASDAQ: COST) stock is one of the few that has consistently risen lately. It almost always trades at a premium over its peers, but that has not undermined its valuation. After a $69.19 close on Monday, shares hit a 52-week high of $69.41. Does it matter then that analysts have a consensus price target of $68.61 a year out? The dividend yield here is only 1.2%. It is worth noting that shares peaked just above of $70.00 in late-2007 and in early 2008 .
Becton, Dickinson and Company (NYSE: BDX) is the first of several stocks that still have upside but that is so small that it is hardly worth mentioning. Monday’s close for BD was $80.85, and its 52-week trading range is $66.47 to $81.65. The consensus price target for one-year out is $82.23. That implies an upside of only 1.7%, which is below its 2% dividend. The shares still managed to challenge 52-week highs recently. The 52-week trading range is $66.47 to $81.65.