Eleven Overvalued Warren Buffett Stocks to Sell from Berkshire Hathaway’s Portfolio

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Stock market volatility has returned, and some stocks have sold off enough that they almost appear to be bargains to investors who missed the boat on the way up. As value investors start to look for ample dividend and defensive investments and other cyclical stocks, many will look to see what investment gurus are doing with their money. The stocks inside the Warren Buffett and Berkshire Hathaway Inc. (NYSE: BRK-A) portfolios are often where many investors start to look for value, income and opportunity for the long haul.

24/7 Wall St. has decided to review the Berkshire Hathaway Inc. (NYSE: BRK-B) portfolios to look for opportunities and pitfalls. While we already screened out the “cheapest” Warren Buffett stocks, the review of this guru’s stock portfolio brought up a stark realization. Many of Warren Buffett’s stocks are now either fully valued, according to Wall Street, or they have such a small implied upside that the risk is not worth the chase.

Warren Buffett and his team of portfolio managers are of course interested in value and growth, but they will tell you over and over that they will pay up for solid companies that do well in good times and bad. The 24/7 Wall St. screens focused on the current share prices versus the Thomson Reuters consensus price targets from Wall Street analysts to determine “cheap” or “expensive,” but we also added in our own color so that you might avoid some traps or not get tricked into looking at numbers alone. We included other valuation metrics and historical pricing as well.

Be advised about one thing when it comes to Mr. Buffett. He would tell you that he could not care less what a Wall Street analyst price target looks like, unless of course it is much higher than what his own numbers. Buffett also has the luxury of having held some of these stocks for long enough that a one-year price target might be irrelevant to him. Still, that does not mean that if you are guru-chasing you have the same luxuries as one of the greatest modern day investors.

Also Read: The Cheapest Buffett Stocks in Berkshire Hathaway’s Portfolio

These were broken down into two key groups. The first group includes the portfolio names where the analyst community believes that the upside is 5% or less. The market has lifted most ships in 2013 since the 2009 rally started, but chasing the last 5% of upside should be no better than a sucker’s game by any stretch of the imagination. The second group of is a handful of truly overvalued stocks, where the stock price already has gone above and beyond what the Wall Street analysts’ consensus price target valuation is.

First for the stocks with only 5% or less upside.

Costco Wholesale Corp. (NASDAQ: COST) is very close to all-time highs and has been treading water with a $48 billion or so market value since the earnings report. The current share price of $111.09 only comes with an implied upside of about 1.1% to the price target of $112.36. Its 52-week trading range is $87.25 to $115.77, and the dividend yield is low at only about 1.1%. If the team wants to remain bullish here, they might  point out that the street-high price target is $126. Even then, 24 times this year’s expected earnings sounds rich even for a good growth story.

Johnson & Johnson (NYSE: JNJ) is a megacap stock at $237 billion in market cap. Its share price of $84.46 comes with only 5% upside to the consensus target of $88.78, and its 52-week range is $61.83 to $89.99. At least Johnson & Johnson comes with a 3.1% yield for new investors. This position is one that Buffett has been very profitable in, so he does not have to care about the targets. Even then, the team might point out that the street-high analyst target price is $97.