Investing

The 11 Best Warren Buffett Stocks to Buy Within Berkshire Hathaway Portfolio

J.P. Morgan Chase & Co. (NYSE: JPM) is a personal stock holding of Buffett, even though Wells Fargo & Co. (NYSE: WFC) keeps becoming a larger and larger stake for Berkshire Hathaway each and every quarter. We are not sure how much money Buffett has put into J.P. Morgan himself because it has not been disclosed. With shares just under $53, the implied upside is close to 8% here, and that was the most upside in the Buffett banking and financial giants. Buffett himself likely agrees more with the highest consensus target of $66, since this top bank trades at less than 10 times earnings and yields almost 3%.

Coca-Cola Co. (NYSE: KO) has retreated to under $41 from $43 in this latest market pullback, but the implied upside to the $46.20 price target is now about 13.5%. Buffett has been a long-term holder here, and the position is worth close to $16 billion. The top analyst target is $50 and the dividend yield is about 2.8%. Buffett has had a stake in Coca-Cola so long that he likely could not care less that a beverage stock trades at about 19 times expected earnings.

International Business Machines Corp. (NYSE: IBM) is still somewhat new and a larger position, worth close to $14 billion, for Buffett’s position of more than 68 million shares. The $203 share price implies almost 10% upside to the $222 price target. IBM keeps buying back stock at a rapid pace but only pays a 1.8% dividend yield. This trades at about 12 times earnings, and the highest price target from the analyst community is $250.

Full Buffett and Berkshire Hathaway Portfolio

National Oilwell Varco Inc. (NYSE: NOV) has grown as a stock position to almost 7.5 million shares, with a current market value of more than $500 million for Berkshire Hathaway’s stake. It trades at about $69.25, and that implies about 19% upside to the $82.58 consensus price target. The dividend yield here is lower than most Buffett stocks at only about 1.5%, but its valuation in the oil infrastructure market is not excessive at about 12 times expected earnings. Buffett’s new portfolio managers probably think that the highest analyst price target of about $93 is a better reading here, considering its dominance oil and gas infrastructure.

Precision Castparts Corp. (NYSE: PCP) is worth about $420 million for the total portfolio, but the $211 share price implies upside of about 13.5% to the consensus $239.60 price target. The dividend is just too small to even matter, although it was hard to not notice that street-high price target of $280 for the metal components and products player.

Procter & Gamble Co. (NYSE: PG) is still a large position for the conglomerate with a value of about $4 billion, although this is a lower stake than it had been in the past. Now that shares have pulled back to about $76.85, the implied upside that remains here is just over 10% to the consensus target of $84.78. Buffett likely agrees with the activists that the CEO change may help, and Buffett probably would think that the street-high target price of $95 is perhaps better for the long-term, as the consumer products giant recently tried to break out to higher prices. Buffett would also say that he is happy to get that 3.1% dividend yield while he waits. he might agree that 19 times earnings is too much in general to own a consumer products stock, but he has said over and over that he will pay up for quality.

Phillips 66 (NYSE: PSX) was added to after the Conoco spin-off, and Berkshire Hathaway’s 27.16 million shares is worth more than $1.7 billion. The $63.75 share price implies upside of more than 13% to the $72.15 share price. Buffett went out of the way to talk up this holding in 2012, and the dividend is about 1.9%. This refiner and marketer trades at only eight times earnings, and the street-high target price is $85.

Read also: Buyback Versus Dividend Analysis, Which Makes You More Money

Verisk Analytics Inc. (NASDAQ: VRSK) is a rather small position, worth less than $100 million, making it one of the new portfolio manager’s positions. Now that shares are down around $58, this implies about 12% upside to the $65.18 consensus price target. This analytics outfit for financial, insurance and health care decision-making does not pay a dividend, but the highest analyst target is up at $71 here.

USG Corp. (NYSE: USG) is a strange position for Berkshire because the equity value of the stake of more than $400 million is undercounted to the actual control that the company has here. The $24.25 share price has corrected from more than $30, but there is 27% implied upside to the $30.82 consensus price target. The common stock pays no dividend, but there is over 50% implied upside to the street high $39 price target. The home builder products company still trades at a very high multiple of about 40 times earnings, but this has been a stake for years and years, while shares have been both much higher and much lower.

So there you have it. Some of the stocks from the Buffett portfolio have quite a lot of implied upside, and other upside winners are only about at-market upside risks. Stocks have pulled back in recent days and volatility has returned with force as the Dow has had 100-point moves up and down for most of the past week.