Berkshire Hathaway's (NYSE: BRK.A)(NYSE: BRK.B) portfolio includes many top blue chip stocks -- solid investments that you can potentially hold for not only years, but decades. While CEO Warren Buffett doesn't handpick every stock in the portfolio, it's the most natural place to find the types of stocks that fit his investing style.
And there are some potential deals in there right now. Three stocks in Berkshire's portfolio that look incredibly cheap today are Kraft Heinz (NASDAQ: KHC), American Express (NYSE: AXP), and Chevron (NYSE: CVX).
1. Kraft Heinz
Kraft has been one of Berkshire's larger holdings for quite a while. Today, it accounts for around 4% of the overall portfolio's value. Buffett loves companies that have strong brands, and Kraft Heinz definitely fits that mold. Besides its two namesake brands, it owns Philadelphia, Lunchables, Oscar Mayer, and many other staples that consumers buy regularly.
The challenge for the consumer staples company has been that due to inflation, many consumers have been trading down to no-name brands more often. This has hurt its sales. But for the most part, business has been fairly stable: Kraft Heinz's revenue through the first two quarters of the year totaled $12.9 billion -- down a little more than 2% from the same period last year. While its net income fell by half during that period, that was largely due to goodwill impairment writedowns.
Based on analyst estimates for next year's earnings, Kraft's forward price-to-earnings (P/E) multiple of 11 looks dirt cheap. Between that and its above-average dividend, which yields 4.5% at the current share price, it looks like an excellent stock to buy right now.
2. American Express
Buffett also loves credit card companies, and his favorite appears to be American Express -- Berkshire's largest holding after Apple, accounting for approximately 13% of its portfolio. American Express has a strong and affluent customer base that allowed it to continue posting strong results this year, even as the average consumer struggles with inflation.
American Express has been posting record sales numbers; its revenue net of interest expense was up 10% through the first half of the year, while adjusted earnings rose by 29%. The company normally generates strong double-digit percentage profit margins, which gives it a good buffer should it face headwinds.
While the stock trades at a forward P/E of around 18 -- a valuation that's a bit higher than Kraft Heinz's -- that's still far cheaper than what Visa (25) and Mastercard (30) trade at. American Express is doing well amid some challenging economic conditions, and it may do even better as consumer purchasing power improves.
3. Chevron
Representing nearly 6% of Berkshire's holdings, Chevron is another top stock in Buffett's portfolio. The oil and natural gas producer can sometimes experience a lot of volatility in its earnings since commodity prices heavily impact its results. But it has typically been a fairly resilient business to invest in. In just the past three years, Chevron has accumulated more than $72 billion in earnings.
With such significant profits, even if oil prices come down a bit, the business has a big cushion. While some oil producers may get squeezed out of the industry when economic conditions get tough, a big player such as Chevron can be in a great position to pursue acquisitions that will help it increase productivity and efficiency, which is why it could make for a good long-term investment now.
Chevron's forward P/E multiple is just over 12, which looks cheap, and its dividend yields a tasty 4.3% at the current share price. Whether you're looking for some diversification and protection against inflation or just a solid business to invest in that also provides a strong dividend, Chevron can be a good option to add to your portfolio today.
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Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
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- Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $21,139!*
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Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of October 14, 2024
American Express is an advertising partner of The Ascent, a Motley Fool company. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, Chevron, Mastercard, and Visa. The Motley Fool recommends Kraft Heinz and recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
