Need some new names for your portfolio? It's never a bad idea to start your search with stocks already hand-picked by Warren Buffett (and his lieutenants) and currently held by his conglomerate, Berkshire Hathaway. After all, there's a good reason he's called the "Oracle of Omaha."
On the flip side, even if you're Warren Buffett, every now and then one of your long-term holdings can fall out of favor -- even if only temporarily.
With that as the backdrop, here are two tickers currently owned by Berkshire Hathaway that could be at home in your portfolio as well, plus a closer look at one of Buffett's picks that might be best left avoided for the time being.
Buy Kroger
It may not be a particularly exciting stock, but what grocery store chain Kroger(NYSE: KR) lacks in pizzazz it more than makes up for in consistency. Net losses are rare and short-lived, and almost always the result of extraordinary circumstances like a pandemic or accounting charges linked to divestures or acquisitions.
That's due to the nature of its business, of course. Consumers always need food, regardless of the cost. While Kroger must remain price-competitive, it's also got at least some pricing power.
Where this dynamic really makes a difference, however, is on the dividend front. Not only has the grocery giant paid one like clockwork for years now, but it has reliably raised its payout. Indeed, Kroger has upped its annual dividend payment for 18 consecutive years now, and by more than a little.
KR Dividend data by YCharts
Management expects this growth streak to continue indefinitely, driven by continued inflation, population growth, and acquisitions. Although the Federal Trade Commission has pushed back against Kroger's plans to merge with rival grocer Albertsons Companies, it looks like the deal is proceeding with relatively modest conditions being required by regulators. If and when it's completed, the combined chain will be over 4,000 stores strong. That's a lot of scale, leverage, and subsequent pricing power.
For perspective, Walmart only operates around 4,600 supercenters within the U.S., plus just under 600 Sam's Club warehouses. Given this scope and scale, Kroger's revenue, earnings, dividend, and dividend growth would become even more reliable as a result of the merger with Albertsons.
Either way, newcomers will be stepping in while Kroger's forward-looking dividend yield stands at 2.3%.
Berkshire is sitting on 50 million shares of Kroger, by the way, collectively worth $2.8 billion.
Buy Nu Holdings
Not every Buffett stock pick promises regulatory drama or requires the tedious process of melding two different U.S. grocery chains into one. Indeed, one of Berkshire's current positions is a strangely exciting growth name: Nu Holdings(NYSE: NU).
Never heard of it? There's a reason. It doesn't operate in the U.S. Rather, Nu Holdings is parent to Latin America's online bank Nu, which currently serves over 100 million customers spread across Brazil, Mexico, and Colombia. Given that Latin America is home to nearly 700 million people, the company's only scratched the surface of its opportunity.
The Nu Holdings story isn't just about the size of its prospective market, however. It's a timing thing too.
See, in many ways, the region is where North America was around the turn of this century, when banking was still relatively new, and not exactly common. Although the figure's growing rapidly, the World Bank reports that, as of last year, only around 80% of the people living in Latin America were regular users of the internet, with even fewer able to access broadband connections. Most of the region is also "mobile first," meaning smartphones are residents' primary means of accessing the web.
As was the case elsewhere, though, more and better connectivity follows. When it does, adoption of services like online shopping and online banking follows too.
And this adoption is already underway if Nu's recent results are any indication. The company's second-quarter income more than doubled year over year from $225 million to $487 million thanks to 64% growth in deposits and the addition of 5.2 million new customers, extending trends first seen in Q1. The analyst community is looking for similar growth for the remainder of this year and through next year, at least.
Berkshire's 107 million share stake in Nu is currently worth $1.45 million.
Avoid Chubb
Chubb(NYSE: CB) is one of the few Berkshire Hathaway stocks you might want to avoid -- at least for the time being. It's not just cliché to point out that property and casualty insurers like Chubb suffer in the wake of costly widespread disasters like hurricanes. It's also misleading.
Massive claims payouts are looming for Chubb (and plenty of other insurance companies) in the wake of hurricanes Helene and Milton. The company might even soon be reporting a quarterly net loss, and that loss could continue for at least another quarter beyond.
These massive waves of payouts are rarely ruinous for insurers, though, particularly for bigger insurers like Chubb that know the sort of risks they're taking when they insure homeowners, car owners, etc. in areas prone to claim-qualifying damage. They also know what catastrophes like the one left behind by a major hurricane can ultimately cost. The asset bases used to support these payouts adequately reflect these risks. If not, they'll soon be reflected in future insurance premiums. Insurers at this level also invest in something called reinsurance to help them manage when they are likely to get an overwhelming number of claims in a relatively short timeframe.
While Chubb has occasionally slipped into the red ink over the course of the past three decades, it's never needed to remain there for long. In fact, it's continued to grow its top and bottom lines despite increasingly expensive payouts.
CB Revenue (Quarterly) data by YCharts
Consumers and companies may not like the underlying ever-rising cost of insurance, but they still have to have it.
So, if Chubb's at no real long-term risk here, why avoid it? Because it's at near-term risk. Once the shock of the sheer scope of Helene's (and potentially Milton's) damage wears off, investors are almost certainly going to see this company shelling out some seriously big money to its clients. This may well jar them into panic-selling. While any such weakness is likely to be short-lived, there's no need to suffer it. Indeed, once it runs its course, Chubb stock could present investors with a buying opportunity.
Berkshire's current position in Chubb is a little over 27 million shares worth roughly $7.5 billion.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Walmart. The Motley Fool recommends Kroger and Nu Holdings. The Motley Fool has a disclosure policy.
