The 3 Warren Buffett Stocks to Buy After Berkshire Hathaway’s New 13F Filing

Plus, what we think of Berkshire’s new positions and why Buffett might be raising so much cash.

Susan Dziubinski 15 November, 2024 | 3:52PM
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A photograph featuring Warren Buffett speaking at an event.

Warren Buffett’s Berkshire Hathaway BRK.A BRK.B has released its 13F for the third quarter of 2024. The report indicates that Berkshire was a big seller of stocks last quarter―most notably, Bank of America BAC and Apple AAPL. In fact, Berkshire closed the third quarter with a record $325.2 billion in cash and cash equivalents, up from $276.9 billion at the end of June 2024.

Here’s a look at the stocks that the team bought and sold during the third quarter, a few undervalued Warren Buffett stocks to buy from Berkshire Hathaway’s portfolio today, and why Berkshire might’ve raised so much cash last quarter.

What Stocks Berkshire Hathaway Bought Last Quarter

Stock

New Position or Add to Existing?

Morningstar Rating for Stocks (as of Nov. 13, 2024)

Domino’s Pizza DPZ

New position

3 stars

Heico HEI

Add to existing

1 star

Pool POOL

New position

3 stars (quantitative rating)

Warren Buffett and his team initiated positions in two new stocks last quarter: Domino’s Pizza DPZ and Pool POOL.

Domino’s Pizza is in some ways classic Buffett: It’s a wide-moat company with great capital allocators at the helm. According to Morningstar senior analyst Sean Dunlop, Domino’s boasts “economic returns supported by comparable sales growth in excess of peers, commanding franchise level profitability, and impressive international portability, underpinned by its ‘fortressing’ strategy and commitment to a lean, value-driven menu.” Morningstar forecasts average adjusted returns on invested capital (including goodwill) of 50% through 2033, which exceeds our weighted average cost of capital estimate of 6.9%, he adds. That being said, we think shares are worth $415 and appear fairly valued.

Pool is a midsize distributor of swimming pool supplies and related products. Morningstar analysts do not actively cover the stock, but it looks about fairly valued through the lens of our quantitative rating system.

Berkshire also added to its existing position in Heico HEI last quarter. Heico is an aerospace and defense supplier focusing on niche replacement parts for commercial aircraft and components for defense products. Morningstar assigns Heico a narrow economic moat rating thanks in part to switching costs stemming from the importance of its products operating correctly and their placement on long-cycle products, explains Morningstar analyst Nicolas Owens. We think the stock looks overvalued, as it trades 58% above our $173 fair value estimate.

Also last quarter, Liberty Media’s tracking stocks of Sirius XM Holdings merged with Sirius XM SIRI. Notably, Berkshire purchased additional shares of Sirius XM in October, which isn’t included in this 13F covering purchases and sales through Sept. 30. As of today, Berkshire owns approximately one third of Sirius XM’s outstanding stock.

Buffett hasn’t commented on the Sirius XM stake publicly as of this writing―so it remains a head-scratcher investment in the eyes of many Berkshire watchers. Sirius XM stock is down about 50% this year, but even so, Morningstar thinks the stock of this no-moat company is fairly valued. “In our view, Sirius XM is fighting an uphill battle as the technology that once gave it a unique offering and an advantage over competition is no longer a necessity to offer a subscription service in vehicles,” says Morningstar senior analyst Matthew Dolgin. “We now see Sirius XM’s primary competition coming from streaming music providers that rely on internet connectivity rather than from terrestrial radio stations, and we believe those services provide the better value proposition for most consumers.”

What Stocks Berkshire Hathaway Sold Last Quarter

Stock

Scaled Back or Sold Entirely?

Morningstar Rating for Stocks (as of Nov. 13, 2024)

Apple AAPL

Scaled back

2 stars

Bank of America BAC

Scaled back

2 stars

Capital One COF

Scaled back

3 stars

Charter Communications CHTR

Scaled back

4 stars

Floor & Decor FND

Sold entirely

3 stars (quantitative rating)

Nu Holdings NU

Scaled back

3 stars (quantitative rating)

Ulta Beauty ULTA

Scaled back

3 stars

Berkshire continued to peel back its position in Apple during the third quarter. “Apple was accounting for 40%-50% of Berkshire’s reported stock holdings before the end of 2023—so anything that lessens that concentrated of a position was not only good from a diversification perspective but also removes a decision for Greg Abel (and Ted Weschler and Todd Combs) down the road,” comments Morningstar strategist Greggory Warren. Another possible reason for reducing Berkshire’s exposure to Apple: China. “There’s also that longer-term concern about China becoming more belligerent regionally, which would lead to Russian-like sanctions, especially if China was bold enough to invade Taiwan—which we think was the main reason Buffett bailed on Berkshire’s Taiwan Semiconductor TSM stake shortly after establishing it in the quarters preceding Russia’s invasion of Ukraine,” adds Morningstar’s Warren.

Berkshire also scaled back in several other names during the third quarter, including Capital One COF, Charter Communications CHTR, Nu Holdings NU, Ulta Beauty ULTA (in which it had just initiated a position during the second quarter), and longtime holding Bank of America. Of the latter, says Morningstar’s Warren, “It looks to be more profit taking similar to what we’ve seen with the Apple shares.”

The firm also completely sold out of its position in Floor & Decor FND.