Are you looking for some new holdings to round out your portfolio? Don't stress! Just borrow a few ideas pre-selected by Warren Buffett and/or his lieutenants by virtue of already being owned by Berkshire Hathaway. After all, Berkshire's market-beating performance speaks for itself.
Here's a closer look at three Berkshire holdings you may want to consider scooping up sooner rather than later. They've all been lagging a bit of late, but that could change soon.
1. Kraft Heinz
There's no denying Warren Buffett misread the upside and ease of merging then-separate Kraft and Heinz into The Kraft Heinz Company(NASDAQ: KHC) in 2015. The intended synergies and benefits of scale just never materialized. If anything, melding the two companies into one caused more problems than it solved. In 2019, Buffett finally conceded he "overpaid for Kraft." But the acknowledgment meant little to shareholders who watched their Kraft Heinz shares get halved during that four-year stretch. They've not really made any progress since then.
As the old adage goes, though, time heals all wounds.
Although it's taken far longer than anyone expected at the time, the merger of Kraft and Heinz is finally starting to help more than hurt. Under new leadership from CEO Carlos Abrams-Rivera, the combined companies are now able to meaningfully implement higher-level initiatives like innovation, cost-saving restructuring, and clever promotions. The company recently unveiled a Super Mario-themed macaroni and cheese, for example, leveraging Nintendo's beloved video game character.
As for cost-culling, Kraft Heinz says it's still on track to find the $2.5 billion worth of efficiencies it said it would a couple of years ago, starting with its supply chain.
So far, none of this progress seems to have caught investors' attention. The company's doing its part, with sales and earnings growth both in the cards for the foreseeable future. The market will see it eventually. In the meantime, today's newcomers will be stepping in while the forward-looking dividend yield stands at a healthy 4.9%.
2. Chubb
Of all the big names currently held by Berkshire Hathaway, Chubb(NYSE: CB) is arguably the least-touted one. Indeed, despite being Berkshire's 10th biggest holding (worth nearly $7 billion), many investors may not even realize Buffett's sitting on a 26-million-share stake in the insurer. That's largely because Chubb is a relatively boring company with a relatively boring stock.
Don't confuse boring with a lack of upside potential, however. Plenty of boring stocks dish out sizable gains. This is one that's done so in the past and could continue doing so in the future.
There's not much Chubb doesn't protect. It offers home, auto, and even travel or identity theft coverage to individuals, as well as whatever sort of insurance a business may need. The Switzerland-based company earned a little over $9 billion worth of net income in fiscal/calendar 2023, which was a fairly typical year.
As was already noted, the insurance business isn't an exciting one. It is a consistent and reliable one for the long haul, though, with one year's premiums largely based on the prior year's payouts. It's actually a rather predictable industry in a bigger-picture sense, with growth built into the underlying math of the financial protection the world needs.
CB Revenue (Quarterly) data by YCharts.
The upside of this business model to Buffett and any other Chubb shareholders is the resulting reliable cash flow that's ultimately turned into ever-growing dividends. To this end, Chubb has not only paid dividends like clockwork every quarter for years now, but it has upped its annual dividend payouts in each of the past 31 years. The current yield of 1.4% may not be thrilling, but the underlying payment is almost certain to continue growing going forward.
That being said, Chubb shares are especially attractive right now while they're valued at only around 12 times this year's expected earnings and nearly 11 times next year's projected per-share profits.
3. Kroger
Finally, add Kroger(NYSE: KR) to your list of Warren Buffett stocks to buy right now.
If you've been keeping tabs on Kroger of late, you likely already know its plan to acquire rival grocerAlbertsons is now running into more complex (but predictable) hurdles. Namely, despite Kroger's willingness to sell certain locations that would otherwise stifle competition, the Federal Trade Commission is aiming to outright prevent the merger from materializing. It remains to be seen just how open the FTC will be to additional accommodations, but it's not a stretch to suggest the regulator will seek to minimize the deal as much as possible.
That effort ultimately works against the stock, of course, which is a key reason Kroger shares peeled back from April's peak following the announcement that Kroger would be willing to pre-sell some of its stores.
Here's the thing: Given how much time, energy, and thought has already been put into the merger, as well as all of its obvious benefits, neither party is apt to walk away from these plans now. They'll simply continue to test solutions until the Federal Trade Commission is satisfied, or if push comes to shove, make their valid case in a court of law.
Investors seem to be picking up on this premise now, with Kroger shares perking up in response. There's much more upside left to tap, which will likely press the stock higher leading up to and then even following whatever acquisition is allowed to take shape.
Berkshire Hathaway is holding 50 million shares of Kroger stock collectively worth $2.7 billion, by the way. It's also a position the fund's been sitting on since 2019, collecting decent dividends the whole time.
Should you invest $1,000 in Kraft Heinz right now?
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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. The Motley Fool recommends Kraft Heinz, Kroger, and Nintendo. The Motley Fool has a disclosure policy.
