In this piece, we will take a look at the 12 cheapest stocks in Warren Buffett's portfolio for 2024. If you want to see more stocks in this selection, you can look at the 5 Cheapest Stocks in Warren Buffett's Portfolio for 2024.

Warren Buffett is one of the most successful money managers on Wall Street. Backed by a highly experienced investment team that included Charlie Munger, Buffett succeeded in returning nearly 20% in annualized returns, double the S&P 500 returns, since the mid-1960s. Berkshire Hathaway has always been his investment vehicle for pursuing hi-low risk, high-value opportunities in the broader stock market.

The "oracle of Omaha," as he is commonly known, Buffett, has relied on an investment strategy that focuses on highly undervalued stocks in various sectors. Worth over $100 billion, he invests in businesses that he believes are backed by solid business models. He also leverages their dividends and earnings to increase his investments gradually.

Value investing is the strategy the legendary investor has perfected for discovering stocks trading below their intrinsic value. Buffett is fond of carrying out in-depth discounted cash flow analysis when determining whether stocks are trading below their intrinsic value.

The analysis entails closely monitoring a company's financial statements to project revenues, costs, and net income. The figures are then used to determine cash flows, which are discounted to their present value and divided with outstanding shares to provide an intrinsic value per share.

A stock is deemed undervalued if the intrinsic value per share is below the current market share price. Given the success of the discounted cash flow analysis over the years, it could help in selecting the cheapest stocks in Warren Buffett's portfolio heading into 2024.

Nevertheless, Buffett does not entirely rely on discounted cash flow analysis to determine the cheapest stocks worth investing in. The investor is also known to pay close attention to price-to-earnings (P/E) multiples as they provide valuable insights on how the stock trades relative to its future earnings, expectations, and overall market.

Stocks trading with a price-to-earnings multiple of less than 20 have always proved ideal investment plays. Additionally, a stock trading with a P/E that is less than the market average is often deemed to be trading at a discount, significantly if its revenues and earnings grow at an impressive rate. A lower P/E ratio tends to be favourable as it means one will pays less for each dollar earnings the company generates.

In addition to profiting from share price appreciation by investing in highly undervalued stocks, Buffett is also a lover of dividends. The hedge fund manager is fond of investing in stocks with an impressive track record in returning value to shareholders. Coca-Cola and American Express are some of the oldest holdings in Berkshire Hathaway that Buffett has always stuck to, owing to their enticing dividend yields.

Unlike most investors who tend to spend their dividends, Buffett reinvests dividends as one of the ways of increasing the value of his investment over time. The strategy is often deemed a passive investment whereby Buffett focuses on a stock with an impressive track record in paying dividends and then holding for years to generate passive income. The love for compounding is one of the factors that has propelled Buffett into a billionaire investor.

Heading into 2024, valuation levels in the equity markets appear stretched. The tech-heavy Nasdaq index is up by about 55% for the year; the S&P 500 has gained about 21%. The impressive gains come against the optimism that the US Federal Reserve has peaked on its monetary policy tightening spree.

In the first three quarters of the year, Buffett sold $28.7 billion worth of stocks and bought less than $5 billion. The sell-off spree affirms caution in taking up new positions, according to economists, and should ring alarm bells. According to Steve H. Hanke, a professor of applied economics at Johns Hopkins University, the sell-off and a move to accumulate $157 billion in cash signals Buffett's concerns about valuation levels, and therefore, he refrained from putting his massive cash hoard into use.

Expectations that the Fed will start cutting interest rates as early as next year have been the catalyst fuelling the buying spree in the market. Likewise, stocks have rallied, and valuations have gotten out of hand.

Nevertheless, the cheapest stocks in Warren Buffett's Portfolio for 2024 could provide a way out of the valuation dilemma. The stocks are spread across various sectors, ideal for any investor looking to diversify their investment portfolio. In addition, most stocks are trading below their intrinsic value and offer a way of generating passive income through dividends.

Our Methodology

Buffett is one of the best in picking highly undervalued stocks likely to explode and generate long-term value on share price gains and dividends. After examining Berkshire Hathaway 13F fillings, we have identified the cheapest stocks in Warren Buffett's portfolio for 2024. We focused on stocks that appear to be trading below their intrinsic value based on their P/E ratio and ranked them accordingly. Hedge funds' top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.

Cheapest Stocks in Warren Buffett's Portfolio for 2024

12. American Express Company (NYSE:AXP)

Berkshire Hathaway's Latest Investment: $22.62 Billion

Number of Hedge Fund Holders: 74

P/E Ratio: 17.60

American Express Company (NYSE:AXP) offers payment and financing products and services, including network and expense management solutions.

American Express Company (NYSE:AXP) remains one of the cheapest stocks in Warren Buffett's portfolio for 2024 while trading at a price-to-earnings multiple of 17.60. It also offers a yield of 1.28%. American Express Company (NYSE:AXP) was the third largest holding in Berkshire Hathaway's portfolio in Q3 2023, with holdings worth $22.62 billion.

At the close of Q3 2023, American Express Company (NYSE:AXP) attracted investment from 74 hedge funds monitored by Insider Monkey, amounting to a cumulative value exceeding $25.6 billion. This marked an increase from the preceding quarter, where 73 hedge funds were invested in the company. Notably, Berkshire Hathaway held the most significant stake in Q3.

11. DaVita Inc. (NYSE:DVA)

Berkshire Hathaway's Latest Investment: $3.41 Billion

Number of Hedge Fund Holders: 32

P/E Ratio: 16.22

DaVita Inc. (NYSE:DVA) is one of Buffett's top stock picks in the healthcare sector, specializing in offering kidney dialysis services. DaVita Inc. (NYSE:DVA) operates kidney dialysis centres and provides related lab services. It also offers outpatient hospital inpatient and home-based services.

DaVita Inc. (NYSE:DVA) remains one of the cheapest stocks in Warren Buffett's portfolio for 2024 despite gaining 40% year to date and trading at a price-to-earnings multiple of 16.22. 

In the third quarter database from Insider Monkey, 32 hedge funds expressed a bullish stance on DaVita Inc. (NYSE:DVA), marking an increase from 30 funds in the preceding quarter. Warren Buffett’s Berkshire Hathaway was the most significant shareholder of DaVita Inc. (NYSE:DVA) in Q3 2023. The hedge fund held stakes worth $3.41 billion in the healthcare company. 

10. Kraft Heinz Co (NASDAQ:KHC)

Berkshire Hathaway's Latest Investment: $10.95 Billion

Number of Hedge Fund Holders: 40

P/E Ratio: 15.18

The Kraft Heinz Company (NASDAQ:KHC) is a consumer defensive investment player in Berkshire Hathaway's portfolio. The company produces and sells food and beverage products. The Kraft Heinz Company (NASDAQ:KHC)’s product line includes condiments and sauces, cheese and dairy products, meals, meat, and refreshment beverages.

A 10% year-to-date pullback has seen The Kraft Heinz Company (NASDAQ:KHC)'s valuation drop significantly, making it one of the cheapest stocks in Warren Buffett's portfolio for 2024. The Kraft Heinz Company (NASDAQ:KHC) currently trades at a price-to-earnings multiple of 15.18 while offering a 4.35% yield. Berkshire Hathaway held stakes worth $10.95 billion as of the end of Q3 2023.

During the third quarter of the present year, 40 hedge funds out of the 910 examined by Insider Monkey maintained holdings in The Kraft Heinz Company (NASDAQ:KHC). 

9. Occidental Petroleum Corporation (NYSE:OXY)

Berkshire Hathaway's Latest Investment: $14.54 Billion

Number of Hedge Fund Holders: 75

P/E Ratio: 13.07

Houston, Texas-based Occidental Petroleum Corporation (NYSE:OXY) is an energy investment play in Berkshire Hathaway's portfolio and one of the cheapest stocks in Warren Buffett's portfolio for 2024. Occidental Petroleum Corporation (NYSE:OXY) explores and develops oil and gas properties in the US.

While Occidental Petroleum Corporation (NYSE:OXY) has underperformed, going down by 5% year to date, it remains one of Buffett's cheap investment plays in the energy sector. The stock trades at a P/E of 13.07 and offers a dividend yield of 1.20%. Occidental Petroleum Corporation (NYSE:OXY) is one of Berkshire Hathaway's biggest holdings, with stakes worth $14.54 billion.

At the end of the third quarter in 2023, 75 hedge funds declared their holdings in Occidental Petroleum Corporation (NYSE:OXY), marking an increase from 73 in the preceding quarter. Warren Buffett's Berkshire Hathaway held the most significant stake in Occidental Petroleum Corporation (NYSE:OXY), valued at $14.5 billion.

8. Charter Communications, Inc (NASDAQ:CHTR)

Berkshire Hathaway's Latest Investment: $1.68 Billion

Number of Hedge Fund Holders: 73

P/E Ratio: 12.81

Charter Communications, Inc. (NASDAQ:CHTR) is a communication services company that offers broadband connectivity and cable services to residential and commercial customers. Charter Communications, Inc. (NASDAQ:CHTR) offers subscription-based internet video, mobile, and voice services.

Even though Charter Communications, Inc. (NASDAQ:CHTR) has gained 15% year to date, it remains one of the cheapest stocks in Warren Buffett's portfolio for 2024, going by its P/E of 12.81. Berkshire Hathaway held stakes worth $1.68 billion as of the end of Q3 2023.

In Q3 2023, Insider Monkey's database, comprising 910 hedge funds, revealed that 73 funds held stakes in Charter Communications, Inc. (NASDAQ:CHTR), an increase from 67 in the previous quarter.

7. Chevron Corp (NYSE:CVX)

Berkshire Hathaway's Latest Investment: $18.59 Billion

Number of Hedge Fund Holders: 72

P/E Ratio: 11.12

San Ramon, California-based Chevron Corp (NYSE:CVX), is one of the largest oil companies in the world. The company explores, develops, produces, and transports crude oil and natural gas. While being one of the biggest investments in Berkshire Hathaway's portfolio, Chevron Corp (NYSE:CVX) is also one of the cheapest stocks in Warren Buffett's portfolio for 2024.

Chevron Corp (NYSE:CVX) trades at a price-to-earnings multiple of 11.12 while offering a yield of 4.03%. Berkshire Hathaway slashed its holdings in Chevron Corp (NYSE:CVX) by 11% in Q3 2023 to $18.59 billion.

Among the 910 hedge funds monitored by Insider Monkey, 72 held shares of Chevron Corp (NYSE:CVX). The leading shareholder of Chevron Corp (NYSE:CVX) was Berkshire Hathaway, managed by Warren Buffett, with a holding valued at $18.6 billion.

6. D.R. Horton, Inc. (NYSE:DHI)

Berkshire Hathaway's Latest Investment: $641.57 Million

Number of Hedge Fund Holders: 64

P/E Ratio: 11

D.R. Horton, Inc. (NYSE:DHI) has always been Buffett's holding for gaining exposure in the real estate sector. The homebuilding company engages in the acquisition and development of land. D.R. Horton, Inc. (NYSE:DHI) also constructs and sells residential homes in 118 markets.

While D.R. Horton, Inc. (NYSE:DHI) has gained about 69% year to date, it still trades with a P/E of 11, affirming its status as one of the cheapest stocks in Warren Buffett's portfolio for 2024. Additionally, D.R. Horton, Inc. (NYSE:DHI) offers a yield of 0.79%. Buffett started investing in the company in Q2 2023 and held stakes worth $641.57 million as of the end of Q3 2023.

Based on Insider Monkey's third-quarter dataset, there were 64 hedge funds expressing a positive outlook on D.R. Horton, Inc. (NYSE:DHI), marking an increase from 54 funds in the previous quarter. Rajiv Jain’s GQG Partners holds a noteworthy position as a major stakeholder in D.R. Horton, Inc. (NYSE:DHI), possessing 3.8 million shares valued at $412 million. 

Baron Real Estate Fund shared its perspective on D.R. Horton, Inc. (NYSE:DHI) in its second-quarter 2023 investor letter. Here is what it said:

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Disclosure: None. 12 Cheapest Stocks in Warren Buffett's Portfolio for 2024 is originally published on Insider Monkey.