Warren Buffett’s 10 Stock Picks with Huge Upside Potential
In this article, we're going to take a look at Warren Buffett's 10 stock picks with huge upside potential. You can skip ahead and follow this link to read about Warren Buffett's 5 Stock Picks with Huge Upside Potential.
Warren Buffett is one of the most famous and well-followed investors on the Street due to his acumen and ability to pick companies that generate solid long-term returns. Spending his entire career in investing, most of which as chairman and CEO of Berkshire Hathaway Inc (NYSE:BRK.B), Buffett is estimated to have generated returns of over 20% per year on average, beating the S&P 500, which averaged around half of these figures.
Given Buffett's fame, Berkshire Hathaway's quarterly 13F filings are analyzed carefully in order to identify companies that the "Oracle of Omaha" can be followed into. Berkshire Hathaway usually keeps a concentrated portfolio with top five largest holding accounting for 73% of the total portfolio value. Berkshire's largest investment is represented by Apple Inc (NASDAQ:AAPL), in which Berkshire owns 915.56 million shares worth $156.75 billion, which was equal to around 50% of the total equity portfolio value at the end of September.
In order to identify Warren Buffett's 10 stock picks with huge upside potential, we assessed the consensus target price for all 45 of Berkshire Hathaway Inc (NYSE:BRK.B)'s holdings and then compared it with the current stock price to assess the upside potential. Looking at the consensus price target set by analysts can be a useful metric to assess a stock's potential, even though in the past Warren Buffett himself admitted that he didn't look at analyst reports. During the 2003 Berkshire Hathaway annual meeting Buffett said:
"It’s far overrated — we never look at any analyst reports."
Buffett's partner, late Charlie Munger, who has passed away recently, added later in the conversation:
"What’s interesting is that at least 90 percent of the professional investment management operations don’t think the way we do at all."
Nevertheless, coincidentally or not, most of stocks in Berkshire Hathaway Inc (NYSE:BRK.B)'s equity portfolio have a positive upside potential when compared to the consensus price target set by analysts.
Our Methodology
Once we identified the upside or downside potential of Berkshire Hathaway's equity holdings, we sorted them based on the percentage upside to find the stock picks with huge upside potential. The companies were sorted based on the size of Berkshire Hathaway Inc (NYSE:BRK.B)'s position in them.
Without any further ado, let's jump into Warren Buffett's 10 stock picks with huge upside potential.
10. Diageo plc (NYSE:DEO)
Berkshire Hathaway Holding: $33.98 million
Upside Potential: 16%
In Diageo plc (NYSE:DEO), Berkshire Hathaway owns 227,750 shares. The UK-headquartered multinational alcoholic beverage company has been in Warren Buffett's equity portfolio since the first quarter of 2023. Diageo plc (NYSE:DEO)'s shares have a consensus price target of $166.37. In a recent update, Diageo plc (NYSE:DEO) said that it expects slower growth due to a weaker outlook in Latin America and Caribbean segment, which accounts for 11% of Diageo's sales. The sales for the LAC segment are expected to grow by more than 20% on the year in the first half of 2024.
At the end of September, there were 30 funds in our database bullish on Diageo plc (NYSE:DEO), up by five on the quarter.
9. Louisiana-Pacific Corp (NYSE:LPX)
Berkshire Hathaway Holding: $389.37 million
Upside Potential: 14.10%
In its latest 13F filing, Berkshire Hathaway disclosed ownership if 7.04 million shares of Louisiana-Pacific Corp (NYSE:LPX). Overall, there were 38 funds holding $847.91 million worth of Louisiana-Pacific Corp (NYSE:LPX) at the end of the third quarter. Louisiana-Pacific Corp (NYSE:LPX) is a manufacturer of building materials, which is one of the largest producers of Oriented Strand Board (OSB) panels. In its latest quarterly report, the company posted EPS of $1.62 and revenue of $728 million, beating the consensus estimates by $0.09 and $3.59 million, respectively. Analysts currently have a consensus price target of $72 on Louisiana-Pacific Corp (NYSE:LPX) stock, which represents a consensus of 14.10%.
8. T-Mobile Us Inc (NASDAQ:TMUS)
Berkshire Hathaway Holding: $734.14 million
Upside Potential: 19%
Next on our list of Warren Buffett's 10 stock picks with high upside potential is T-Mobile Us Inc (NASDAQ:TMUS). Berkshire Hathaway has been holding shares of the telecom company since the third quarter of 2020, during which the stock has appreciated by more than 85%. At the end of September, Berkshire held 5.24 million shares of the company. However, T-Mobile Us Inc (NASDAQ:TMUS) might have more room to run, as analysts predict a price target of $181. T-Mobile Us Inc (NASDAQ:TMUS) also pays a dividend to its shareholders, with latest payout amounting to $0.65 per share payable on December 15. During the latest earnings call, T-Mobile Us Inc (NASDAQ:TMUS) CEO Mike Sievert pointed out the company's success in 5G coverage, with the company achieving its 2023 goal to supply 300 million people with dedicated mid-band 5G. "We started the 5G era two years ahead of the competition and today we remain two or more years ahead. And I predict that two years from now, we still will be," Sievert added. During the third quarter, the number of funds from our database bullish on T-Mobile US Inc (NASDAQ:TMUS) declined by seven to 79, while the aggregate value of their holdings fell to $4.89 billion from $5.81 billion.
7. Amazon.com Inc (NASDAQ:AMZN)
Berkshire Hathaway Holding: $1.27 billion
Upside Potential: 17%
Amazon.com Inc (NASDAQ:AMZN) is one of Berkshire Hathaway's longer-term holdings, with the fund having been invested in the tech behemoth since 2019. During the third quarter, Warren Buffett's fund sold 551,000 shares of Amazon, bringing its position to 10 million shares. Overall, there were 286 hedge funds long Amazon.com Inc (NASDAQ:AMZN) at the end of September, up from 278 funds a quarter earlier. On December 1, Oppenheimer raised its price target on the stock to $200 from $170 and reiterated the 'Outperform' rating. In his research note, analyst Jason Helfstein highlighted Amazon's eCommerce margins, and the strong performance of the Amazon Web Services segment, among other things. With the latest increase, Amazon.com, Inc (NASDAQ:AMZN) boasts a consensus price target of $170 per share.
6. Charter Communications Inc (NASDAQ:CHTR)
Berkshire Hathaway Holding: $1.68 billion
Upside Potential: 25%
Then there's Charter Communications Inc (NASDAQ:CHTR), which sports a consensus price target of $501 per share. Warren Buffett's has been bullish on Charter Communications Inc (NASDAQ:CHTR) since 2014, seeing the stock gain over 200% since then, although at the peak in 2021, the return amounted to more than 800%. At the end of September, Berkshire held 3.83 million shares of Charter Communications Inc (NASDAQ:CHTR). The company currently serves more than 32 million customers across 41 states, providing cable and broadband connectivity. Recently, Charter Communications Inc (NASDAQ:CHTR) has announced that it would invest more than $1.3 billion in Texas to provide higher internet speeds and expand in rural regions in the state. At the end of September, there were 73 funds long Charter Communications Inc (NASDAQ:CHTR) holding $6.24 billion worth of stock, up from 67 funds and $4.97 billion, respectively at the end of June.
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Disclosure: None. Warren Buffett's 10 Stock Picks with Huge Upside Potential was originally published on Insider Monkey.