Warren Buffett bets on new stocks: which one is the biggest trump card?

21. 11. 2024 | Natalie Bezděková

Warren Buffett, one of the most prominent figures in the investment world, known for his long-term strategy and ability to identify undervalued opportunities, has added four new stocks to the Berkshire Hathaway portfolio.

The move comes at a time when Buffett was a net seller of shares for the eighth straight quarter in the third quarter of 2024. His decision to limit some positions, including further sales of Berkshire’s stake in Apple, suggests a cautious approach in an environment full of economic uncertainty. Still, he decided to invest some of the company’s massive cash reserves, which has attracted the attention of investors around the world.

Buffett’s new acquisitions

Buffett’s strategy in the third quarter included buying shares in four different companies, each of which presents a unique investment story:

Domino’s Pizza
Berkshire Hathaway bought 1.28 million shares of the well-known pizza franchise. At the end of the quarter, these shares were worth $549.4 million, making them the largest addition to the portfolio during the period. Domino’s Pizza is known for its global presence and growth potential in the fast food industry.

Pool Corporation
A company that specializes in the distribution of pool supplies has become another Berkshire Hathaway target. The firm acquired 404,000 shares of Pool Corporation stock valued at $152.3 million. The move indicates Buffett’s confidence in the steady demand for products in the recreational infrastructure sector.

Sirius XM
Berkshire’s stake in Sirius XM, a satellite radio company, increased by 6.99%. Part of this increase was due to the merger between Sirius XM and Liberty SiriusXM Holdings. But beyond that, Berkshire continued to buy more Sirius XM stock, signaling faith in the company’s ability to generate long-term value.

Heico Corporation
Berkshire increased its stake in this aerospace and electronics company by 0.52%. At the end of the quarter, the value of this investment was $214 million. Heico has a strong position in the aerospace industry and its stock has shown steady growth, although its valuation is relatively high.

Share performance

In terms of performance in 2024, Heico shares outperformed other newly purchased shares. Their price almost doubled, reflecting high investor confidence. Domino’s Pizza is in second place with a year-on-year growth of around 10%. Pool and Sirius XM saw declines – down 5% and 50%, respectively.

In terms of valuation, Sirius XM has the lowest forward price-to-earnings ratio, which is around 7. This means that the stock may be undervalued. Domino’s Pizza has a forward earnings multiple of 24, which is reasonable for a company with consistent growth. Pool Corporation shares are trading at about 30 times forward earnings. Heico is the most expensive in this regard with a multiple of over 60, well above Buffett’s usual standard.

Dividends and growth prospects

All four companies pay dividends, with Sirius XM having the highest prospective yield of 4.2%. Domino’s Pizza and Pool pay around 1.4% and 1.3%, respectively, while Heico has a very low yield of 0.08%. In terms of growth prospects, analysts expect Sirius XM to increase its earnings by an impressive 150.9% over the next year. Heico comes in second with an expected growth of 16.8%, while Pool and Domino’s Pizza have more modest earnings growth expectations of 9.3% and 5.6%, respectively.

Analyst views and recommendations

According to analysts, Sirius XM also has the greatest potential for share price growth over the next 12 months, with a price target suggesting growth of 11.6%. Domino’s Pizza lags just behind with an expected growth of 11.4%. Pool and Heico have lower growth potential – 6.4% and no growth, respectively – as Heico’s target price is lower than its current value.

Which stock is the most interesting?

Over the long term, Domino’s Pizza appears to be an attractive investment due to its steady growth and solid dividend. However, if you’re looking for a stock with the best risk/reward ratio among Buffett’s recent purchases, Sirius XM appears to be the most interesting choice. It offers a high dividend yield, an undervalued price, and significant earnings growth potential.

Buffett’s investments show that despite limited activity in the markets, it is still possible to find opportunities with high potential, whether they are stable growth stocks or undervalued titles with attractive dividends.

Photo source: www.pexels.com

 

Author of this article

Natalie Bezděková

I am a student of Master's degree in Political Science. I am interested in marketing, especially copywriting and social media. I also focus on political and social events at home and abroad and technological innovations. My free time is filled with sports, reading and a passion for travel.

WAS THIS ARTICLE HELPFUL?

Support us to keep up the good work and to provide you even better content. Your donations will be used to help students get access to quality content for free and pay our contributors’ salaries, who work hard to create this website content! Thank you for all your support!

Write a comment