Look Inside Berkshire Hathaway’s Portfolio Before Its Annual Meeting

The Berkshire Hathaway BRK.A BRK.B faithful will descend on Omaha, Nebraska, this weekend for the Berkshire Hathaway 2024 annual meeting. Some will join in Berkshire’s “Invest in Yourself 5K.” Others will walk the showroom on Shareholder Shopping Day, sampling See’s Candies and buying fine jewelry from Borsheims.

The main event, however, happens on Saturday: That’s when investors have an opportunity to hear from Berkshire Hathaway chairman Warren Buffett about stocks, investing, the market, and Berkshire Hathaway’s businesses, among other topics. Investors can watch the meeting livestream on CNBC. Morningstar strategist and Berkshire Hathaway analyst Greggory Warren is attending the meeting in person and will share his key takeaways after the meeting ends.

In the meantime, we’re taking a deep dive into the stocks in Berkshire Hathaway’s portfolio. Which stocks in Berkshire’s portfolio look undervalued before the meeting? And what characteristics do these companies share that make them “Warren Buffett companies”?

The Berkshire Hathaway Portfolio: How Morningstar Rates the Stocks

Here are Morningstar’s ratings for each of the stocks in Berkshire’s portfolio as of Dec. 31, 2023, which appeared in the company’s most recent 13F filing. Stocks are ranked by portfolio weighting. Morningstar ratings are as of May 1, 2024.

Trends in Buffett’s Berkshire Portfolio

Notably, many of the stocks in Berkshire’s portfolio earn Morningstar Economic Moat Ratings of wide or narrow. That’s not surprising, given the firm’s longtime preference for quality companies. “Above all else, Buffett looks for companies with a durable competitive advantage, or economic moat,” reminds Morningstar portfolio strategist Amy Arnott. “Just as a circle of water or dry land protects a castle from intrusion, an economic moat protects a company from being encroached on by competitors.” Companies that earn wide economic moat ratings are those Morningstar expects to outearn their cost of capital for 20 years or more; those with narrow moats should effectively compete for a decade or longer.

Buffett also favors companies that are run by managers who act like owners. “Some of the qualities he looks for are integrity, financial discipline, dedication to quality, maintaining a tight focus on their circle of competence, and thinking independently instead of falling victim to the ‘institutional imperative,’ which involves resistance to change, making misguided acquisitions, catering to the business leader’s whims, and mindlessly imitating the strategy of other companies in their peer group,” explains Arnott. Not surprisingly, Berkshire’s portfolio is filled with companies led by management teams that Morningstar thinks have done a good job of allocating capital: Only one company in the portfolio, Paramount Global PARA, earns a Poor Morningstar Capital Allocation Rating.

Lastly, the Morningstar Rating for stocks reveals that very few stocks in Berkshire Hathaway’s portfolio today look undervalued; stocks that earn 4- and 5-star ratings are undervalued according to our metrics. The undervalued stocks in Berkshire’s portfolio today are:

1. Kraft Heinz KHC
2. Citigroup C
3. VeriSign VRSN
4. Charter Communications CHTR
5. Paramount Global PARA
6. Sirius XM Holdings SIRI
7. Diageo PLC DEO
8. Jefferies Financial Group JEF

What Are Morningstar’s Ratings About?

Buffett and Munger heavily influenced how we evaluate stocks at Morningstar.

Morningstar evaluates stocks as companies first. Like Buffett and Munger, we believe stocks represent ownership in a business. And as a result, we emphasize company fundamentals when evaluating stocks.

Morningstar thinks economic moats are the bedrock of stock investing. We believe that firms possessing competitive advantages have a better chance of increasing intrinsic value over time.

Morningstar focuses on long-term intrinsic value, not short-term earnings. What matters is how much cash a company can generate for its owners in the future. Therefore, we value companies using a discounted cash flow analysis.

Morningstar’s rating for stocks embeds a margin of safety. Future cash flows are, by their nature, uncertain. Our rating for stocks takes that uncertainty into account.