As the end of the first quarter approaches, a handful of Warren Buffett (Trades, Portfolio) stocks are trading near their 52-week lows.
While the market continues to contend with rising inflation and interest rate hikes, several financial services stocks in the guru’s Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial) equity portfolio have dived following the collapse of SVB Financial Group’s (SIVB, Financial) Silicon Valley Bank and Signature Bank (SBNY, Financial) last week.
In contrast, after returning -18.11% in 2022, the S&P 500 Index has gained around 2.5% so far this year.
The billionaire investor seeks a margin of safety between a company’s share price and its intrinsic value. Additionally, he advocates for buying “wonderful” companies at “fair” prices instead of fair companies at wonderful prices. Buffett also tends to favor high-quality companies that he understands and have strong moats.
While the guru, whom many regard as one of the greatest investors of all time, modestly reduced a number of his financial holdings during the fourth quarter, they still have the second-largest representation in his equity portfolio with a weight of 24.65%.
The fourth-quarter 13F filing showed his equity portfolio consisted of 50 stocks as of the three months ended Dec. 31, which was valued at $299.01 billion. Buffett’s holdings have posted mixed performances so far in 2023, with 10 of the top 20 positions declining.
As of March 15, Buffett’s financial stocks that have collapsed to near their lowest prices in a year are Bank of America Corp. (BAC, Financial), U.S. Bancorp (USB, Financial) and Ally Financial Inc. (ALLY, Financial).
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Bank of America
Bank of America’s (BAC, Financial) shares have tumbled nearly 35% over the past year. The stock is currently 1.14% above its yearly low of $27.68.
The Oracle of Omaha owns 1.01 million shares of the company, which represent 11.19% of his equity portfolio. It is also his second-largest holding.
The Charlotte, North Carolina-based bank has a $224.94 billion market cap; its shares were trading around $28.12 on Wednesday with a price-earnings ratio of 8.82, a price-book ratio of 0.92 and a price-sales ratio of 2.42.
The GF Value Line suggests the stock is modestly undervalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 81 out of 100, the GF Score indicates the company has good outperformance potential. While it received high ratings for growth, GF Value and momentum, the financial strength and profitability ranks were more moderate.
Of the gurus invested in the stock, Buffett has the largest stake with 12.63% of its outstanding shares. Dodge & Cox, Ken Fisher (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio) and Li Lu (Trades, Portfolio), among many others, also have positions in Bank of America.
U.S. Bancorp’s (USB, Financial) stock has retreated more than 30% over the past year. Shares are currently trading 2.46% above the annual low of $35.70.
Buffett holds 6.67 million shares currently, which occupy 0.10% of the equity portfolio.
The bank holding company headquartered in Minneapolis has a market cap of $55.50 billion; its shares were trading around $36.20 on Wednesday with a price-earnings ratio of 9.77, a price-book ratio of 1.26 and a price-sales ratio of 2.23.
According to the GF Value Line, the stock is significantly undervalued currently.
The GF Score of 77, however, implies the company is likely to have average performance going forward on the back of high ratings for GF Value and momentum. The profitability and growth ranks are more moderate, while financial strength is low.
With a 1.03% stake, Chris Davis (Trades, Portfolio) is the company’s largest guru shareholder. Other notable guru investors include First Eagle Investment (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Mairs and Power (Trades, Portfolio), Hotchkis & Wiley and Jim Simons (Trades, Portfolio)’ Renaissance Technologies.
Shares of Ally Financial (ALLY, Financial) have fallen approximately 47.01% over the past year. The stock is currently 1.97% above its annual low of $21.58.
The guru owns 29.8 million shares of the company, accounting for 0.28% of his equity portfolio.
The Detroit-based bank holding company, which offers traditional banking services along with auto financing and corporate lending, has a $6.91 billion market cap; its shares were trading around $22.86 on Wednesday with a price-earnings ratio of 4.62, a price-book ratio of 0.65 and a price-sales ratio of 0.84.
Based on the GF Value Line, the stock appears to be significantly undervalued currently.
Driven by high growth and GF Value ranks, the GF Score of 77 indicates the company is likely to have average performance going forward. Ally also has moderate profitability and momentum ratings, while its financial strength was low.
Buffett is Ally Financial’s largest guru shareholder with a 9.96% stake. Bill Nygren (Trades, Portfolio), Howard Marks (Trades, Portfolio), Simons’ firm and Louis Moore Bacon (Trades, Portfolio) also have significant holdings.
Additional potential opportunities
Other stocks in Buffett’s portfolio that were trading near their 52-week lows as of Wednesday were Liberty SiriusXM Group (LSXMA, Financial) (LSXMK, Financial) and Johnson & Johnson (JNJ, Financial).