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4 Warren Buffett Stocks to Buy

These undervalued stocks are among the holdings in Berkshire Hathaway today.

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Berkshire Hathaway (BRK.A) (BRK.B) released its first-quarter 2022 13-F this week, which means it's time to scour Berkshire's latest portfolio for undervalued Warren Buffett stock picks.

The first quarter was a tough one for investors, but, not surprisingly, a busy one for Berkshire's investment team, which practiced what Warren Buffett has preached: "Be fearful when others are greedy, and greedy when others are fearful." Berkshire initiated new positions in the stocks of Citigroup (C), Ally Financial (ALLY), Occidental Petroleum (OXY), HP (HPQ), Markel (MKL), McKesson (MCK), Celanese (CE), and Paramount Global (PARA) and added to its stakes in Apple (AAPL), Chevron (CVX), and General Motors (GM), among others. Of note among the stocks sold during the first quarter, the team entirely cleared out its positions in AbbVie (ABBV) and Bristol-Myers Squibb (BMY)—and perhaps most striking, sold its longtime position in Wells Fargo (WFC). The team also slashed its stake in Verizon (VZ) to next to nothing.  

Most of the publicly traded stocks held in Berkshire Hathaway—both new purchases and existing positions—are fairly valued or overvalued, according to Morningstar's metrics.

4 Warren Buffett Stock Picks

These stocks are among Berkshire Hathaway's holdings according to its new 13-F and are undervalued as of mid-May:

  1. Citigroup (C)
  2. DaVita (DVA)
  3. Moody's (MCO)
  4. Paramount (PARA)

Here's a little bit about why we like each of these stocks at these prices, along with some key Morningstar metrics. All data is as of May 16, 2022.

Citigroup

  • Morningstar Rating: ★★★★★
  • Morningstar Economic Moat Rating: None
  • Moat Trend: Stable
  • Morningstar Capital Allocation Rating: Standard
  • Industry: Banks–Diversified

One Warren Buffett stock pick purchased during the first quarter this year, Citigroup, is a work in progress: The bank is in the midst of selling off multiple consumer units and is refocusing on its core international corporate banking unit and its North American consumer and global wealth businesses. "At the end of this process, we think the bank will be easier to understand, structurally more focused, and will hopefully have a more predictable and stable return profile," says Morningstar equity strategist Eric Compton. The bank's complex story has weighed on its stock price: We think Citigroup stock is worth $78, and it's trading in 5-star range as of this writing, suggesting that it's significantly undervalued.

Read more: "Why Citigroup's Stock Is a Top Pick"

DaVita

  • Morningstar Rating: ★★★★
  • Morningstar Economic Moat Rating: Narrow
  • Moat Trend: Stable
  • Morningstar Capital Allocation Rating: Standard
  • Industry: Medical Care Facilities

DaVita is a mid-cap stock that doesn't consume a large spot in Berkshire Hathaway's portfolio. However, Berkshire owns 38% of DaVita's stock. DaVita is the largest provider of dialysis services in the United States. With its large network, reputation for quality, and extensive physician relationships, the company has carved out a narrow Morningstar Economic Moat Rating, says Morningstar senior analyst Julie Utterback. Though the company reported weaker first-quarter results than the market expected owing to increased cost pressures and the surge in the omicron coronavirus variant, management maintained its guidance for the full year. We assign DaVita stock a $116 fair value estimate.

Moody's

  • Morningstar Rating: ★★★★
  • Morningstar Economic Moat Rating: Wide
  • Moat Trend: Stable
  • Morningstar Capital Allocation Rating: Exemplary
  • Industry: Financial Data and Stock Exchanges

Macroeconomic volatility and rising interest rates are weighing on the issuance outlook for this leading provider of credit ratings on fixed-income securities. We nevertheless think that Moody's wide economic moat is stable, thanks to the company's strong competitive position and solid operating margin, says Morningstar analyst Rajiv Bhatia. We also think that Moody's stock—of which Berkshire Hathaway owns more than 13%—is undervalued. We assign Moody's stock a $350 fair value estimate.

Paramount

  • Morningstar Rating: ★★★★★
  • Morningstar Economic Moat Rating: Narrow
  • Moat Trend: Negative
  • Morningstar Capital Allocation Rating: Standard
  • Industry: Entertainment

Like Citigroup, Paramount was a Warren Buffett stock pick purchased during the first quarter of 2022. The company got off to a solid start in 2022 with impressive growth in Paramount+, and its direct-to-consumer expansion offset weak results in its television and studio businesses. We think Paramount has carved out a narrow economic moat, thanks to its worldwide portfolio of broadcast and cable networks, production studios, and content library, says Morningstar senior analyst Neil Macker. We think Paramount stock is worth $58 per share today. Even after enjoying a pop in price after news broke about Berkshire's purchase, the stock still looks undervalued.

Read more: Is Now the Time to Buy Paramount Global Stock?

More About Warren Buffett Stock Picks

Buffett has said that he doesn't consider himself to be a stock-picker; instead, he's a company picker. That comment pretty much encapsulates how Buffett thinks about stocks: They're parts of businesses. Learn more about how the Oracle of Omaha chooses companies to buy in "How to Invest Like Warren Buffett." 

Susan Dziubinski does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.