Warren Buffett’s Berkshire Hathaway BRK.A has released its fourth-quarter 2023 13F. The report indicates that Berkshire wasn’t a big buyer of stocks last quarter. That’s not surprising, given that stocks skyrocketed during the period: The Morningstar US Market Index was up about 12% during the fourth quarter.

Here’s a look at some of the stocks that Warren Buffett and his team bought and sold during the fourth quarter, as well as several of the most undervalued Buffett stocks to buy in Berkshire Hathaway’s portfolio today.

Berkshire Hathaway’s fourth-quarter 13F didn’t indicate that Buffett added any new names to the publicly traded portfolio. According to the report, Berkshire simply added to existing positions in Chevron CVX, Occidental Petroleum OXY, and Sirius XM Holdings SIRI.

However, it’s what Berkshire Hathaway didn’t report that has the financial media abuzz.

Explains Morningstar strategist Greggory Warren:

“The SEC occasionally permits confidential treatment for new stock purchases by large portfolio managers, exempting them required disclosure in quarterly 13F filings when ‘such action is necessary or appropriate in the public interest and for the protection of investors or to maintain fair and orderly markets.’ Berkshire received an exemption last quarter (much as it has at different times in the past), as well as for the third quarter of 2023, and now its biggest stock purchase during the third and fourth quarters remains a mystery to investors.

Eventually, the company will disclose the stock (or stocks) that they have been buying.”
Notably, Berkshire trimmed its position in Apple AAPL during the quarter. But despite the haircut, Apple stock remains Berkshire’s top holding—by a landslide. Buffett and his team slashed their positions in HP HPQ and Paramount Global PARA. Berkshire entirely sold out of its positions in D.R. Horton DHI, Globe Life GL, Markel Group MKL, and StoneCo STNE.

4 Warren Buffett shares to buy now

Many of the publicly traded stocks held by Berkshire Hathaway are fairly valued or overvalued today, according to

Morningstar’s metrics. Here are some of the stocks among its holdings in the latest quarter that looked undervalued as of Feb. 13, 2024.

  1. Charter Communications CHTR
  2. Citigroup C
  3. Kraft Heinz KHC
  4. Kroger KR

Here’s a little bit about why we like each of these stocks at these prices, along with some key metrics for each. All data is as of Feb. 13.

Charter Communications

  • Morningstar Rating: 5 stars
  • Morningstar Economic Moat Rating: Narrow
  • Morningstar Capital Allocation Rating: Standard
  • Industry: Telecom Services

Berkshire Hathaway owns about 2.6% of Charter Communications’ stock. The company is the result of a 2016 merger of three cable companies: legacy Charter, Time Warner Cable, and Bright House Networks. We think the company has carved out a narrow economic moat, thanks to its efficient scale and cost advantage. Charter Communications stock currently trades a whopping 47% below our $550 fair value estimate.

Here’s what Morningstar director Mike Hodel had to say about the stock after the company’s fourth-quarter earnings release:

Ugly headline numbers marred Charter’s fourth-quarter results. While we don’t see much reason to change our long-term view of the firm, the next couple of years are shaping up to be more challenging than we had expected. We are trimming our fair value estimate to $550 from $580, but we believe the market has overreacted to current weakness.

Customer metrics were very weak, especially given Charter's emphasis on volumes over price. The firm lost 61,000 net broadband customers during the quarter, far worse than the 105,000 added a year ago and the first loss since the second quarter of 2022. Management didn’t flag any recent changes in the competitive environment.

Fixed-wireless customer gains and fixed-line results from AT&T and Verizon were generally consistent with recent performance. Charter also claims that it hasn’t seen an impact on broadband customer losses as Spectrum One bundle discounts expire. We agree with management that small changes in customer wins and losses get undue attention when net customer growth is near zero, but those changes haven’t gone in Charter’s favor recently.

Average revenue per residential broadband customer increased only 2.2% year over year, as Spectrum One bundle discounts are allocated between broadband and wireless revenue.

Total revenue per residential customer was roughly flat versus a year ago, with television losses offsetting wireless and broadband gains. Residential revenue was flat year over year and total revenue increased 0.3% on modest business services growth, largely offset by a sharp drop in political ad revenue.

Management provided capital spending expectations through 2027 to shed more light on the firm’s investment plans. Charter expects annual spending in 2024 and 2025 to be above $12 billion, about $1 billion more in total than we had forecast. The firm believes spending will drop sharply in 2027, excluding any additional subsidized project wins, to $8 billion, which we suspect is overly aggressive.

Mike Hodel, Morningstar director

Citigroup

  • Morningstar Rating: 4 stars
  • Morningstar Economic Moat Rating: None
  • Morningstar Capital Allocation Rating: Standard
  • Industry: Banks—Diversified

Citigroup isn’t Berkshire Hathaway’s favorite bank: That honor goes to Bank of America BAC, which is one of the top holdings in Berkshire’s publicly traded portfolio. But Citigroup stock is more attractive from a valuation perspective today, according to Morningstar. Citigroup stock currently trades 20% below our $66 fair value estimate.

Here’s what Morningstar analyst Suryansh Sharma has to say about the stock after the company’s fourth-quarter earnings release:

Citigroup posted a disappointing set of numbers in the fourth quarter with a loss of $1.8 billion, or $1.16 per share. The quarterly loss was primarily due to various nonrecurring charges, including $1.7 billion for an FDIC special assessment charge for uninsured deposits of certain failed banks during the banking turmoil, $0.8 billion for restructuring charges related to organizational simplification, $0.9 billion to account for the impact of Argentina currency devaluation, and $1.3 billion in transfer risk related to Russia and Argentina. Citi’s earnings per share is estimated to be $0.84 after excluding the nonrecurring charges.

While the quarterly results were lackluster, 2024 guidance was encouraging. Management guided for 2024 revenue of $80 billion to $81 billion, up 4% from the full-year 2023 level.

Management expects net interest income to be down modestly in 2024 due to lower interest rates. Management’s 2024 guidance for net interest income assumes mid-single-digit loan growth driven by the card business and modest deposit growth. The noninterest income implied from the company guidance points to strong results in Treasury and Trade Solutions and a rebound in the investment banking and wealth businesses.

The company has expectations for $53.5 billion to $53.8 billion in expenses for full-year 2024, down around 1% from $54.3 billion in 2023. Citi’s management has also set a medium-term expense target of $51 billion to $53 billion, which we think is ambitious but achievable. Citi announced a major 20,000 headcount reduction program to reach its medium-term expense reduction target. For context, this is approximately 10% of its 2023 workforce. Expense reduction will continue to be a key deliverable for management and is instrumental in achieving higher returns. Citi remains a complex turnaround story with substantial execution-related uncertainties. We do not plan to materially change our $66 fair value estimate as we incorporate fourth-quarter results.

Suryansh Sharma, Morningstar analyst

Kraft Heinz

  • Morningstar Rating: 5 stars
  • Morningstar Economic Moat Rating: None
  • Morningstar Capital Allocation Rating: Standard
  • Industry: Packaged Foods

Berkshire Hathaway owns more than 26% of Kraft Heinz’s stock. The packaged-foods manufacturer has revamped its road map and is now focused on consistently driving profitable growth. We think Kraft Heinz stock is worth $53 per share, and shares are trading at a 32% discount to that fair value today.

Here’s what Morningstar director Erin Lash thinks of Kraft Heinz’s fourth-quarter results:

The market soured on no-moat Kraft Heinz following mixed fourth-quarter marks, sending shares down by a mid-single-digit percentage. While its adjusted gross margin popped 260 basis points to 34.8%, organic sales slipped 0.7% on a 4.4% degradation in volume. This shortfall was particularly acute on its home turf (around three fourths of its total sales), where organic sales fell 3% on a 5.5% downdraft in volumes. Beyond a few one-time factors (related to trade timing and retail inventories, which compressed sales by 150 basis points), management was also forthright that consumers are struggling under the weight of higher interest rates and a reduction in SNAP benefits.

The combination of Kraft Heinz’s fiscal 2023 results, the outlook for fiscal 2024 (flat to 2% organic sales growth—which squares with our forecast—and a 1%-3% uptick in adjusted earnings per share, slightly outpacing our profit estimates), and time value should warrant a low-single-digit percentage bump to our $53 fair value estimate. With shares trading around a 30% discount to our valuation, while offering a 4% dividend yield, we think investors should stock up.

We surmise Kraft Heinz is working vigorously to thwart looming challenges. For one, it boosted spending on research and development—wedded in data and analytics—by 15% last year while raising marketing spending at a commensurate rate, which we applaud. The fruits of these efforts were realized in a stabilizing share position across a host of categories (qualitatively referenced) and 150 basis points of shelf space gains (including through club and dollar stores) over the past year. We don’t expect Kraft Heinz will back down from these pursuits; we think it will expend more than 6% of sales annually on its brands while investing around 3.5% of sales to enhance its capacity and digital competence. Further, we’re encouraged by management’s assertion that it doesn’t intend to squander resources on unprofitable promotions, which we see as judicious.

Erin Lash, Morningstar director

Kroger

  • Morningstar Rating: 4 stars
  • Morningstar Economic Moat Rating: Narrow
  • Morningstar Capital Allocation Rating: Exemplary
  • Industry: Grocery Stores

Berkshire Hathaway owns about 7% of Kroger’s outstanding shares. Kroger and rival Albertsons have announced merger plans, though regulatory hurdles persist. We think Kroger has carved out a narrow economic moat and is run by a management team that has done an exemplary job of allocating capital. Kroger stock trades 14% below our $53 fair value estimate.

Here’s Morningstar senior analyst Dan Wasiolek’s take on Kroger’s business strategy and outlook:

Of the traditional grocers, we believe Kroger’s scale, partnerships, private-label fare, and data capabilities uniquely position the company to defend its returns against competition that should intensify as Amazon, mass merchandisers, and hard discounters continue to price aggressively to boost volume. We contend that Kroger still benefits from enduring intangible assets and cost advantages, even if its acquisition of Albertsons is derailed by regulators.

Grocers use price as a primary lever to drive traffic, necessitating efficiency and cost leverage to deliver returns. We expect this environment to endure as the industry changes, with an omnichannel experience likely to prevail as customers use a combination of deliver-to-home, click-and-collect, and in-store shopping, particularly since most American consumers drive past grocers on their commutes and home delivery can be inconvenient for buyers with uncertain schedules (although the COVID-19 pandemic likely accelerated delivery adoption in the long term). In physical retail, we anticipate shoppers will choose sellers based on convenience, price, and breadth of assortment, demanding high value as well as a compelling store environment.

Kroger should be able to capitalize on the changing landscape. We maintain that its local market scale allows it to derive cost leverage that fuels competitive pricing and the investments needed to build on its presence in the emerging channels. Its progress should be accelerated by partnerships (with Ocado, Walgreens, Microsoft, and others) that we do not believe are available to smaller rivals because they cannot deliver the same value to counterparts.

Nearly all Kroger's transactions are derived from its loyalty database, providing consumer insights that should play a large role in its digital transformation, fueling promotional efforts and customer engagement while informing assortment and providing salable insights as nongrocery revenue streams. We expect data to play a key role in efforts to drive traffic, efficiency, and conversion that few can match.

Dan Wasiolek, Morningstar senior analyst

More about Warren Buffett share picks

Warren 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 he thinks about stocks: They’re parts of businesses.

For more on Buffett see our article on his most misunderstood quote and lessons from Charle Munger.