Legendary investor Warren Buffett may be well-known for practicing Ben Graham-style value investing but not all of Berkshire Hathaway’s (NYSE:BRK-A, NYSE:BRK-B) equity portfolio is invested in undervalued Warren Buffett stocks.
With the Oracle of Omaha pivoting towards owning wonderful businesses at fair prices, many top Buffett holdings are arguably trading at fair prices. In some cases, maybe even at inflated prices.
However, plenty of names in the Buffett portfolio meet the criteria for being value or even deep-value stocks. Some are large, well-known components of the portfolio. Others are obscure names that have nonetheless delivered strong returns.
So, among the undervalued Warren Buffett stocks, which are the top ones to buy this month? Consider the following seven. Each one trades at a low valuation, has the Buffett seal of approval and has the potential to generate strong returns for your portfolio.
BYD (BYDDY)
“Value stock” may not be the best descriptor for BYD (OTCMKTS:BYDDY). “Growth at an extremely reasonable price” may be more accurate. Shares in the China-based electric vehicle and battery company trade at what is a low valuation for an EV stock.
BYDDF stock currently trades for 20 times forward earnings. That’s considerably less than Tesla’s (NASDAQ:TSLA) forward valuation of nearly 70 times earnings. Not only that, BYD has been beating Tesla in both vehicle deliveries and its ability to maintain margins despite the “price war” in the Chinese EV market.
Although Buffett got into BYD early and has been trimming Berkshire’s stake over the past year, now may be an opportune time to buy. As EV demand headwinds ease and BYD gears up for further international expansion, big gains may be in the cards for shares.
Citigroup (C)
Citigroup (NYSE:C), which Buffett made a $3 billion bet on in 2022, is one of the undervalued Warren Buffett stocks. That’s not simply because shares of the money center bank trade at a low price-to-earnings (P/E) ratio. In fact, some would argue that Citi, at 10.7 times forward earnings, trades at a fair valuation.
After all, many similar names to C stock trade at similar valuations. However, other factors point to shares being a deep value play. For instance, Citigroup trades at around a 37% discount compared to its book value. In addition, a potential catalyst could provide a dramatic boost to shares.
As Seeking Alpha commentator IP Banking Research argued last month, Citigroup’s turnaround efforts may soon result in the bank reporting much stronger returns on tangible equity. Per the commentator, that may result in C surging from the $60s to well above $100 per share.
HP (HPQ)
Trading for only 8.1 times forward earnings, HP (NYSE:HPQ) is clearly another of the undervalued stocks in the Berkshire Hathaway equity portfolio. However, “value trap” may be the best description to slap on this position.
Since Berkshire bought HPQ stock two years ago, shares in the PC and printer company have delivered a middling price performance. Buffett has trimmed the size of this position considerably. At one point, Berkshire held over 100 million shares, but now its stake consists of 22.8 million shares worth approximately $687 million.
Value trap status notwithstanding, there now may be a reason for the legendary investor to maintain the rest of his position. David Einhorn’s Greenlight Capital has taken a position in HPQ. Einhorn has also been pointing out HP’s potential to profit from the generative AI trend. The emergence of a new bull case could help drive renewed bullishness for the stock.
Kraft Heinz (KHC)
Trading for only 11.7 times forward earnings, Kraft Heinz (NASDAQ:KHC) is clearly another of the undervalued Warren Buffett stocks. The food products company trades at a discount to comparable names, most of which sport mid-teens forward earnings multiples.
Berkshire’s KHC stock position stems from the holding company’s co-purchase of H.J. Heinz with 3G Capital in 2013. Two years later, Heinz merged with Kraft, and Berkshire rolled over its Heinz investment into a large minority stake in KHC. That position has been a poor performer. Buffett himself even conceded that it was a bad deal.
However, it may be a potential buy for new investors. Besides sporting a low multiple, KHC also has a 4.47% forward dividend yield. Kraft Heinz has also been squeezed by inflation. If inflation finally begins to ease, it could spark a rebound for the stock.
Marubeni (MARUY)
In recent years, Warren Buffett has been betting big on Japan. He’s been doing this by building positions in several of Japan’s general trading companies. These have included not only familiar names like Mitsui & Co. (OTCMKTS:MITSY), but lesser-known general trading companies like Marubeni (OTCMKTS:MARUY).
Berkshire is sitting on big gains from these general trading investments. However, while some of them have become far pricier since the emergence of Buffett as an investor, MARUY stock remains inexpensive, even after strong results and the “Buffett lift.” Those factors sent it from under $100 to nearly $200 per share since late 2022.
Trading for only 10.4 times earnings, even as issues like a depreciating yen are affecting its foreign diversification efforts for now, consider it a buy. As InvestorPlace’s Rich Duprey recently pointed out, the shareholder-friendly management of firms like Marubeni may make MARUY a solid long-term investment opportunity.
Sirius XM Holdings (SIRI)
Sirius XM Holdings (NASDAQ: SIRI) is not only one of the undervalued Warren Buffett stocks but a potential event-driven opportunity. SIRI trades at a low 10 times forward earnings.
Concerns about the company’s prospects in light of audio streaming “disruptors” play a role. However, another factor has been the heavy shorting of SIRI stock. As TheStreet’s Bernard Zambonin discussed back in February, that is due to arbitrageurs shorting SIRI, and going long on Sirius XM’s pending merger partner, The Liberty SiriusXM Group (NASDAQ:LSXMA).
Once this merger is complete, the trade will be unwound. This may drive a sharp rebound for SIRI shares. In the long term, if Sirius XM can show that companies like Spotify (NYSE:SPOT) will not disrupt it out of business, it will help get shares back on an upward trajectory.
Sumitomo (SSUMY)
Sumitomo (OTCMKTS:SSUMY) is another of the Japanese general trading companies that Berkshire Hathaway has invested billions into. Like MARUY, SSUMY is cheap at 13 times earnings. However, what may be really appealing about Sumitomo right now is that Buffett is no longer the high-profile American investor betting big on the stock.
Activist investor Paul Singer’s Elliott Management has disclosed a stake in Sumitomo. While currently a very small position, worth around $64 million, Elliott may be planning to launch an activist campaign, similar to the one Elliott engaged in with Dai Nippon Printing (OTCMKTS:DNPLY) last year.
As some may recall, Elliott made rapid headway in pushing Dai Nippon to make shareholder-friendly moves. While it’s not certain a similar scenario will play out here, that factor may make SSUMY one of the undervalued Buffett Japan general trading stocks worth buying this month.
On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.