4 Stocks Warren Buffett Didn't Sell in Q4: Morningstar

What You Need to Know

An SEC filing from Berkshire Hathaway revealed some stocks the company is hanging onto.
Morningstar analysts chose four stocks that are household names and should have a solid 2022.
Supply chain snags, chip shortages and labor issues are hurdles.

Warren Buffett hasn’t lost his investing mojo. Ahead of market drops in early 2022, Berkshire Hathaway was a net seller of equities in the fourth quarter of 2021, according to a filing with the Securities and Exchange Commission in mid-February.

Gregg Warren, Morningstar’s Berkshire stock specialist, found that the company offloaded positions in Sirius XM Holdings and Teva Pharmaceuticals and scaled back its positions in certain stocks such as Marsh & McLennan, Bristol Myers Squibb and AbbVie.

New positions included Nu Holdings and Activision Blizzard, which is being acquired by Microsoft, Warren noted.

But perhaps what’s key is what the Oracle of Omaha held on to. In reviewing the fourth-quarter 13-F filing, Morningstar did a deep dive into those stocks and what they believe is still undervalued. We’ve added the stocks’ year-to-date performance.

1. Kraft Heinz (KHC)

As of Feb. 16, Morningstar rated this stock four stars. One key reason, according to Morningstar’s Erin Lash, director of consumer sector equity research: “prioritizing investments for the long-term health of the business (in contrast to its mandate under the past regime to elevate margins at all costs).”

Lash also noted that despite supply chain issues, the stock price still improved and “we still think this no-moat name is a bargain, trading at a nearly 30% discount to our intrinsic valuation, while offering a 4% dividend yield.”

Year to date through Wednesday, the stock has risen 11%, versus the S&P 500, which is down just over 10% in the same time period.

2. Verizon Communications (VZ)

Although Morningstar believes wireless industry customer growth will slow in 2022, it does see Verizon as “modestly undervalued” after several strong quarters, according to Mike Hodel, director of communications services equity research.

The firm expects to post “at least 3% wireless service revenue growth in 2022 (9%-10% with Tracfone),” Hodel said, noting that Verizon’s confidence in growth “stems from growth in average revenue per account, which increased 2.6% year over year during the fourth quarter, driving wireless service revenue up 3.5%.”

Also a problem was the company’s dispute with the Federal Aviation Administration in putting 5G (C-band) networks around airports, but Hodel noted that “we expect the aviation industry will gradually gain comfort with C-bank use given the wide separation between these frequencies and those used for navigation.”

Year to date, Verizon’s stock price is up close to 2%.