Three stocks that Buffett bought and that Morningstar liked
You will rarely go wrong when investing with Warren Buffett.
For example, over the past 10 years, his Berkshire Hathaway stock (BRK.B) – Get a free report returns 13.6% annually, compared to 13.3% for S&P 500.
So Morningstar has compiled a list of three stocks that Berkshire bought in the third quarter that Morningstar analysts consider significantly undervalued.
Taiwan Semiconductor Manufacturing
(TSM) – Get a free report
Morningstar analyst Phelix Lee assigns the company a broad moat (competitive advantage) and sets a fair value for the stock at $133. It was recently trading at $82.
Taiwan Semi is the world’s largest manufacturer of specialized contract chips.
“The company has long benefited from the global transition from semiconductor companies from integrated equipment manufacturers to wireless device manufacturers. [fabrication-less] designers,” wrote Lee.
To be sure, “the rise of mismatched semiconductor companies has sustained the growth of foundries, thereby encouraging increased competition,” he said. “However, most of these newer competitors are limited to the low-end manufacturing sector.”
Lee cited two long-term growth factors for TSMC. “First, the consolidation of semiconductor companies is expected to create demand for integrated systems made with the most advanced nodes,” he said.
“Second, the organic evolution of artificial intelligence, the Internet of Things, and high-performance computing applications could span decades.”
Morningstar analyst Neil Macker gives the company a narrow moat and sets a fair value for the stock at $45. It was recently trading at $20.
“Formed through the merger of Viacom and CBS, the rebranded Paramount derives a lasting competitive advantage from the CBS broadcast network, a valuable cable network portfolio with shipping carriers, worldwide manufacturing, and a deeper content library than is available today.” .
“Given our overarching premise that the value of high-quality content will continue to grow, production studios are one of the reunited company’s most compelling assets.”
Meanwhile, “we think revenue growth will be driven by streaming.” turnover from both Paramount+ and Pluto TV,” Macker said.
“The two services build on the company’s strong content creation capabilities, in-depth programming libraries, and secular trends toward more streaming adoption. As a result, Paramount+ can still establish itself in this fiercely competitive market.”
RH (Hardware Recovery)
(RH) – Get a free report
Morningstar analyst Jaime Katz designates the company as moatless and sets a fair value for the stock at $383. It was recently trading at $278.
“RH has gained share in the fragmented home furnishing market in recent years, curating differentiated offerings from specialized global artisans,” she wrote in a commentary.
“The company has broadened its brand awareness by expanding into underserved categories including modern, teen and hospitality, where few peers scale.” That helps to catch market share from store competitors, Katz said.
Furthermore, “RH’s e-commerce business boosts brand awareness, with increased marketability of SKUs [stock keeping units]supported by the launch of the World of RH platform,” she said.
“Demand for RH remains tied to housing and stock market conditions, which have recently impacted consumers’ willingness to spend on luxury home furniture,” she said. . That “supports our moatless thesis.”