It never hurts to be aware of which stocks Warren Buffett’s Berkshire Hathaway (BRK.B) is accumulating.
The Oracle of Omaha’s company bought four U.S. stocks in the first quarter: Apple (AAPL), Bank of America (BAC), Capital One Financial (COF), and Occidental Petroleum (OXY).
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Morningstar analysts think two of them are undervalued, one is overvalued and one is fairly valued. That’s based on the analysts’ fair value estimates.
Apple
Morningstar analyst Abhinav Davuluri assigns the company a wide moat (durable competitive advantage). He puts fair value for the stock at $150. It recently traded at $172.35.
“Apple's fiscal second-quarter results surpassed our estimates, thanks to outperformance in iPhone and services revenue,” he wrote in a commentary.
Still, “we remain cautious about the next several quarters for the firm, as macroeconomic headwinds persist, though we concede that Apple will fare better than many of its smartphone peers.”
Davuluri remains bullish on the company long-term. “We see no other technology titan with comparable expertise across consumer hardware, software, services, and chip design,” he said.
Bank of America
Morningstar analyst Eric Compton gives the company a wide moat. He puts fair value for the stock at $37. It recently traded at $28.90.
“Bank of America reported decent first-quarter results, showing that the bank’s deposit base and funding costs are tracking roughly as would have been expected, even before the Silicon Valley Bank implosion,” he wrote.
Bank of America’s earnings “support our thesis that [it] would be fine amid the recent turmoil in the regional banking landscape.”
But, amid Morningstar’s expectation of rate cuts ahead, “we expect to decrease our fair value estimate for Bank of America by a low- to mid-single-digit percentage,” Compton said.
Capital One
Morningstar analyst Michael Miller assigns the company a narrow moat. He puts fair value for the stock at $140. It recently traded at $103.
“Capital One reported weaker-than-expected first-quarter results, as higher-than-anticipated credit provisioning and net-interest margin contraction compressed the bank's bottom line,” he wrote. But, “our thesis behind Capital One has not fundamentally changed as a result.”
The bank “maintains a more limited branch network than its traditional banking peers, using its online and mobile channels to acquire customers and service its accounts,” Miller said.
“The focus on online bank accounts has allowed the company to establish a national presence broader than what its narrow branch network would traditionally allow.”
Occidental
Morningstar analyst Dave Meats gives the company no moat. He puts fair value for the stock at $56. It recently traded at $60.10
“Occidental enjoyed very strong operational results in the first quarter, with production 2% above the high end of prior guidance,” he wrote. To be sure, “the underlying outperformance wasn't as impressive as the headline makes it sound.”
But the results led Meats to boost his fair value estimate from $53. “The increase reflects stronger-than-expected oil and gas volumes and resilient markets for polyvinyl chloride and caustic soda, which benefit Oxy's chemical segment,” he said.
“These benefits offset the impact of near-term commodity prices, which have declined” recently.
