#Morningstar #WarrenBuffett #Aon
These holdings in Berkshire Hathaway look overvalued to us.
Timestamps
0:00 Introduction
0:51 Proctor & Gamble
1:34 Aon
2:13 Marsh & McLennan
Transcript
Susan Dziubinski: Warren Buffett made headlines in February when investors learned what Berkshire Hathaway BRK.B bought and sold the prior quarter. Notably, Buffett and his team sliced Berkshire’s positions in Taiwan Semiconductor Manufacturing TSM, U.S. Bancorp USB, and Bank of New York Mellon BK while increasing their stakes in Apple AAPL, Occidental Petroleum OXY, and Paramount Global PARA.
Today, we’re looking at three stocks to avoid in Berkshire Hathaway’s recent portfolio. Now, these aren’t bad companies. In fact, quite the opposite: All three of these companies have carved out what Buffett would call economic moats, and those moats are stable. However, we don’t think these companies are trading at an attractive margin of safety, which is another key pillar of Buffett’s approach to investing. In other words, the stocks of these three companies don’t look undervalued to us today. That’s why we think they’re Warren Buffett stocks to avoid, at least for now.
The first stock on our list is Procter & Gamble. In many ways, P&G is a classic wide-moat Warren Buffett kind of company. One of the world’s largest consumer product manufacturers, P&G’s leading brands include Tide laundry detergent, Charmin toilet paper, Pantene shampoo, and Pampers diapers. In fact more than 20 of its brands generate more than $1 billion each in annual global sales. The company generates reliable cash flows, boasts a sound balance sheet with low leverage, and considers bolstering shareholder return a key capital allocation priority. That being said, we think Procter & Gamble stock is worth $126 per share, and the stock is trading above that.
The next stock is Aon. Aon is a leading global provider of insurance and reinsurance brokerage solutions, and is therefore a good fit with Berkshire’s insurance interests. The company put up some solid growth numbers for the recent quarter as it enjoyed tailwinds from a harder insurance pricing environment, economic uncertainty, and the positive impact of higher interest rates on fiduciary income. We think Aon has carved out a narrow economic moat and possesses a solid balance sheet, and the company is run by a strong CEO in Greg Case. However, we think Aon stock is a bit overvalued today: We assign shares a $261 fair value estimate.
The final stock on our list of Warren Buffett stocks to avoid is Marsh & McLennan. Like Aon, Marsh & McLennan is in the insurance brokerage business, and it also enjoyed relatively strong underlying growth last quarter. Here, too, we think the market is overly focused on recent performance for Marsh & McLennan, which was helped by the same tailwinds, including a harder insurance pricing market and economic uncertainty. The company earns a narrow economic moat rating, and we think management has done a good job of improving profitability. We think shares are worth $137 apiece, and they trade well above that.
Learn more about these stocks.
Procter & Gamble [ Ссылка ]
Aon [ Ссылка ]
Marsh & McLennan [ Ссылка ]
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