Banking, finance, and taxes

Warren Buffett Has a Secret Stock He's Hiding - Here's 3 Stocks That Could Be It

Eric Bleeker

Published: March 12, 2024 9:53 am

Last Updated: March 12, 2024 9:54 am

Is there anything more intriguing than investing in a stock Warren Buffett has kept secret from the world?

Buffett’s Berkshire Hathaway (NYSE: BRK.B) continues to ask regulators not to disclose a holding that the Oracle of Omaha is accumulating in secret. Yet, even while asking regulators for secrecy, there are clues that have emerged as to which stock Buffett could be buying.

Let’s dive into the details and make a prediction about the stock Buffett’s loading up on in secret.

The Background on Buffett’s Portfolio

Every quarter Buffett’s Berkshire Hathaway must report its public company holdings. If we look at Berkshire’s most recently filings we find:

• The company has $342 billion in public company holdings at today’s prices
• These stocks have a median P/E of 20.9, which is below the S&P 500 average
• They also report an average dividend yield of 1.6%, which is significantly above market average
• Berkshire’s largest position is Apple (Nasdaq: AAPL) at $154 billion
• His second-largest position is a sharp drop off from Apple, it’s Bank of America at $36.7 billion
• The rest of Buffett’s top 10 is American Express, Coca-Cola, Chevron, Occidental Petroleum, Kraft Heinz, Moody’s, DaVita, and Citigroup

By the time we get outside Buffett’s top 10 holdings, his 11th largest holding (Kroger) is worth $2.8 billion.

Detail on Buffett’s Secret Stock

This makes Buffett’s secret stock even more intriguing because he could be building a position that’s a top-10 holding. While Buffett can ask regulators not to disclose this holding while building a stake in it, there are other regulatory requirements that Buffett can’t avoid.

For example, we can still see the cost basis of Berkshire Hathway’s stocks divided into industries. And the cost basis for Buffett’s banks and insurance holdings jumped by $2.4 billion in the fourth quarter. It also jumped by $1.2 billion in the third quarter.

This makes it highly likely Buffett’s new secret stock is in the financial sector.

Buffett’s Secret Stock Could Be Big News

So, we have Buffett building a position of a stock and asking for confidentiality from regulators. More importantly, he could be building this secret stock into a top-10 position in Berkshire’s portfolio.

This could be very important news because of Buffett’s history asking for confidentiality on stocks he’s building. In 2020 Buffett asked for confidentiality as he built a position on another stock, which later was found to be Chevron (NYSE: CVX).

Flash forward to today and Chevron is Berkshire Hathaway’s 5th largest position and the company owns $18.9 billion in the stock.

The reason that Buffett asks for confidentiality is simple: if news got out which stock he’s buying the shares may take off, giving Berkshire a significantly less attractive price. So, you can see why it would be valuable buying shares in the company of whatever Buffett’s secret stock is before the name is revealed in a future 13-F filing.

A Few Predictions on Buffett’s Secret Stock

I want to make clear: no one knows the identity of Buffett’s secret stock with certainty. There’s not enough information available to positively ID it. Yet, I will suggest a few names that are worthy of more research and fit the profile Buffett could be looking at.

1. Willis Towers Watson (Nasdaq: WTW): In 2020 Warren Buffett kept insurance broker Marsh & McLennan confidential before selling it in 2023. Buffett likes the dynamics of insurance brokers, but McLennan’s stock rose and may simply have reached too high a multiple for Buffett’s liking. Willis Tower Watson is another insurance broker that’s cheaper according to other metrics like P/B that may appeal to Buffett.
2. Morgan Stanley (NYSE: MS): Buffett’s second-largest position is Bank of America, and he also owns Citigroup, American Express, and Capital One. Morgan Stanley would give Buffett a position he could grow to a top-10 holding while being far below a 10% holder in its stock.
3. Blackrock (NYSE: BLK): This is another financial company that is large ($122 billion in market cap) and would allow Buffett to build a sizable position without becoming a 10% holder. Blackrock is richly valued (36X earnings) relative to many of Buffett’s holdings, but it also is an excellent business with an extremely wide moat.