Warren Buffett has obliterated the market’s returns since becoming CEO of Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B) in the mid-1960s. While the S&P 500 has a cumulative return of about 33,000% since then, or a compound annual growth rate rate of 10.2%, the Oracle of Omaha generated 4.9 million percent cumulative returns, or nearly double the index’s CAGR at 19.8%.

Of course, it’s not been a straight shot higher for Buffett and some years other money managers and even the index beats him. But there’s no one that can consistently outperform him over time. It’s why investors flock to the Berkshire annual meeting every year and dissect his every trade. 

One of the reasons Buffett is so successful is that he’s a patient man. He is willing to wait to find the right stock at the right price before pulling the trigger. As he once noted, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

Getting the combination just right is key to generating outsized returns. As we head into the back end of the year, these two Warren Buffett stocks are among the cheapest in Berkshire Hathaway’s portfolio. Let’s see if these wonderful companies are offering investors a fair price for their stock.

Key Points About This Article:

• Warren Buffett is the most successful investor of our lifetime because he is willing to wait for his pitch and buy a great company at a good price.
• The two companies below have very inexpensive valuations and strong fundamentals investors may want to take a closer look at.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

DaVita (DVA)

Dialysis center operator DaVita (NYSE:DVA) is enjoying strong growth and its stock has been on a roll. Shares are up 43% in 2024 and have more than doubled off their lows reached last October. Yet DaVita stock is still a bargain.

It is the second-largest dialysis center in the U.S. behind Fresenius Medical Care (NYSE:FMS) and generates 89% of its revenue and all its operating profits from providing dialysis treatment to around 265,100 end-stage renal disease (ESRD) patients. 

According to the National Institutes of Health, over 800,000 people have ESRD and 69% of them are receiving dialysis while the remainder have a kidney transplant. And depending upon who is counting, ESRD is expected to grow anywhere from 8% to 10% annually over the next decade. Yet because obesity is one of the leading causes of ESRD, many feel the popularity of weight-loss drugs like Wegovy and Zepbound will cause ESRD to expand at far lower rates. DaVita, though, believes it will have a neutral impact on its patient population over the next decade.

Despite the gains made, DaVita stock is still attractively priced. Shares trade at just 13 times estimated earnings and less than 10 times free cash flow, a deeply discounted value. With Wall Street forecasting the dialysis center leader to grow earnings at a 16% CAGR over the next five years, DVA stock is trading below the expected growth rate. It makes DaVita a cheap Buffett stock that can still deliver significant value for investors. 

Charter Communications (CHTR)

Wireless and cable operator Charter Communications (NASDAQ:CHTR) has not had anywhere as good of a run as DaVita. Its stock is down 15% year-to-date and sits nearly 30% below its 52-week high. 

Charter’s performance has been weighed down by the ending of the Affordable Connectivity Program (ACP) in June (it stopped accepting customers in February). The federal program offered a $30 subsidy to make broadband more affordable for households and some 16% of Charter’s customers, or some 5 million households, benefited from the program.

In the second quarter, Charter lost 149,000 net broadband customers with the ACP’s shutdown causing 100,000 of them. Charter ended the quarter with 30.4 million customers. Notably, although Comcast (NASDAQ:CMCSA) didn’t make use of the ACP to the extent Charter did, it still lost 120,000 net broadband customers in the period.

Importantly, Charter says it was able to retain most ACP customers so far, but the real test will come after the third quarter when they can see if they will be able to afford to pay for the service. Still, the wireless and cable stock produced solid results in the second quarter. Adjusted EBITDA grew 2.6% to $5.7 billion on a 37% increase in residential mobile service revenue. Free cash flow doubled in the period to $1.3 billion.

Trading at less than 10 times earnings estimates, a fraction of its sales, and 13x FCF, Charter Communications stock is a cheap Warren Buffett stock to buy.

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