Buffett's secret stock? WarrenAI thinks it's found the answer
In last quarter's 13F, Berkshire disclosed: 'Confidential Treatment Requested. (The Manager has omitted from this public Form 13F one or more holding(s) for which it is requesting confidential treatment from the U.S. Securities and Exchange Commission pursuant to section 13(f) of the Exchange Act and rule 24b-2 thereunder).'
This confidential treatment allows Berkshire to build the stake without publicly disclosing it, which would impact the price of the security.
So what stock did Buffett buy?
Astute Buffett-watchers note that the cost-basis for Berkshire's equity investments in the 'Commercial, industrial and other' have been growing without any corresponding disclosure in the 13F. Market speculators see this as the likely sector he is building a stake in.
Large mega-cap names in this sector that Berkshire doesn't currently own include:
GE Aerospace (NYSE:GE), RTX Corp (NYSE:RTX), Lockheed Martin (NYSE:LMT), Caterpillar (NYSE:CAT), Boeing Co (NYSE:BA), Honeywell (NASDAQ:HON), GE Vernova (NYSE:GEV), and Deere & Company (NYSE:DE).
What does WarrenAI think?
We asked Investing.com's AI stock research assistant, WarrenAI, which of the above stocks fits Berkshire's investment style the best. Here's what it said:
"Caterpillar stands out with a 16.4x P/E, robust 55.4% ROE, and a 5.5% free cash flow yield - the closest fit to classic Warren Buffett/Berkshire Hathaway style among your list. Translation: durable profitability, proven capital allocation, and shareholder-friendly policies, all at a valuation that doesn't scream 'bubble.'
Deere was another stock WarrenAI liked from the above list: Here's what is said on Deere: "Cheaper on P/E (13.5x), fantastic 31.8% ROE, but facing revenue contraction (-15.8% in FY2024), which could give Buffett pause for now."
Here's what it said about the other stocks:
GE: Impressive turnaround, but valuation (30.5x P/E) is rich for Buffett's taste.
RTX/LMT: Defense sector's stability is appealing, but high leverage (RTX: 71.9% D/E, LMT: 338.2% D/E) and premium price tags are drawbacks.
BA: Red-ink everywhere—negative earnings, negative equity, negative FCF. Berkshire avoids turnarounds this messy.
GE Vernova: Exciting growth, but an eye-watering 71.7x P/E and negative shareholder yield.
HON: Missing key profitability and valuation data.
'Buffett would likely put Caterpillar at the top of this list, with Deere a close second if revenues stabilize," according to WarrenAI. "Both offer the kind of moat, cash generation, and management discipline that have filled Berkshire's portfolio for decades."
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