Buffett’s secret stock? WarrenAI thinks it’s found the answer

Investing.com -- Warren Buffett’s Berkshire Hathaway (NYSE:BRKa) is set to file its latest 13F with the SEC after the close of trading today. With it, Buffett is expected to reveal a new mystery stock position he has been building a multi-billion-dollar stake in.

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.”

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.

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."

“InvestingPro members get up to 500 monthly credits to ask WarrenAI anything about the markets. They also get access to our AI-picked stock list that’s beating the market in August—including two winners up over 60% MTD.

Not a member yet? Then here’s your chance to subscribe for less than $9/month in our exclusive summer sale— for a limited time only.

App users can subscribe here. Web users can subscribe here.

Here’s what WarrenAI 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."

BA: is this perennial leader facing new challenges?

With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Sure, there are always opportunities in the stock market – but finding them feels more difficult now than a year ago. Unsure where to invest next? One of the best ways to discover new high-potential opportunities is to look at the top performing portfolios this year. ProPicks AI offers 6 model portfolios from Investing.com which identify the best stocks for investors to buy right now. For example, ProPicks AI found 9 overlooked stocks that jumped over 25% this year alone. The new stocks that made the monthly cut could yield enormous returns in the coming years. Is BA one of them?

Unlock ProPicks AI to find out