Warren Buffett is one of the most widely followed investment managers in the world. And there's good reason for that. His 60-year run at Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) has been nothing short of phenomenal. Investors who followed Buffett into the company have realized a compound average annual return of about 20% since Buffett took over the business in 1965. That's nearly twice the average annual return of the S&P 500.

But it appears that Buffett has struggled in recent quarters to find great ways to deploy Berkshire's growing cash reserves. His potential best opportunities are getting only a small amount of capital infusion, as it appears that he's determined that many of the best large-cap stocks are overvalued. As a result, Berkshire put only $3.2 billion of cash into equities in the first quarter, leaving about $347 billion in cash and Treasury bill investments.

Some of that $3.2 billion went into an undisclosed stock exempted from disclosure by the Securities and Exchange Commission. The rest, which appears to be about $1.8 billion, went into seven different stocks reported on Berkshire's quarterly 13F filing.

One of those stocks stands out as an incredible value for investors right now, and it could be worth adding to your portfolio.

Here are the seven stocks Buffett just bought

Buffett admits he would love to buy more stocks. "Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned," he wrote in his letter to shareholders in February. But for Buffett to buy shares in a company, they must be offered, and offered at good value.

Evidently he saw only a handful of stocks that looked like good values last quarter. Here are the seven Berkshire has disclosed so far:

1. Heico
2. Verisign
3. Sirius XM
4. Pool Corp.
5. Domino's Pizza
6. Constellation Brands (NYSE: STZ)
7. Occidental Petroleum

It's worth pointing out that all of these businesses are relatively small. Occidental Petroleum sports the largest market cap of the group at $42 billion. And Berkshire already owns nearly 27% of that company.

Buffett doesn't see a lot of opportunities for Berkshire to invest tens of billions in a great company trading at a fair value. With Buffett strategically selling off some holdings while Berkshire's subsidiaries generate considerable free cash flow, the cash is piling up.

Everyday investors can invest as much money as they want in any of the seven companies above. But some of them are arguably better values than others, especially considering price movements since Buffett's purchases, some of which date all the way back to early January. Of the seven, there's one that looks like a particularly good value right now.

Here's the best of the bunch

All seven companies are great businesses. Each has at least one source of competitive advantage, and they generally trade for good value relative to earnings. But if I had to choose one of Buffett's latest purchases to invest my own money in, it would be Constellation Brands.

Constellation Brands is the owner of top Mexican beer brands like Corona and Modelo. It absolutely dominates U.S. sales for Mexican lagers. It also owns several wine and spirits brands, although its portfolio got a little bit smaller when it divested its mainstream wine brands earlier this month. Constellation is refocusing its portfolio on high-end brands. The beer business is its most important, accounting for over 80% of sales and over 90% of operating income in fiscal 2025.

It has a stranglehold on the Mexican beer import category in the U.S. The company said it accounts for over 90% of spending in the segment. And it's seen strong growth in sales for both Modelo and its smaller Pacifico brands over the past year, despite secular headwinds against the overall beer category. Total alcohol consumption appears to be declining, especially among younger generations, and new entrants like hard seltzer and ready-to-drink cocktails continue to eat into beer's market share.

Those headwinds and a new tariff this year on Mexican imports into the United States have led many investors to sell the stock. A disappointing earnings report in January didn't help, either. The stock currently trades more than 20% below where it started the year.

But the outlook for the business is strong. Management expects sales growth in the low-single-digit range over the next three years as the wine and spirits business continues to drag down the beer business. Strategic divestments over time could refocus more of the business on higher-margin and growth opportunities. Overall, management also expects its operating margin to expand 1 to 2 percentage points from last year's levels by 2028.

The expected net result is $6 billion to $7 billion in free-cash-flow generation over the next three years, and management has earmarked about $4 billion of that for share repurchases. That would reduce its current share count by over 13% at its current price. Management forecasts it'll buy up about 9% of shares outstanding over the next three years, with expectations that the price of the stock will rise.

Given the resilience of Constellation's beer brands and management's focus on capital returns and high-margin opportunities, investors should see strong earnings growth after adjusting for divestments. Nonetheless, the stock trades for less than 14 times forward earnings estimates. That makes it worth considering as an addition to any value investor's portfolio right now.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Warren Buffett is one of the most widely respected investment managers in the world. His track record, dating all the way back to the 1950s, is hard to argue with. As the manager of Buffett Limited Partnership, he produced compound annual returns over 25% for investors. And since taking over Berkshire Hathaway in 1965, he's produced a compound annual return of 20% over the last 59-and-a-half years.

Despite Berkshire shares rising 25.5% in 2024, beating the S&P 500, the stock might have performed even better if Buffett made a few different investment decisions. Specifically, Buffett oversaw the sale of at least $134 billion worth of equities in 2024, and that's before the final tally for the fourth quarter (Q4) was known. Meanwhile, Buffett's stock purchases for the first nine months of the year came to a total of just $5.8 billion.

Many see Buffett's massive stock sales as a warning to investors that stocks are overpriced right now. But there's a clear reason why Buffett's stock sales have completely dwarfed his purchases recently. Buffett once again pointed to the area of the market where he feels there's great value with some of his most recent purchases. In particular, he bought shares in two companies — purchases that totalled about $200 million in late December and early January. Here's the real message investors should take away from Berkshire's 2024.

Buffett's most recent investments

Between December 17 and January 3, Buffett and his team of investment managers at Berkshire Hathaway made several investments. We know about them because the company had to file a disclosure with the Security and Exchange Commission (SEC) as a greater-than-10% shareholder. Here are the purchases and how much Berkshire paid:

• 8.9 million shares of Occidental Petroleum ($409 million).

• 5 million shares of Sirius XM ($107 million).
• 474 thousand shares of Verisign ($94 million).

Berkshire owns preferred shares of Occidental Petroleum with warrants to buy the common stock at $59.62. Occidental is slowly retiring those shares and warrants, so it's kind of a surprise Berkshire Hathaway isn't buying more shares at prices below that level.

The other two purchases, Sirius XM and Verisign, point to a much broader pattern of purchases for Berkshire Hathaway in 2024. Specifically, they're not particularly big companies. Sirius XM has a market cap of $7.5 billion as of this writing. Verisign's worth just over $20 billion. And that might be why Berkshire was only able to snatch up $200 million worth of the shares in the open market recently. The company might have wanted to buy more but couldn't.

It's worth pointing out Verisign's share price increased 5.3% over the course of Berkshire's purchases while the S&P 500 fell 2.2% during that period. The combination of Berkshire's buying volume propping up the price and its disclosure creating investor excitement around the name likely contributed to the considerable outperformance of the shares.

The big challenge facing Warren Buffett and Berkshire Hathaway

Earlier in the year, Buffett bought shares of Domino's Pizza ($15 billion market cap), Pool Corp ($13.5 billion), and Heico ($29 billion). Even Occidental only has a market cap of $47 billion.

The fact that Buffett sees more value in smaller companies' stocks presents a challenge for him and Berkshire Hathaway. If Buffett decides to sell Apple, he can easily liquidate $75 billion worth of the $3 trillion-plus company. He did just that in Q2 last year. But finding a suitable stock to reinvest that $75 billion is an impossible task.

Buffett warned investors of the situation at the start of the year in his letter to shareholders:

There remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others. Some we can value; some we can't. And, if we can, they have to be attractively priced.

At this point, the largest companies in the market aren't very attractive from a valuation standpoint. The "Magnificent Seven" are currently the seven largest companies by market cap. They have a combined forward price-to-earnings (PE) ratio of 29.8. The biggest banks in the world have seen their price-to-tangible book value climb significantly higher over the last 18 months, which led Buffett to start selling Berkshire's Bank of America stake. Buffett even stopped buying back Berkshire Hathaway shares in Q3, implying he sees his own company's stock as overvalued.

Smaller companies, on the other hand, can still present great value. Sirius XM, for example, trades for 7.4 times analysts' consensus estimate for 2025 earnings. Verisign and Domino's trade for about 24 times forward earnings. And if you look at even smaller companies, many trade for even better valuations. The S&P 400 mid-cap index has an aggregate forward PE of 16.3 as of this writing. The small-cap S&P 600 trades for 15.8 times forward earnings.

The problem for Berkshire Hathaway is that it can only buy so much of a small- or mid-cap company without moving the market. An individual investor, on the other hand, can probably buy as much of these companies' stocks as they want.

The clear message investors should take away

Warren Buffett's massive stock sales and minimal purchases in 2024 aren't a warning to investors to get out of stocks as quickly as they can. It's much more subtle. Investors just need to be more diligent about valuing the stocks they buy, and more and more of the good values in the market are smaller companies.

That's not too surprising. Stock market concentration reached unprecedented levels at the end of 2024, as the biggest companies got bigger, leaving the rest of the market behind. But as earnings multiples for large-cap stocks have expanded over the last few years, investors haven't extended the same multiple expansion to smaller businesses — even "small businesses" worth $25 billion.

There are a lot of opportunities in small- and mid-cap stocks. Buffett seems to favour value stocks in particular, which both the S&P 400 and S&P 600 favour due to profitability requirements for inclusion in the indices. If you don't have the inclination to research individual stocks, you might consider overweighting index funds tracking the S&P indices in your portfolio.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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There's arguably not a money manager on Wall Street that has the ability to command the attention of professional and everyday investors quite like Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) CEO Warren Buffett. In his six decades as CEO of Berkshire, he's overseen a cumulative return in his company's Class A shares of more than 5,460,000%, as of the closing bell on January 2.

Mirroring the Oracle of Omaha's trading activity, which can be done using Berkshire Hathaway's quarterly filed Form 13Fs, has been a seemingly surefire investment strategy for decades.

Even though Buffett has been a net seller of stocks to the tune of $166 billion over an eight-quarter stretch (October 1, 2022 through to September 30, 2024), he's still been buying shares of a select group of time-tested businesses.

As we turn the page to 2025, Buffett is betting big on the following five stocks.

Sirius XM Holdings

One of the most interesting stocks that Berkshire's chief can't stop buying of late is satellite-radio operator Sirius XM Holdings (NASDAQ: SIRI).

Sirius XM completed a merger with Liberty Media's Sirius XM tracking stock following the close of trading on September 9, and also effected a 1-for-10 reverse stock split. Whereas most companies conducting reverse splits do so to avoid delisting from a major stock exchange, Sirius XM was in no danger of delisting. Rather, its split seems solely focused on getting its stock back on the radar of institutional investors who won't purchase stocks trading below $5 per share.

The beauty of Sirius XM's operating model is twofold. First, it's a legal monopoly. There are no other licensed satellite-radio operators, which, more often than not, affords the company strong subscription pricing power.

The other attractive aspect of Sirius XM's operating model is that its primarily subscription driven. Whereas terrestrial and online radio companies rely almost exclusively on advertising revenue to keep the proverbial hamster on its wheel, Sirius XM generated close to 77% of its net sales from subscriptions and roughly 20% from advertising through the first nine months of 2024. The advantage of Sirius XM's approach is that its cash flow remains steadier during periods of economic uncertainty.

Additionally, Sirius XM stock is historically cheap, which is something the value-oriented Oracle of Omaha can appreciate. Amid a historically pricey stock market, Sirius XM is valued at just over 7 times forward-year earnings and its dividend yield is approaching an all-time high of 5%.

Occidental Petroleum

When 2022 began, Berkshire Hathaway held $10 billion worth of Occidental Petroleum (NYSE: OXY) preferred stock (yielding 8% annually), but not a single common share of stock. Over the last three years, Buffett and his top advisors, Ted Weschler and Todd Combs, have acquired 264,178,414 common shares of Occidental stock.

Historically, energy stocks haven't accounted for a sizable percentage of the portfolio Buffett oversees at Berkshire. But that's changed, with over $30 billion, combined, currently invested in Chevron and Occidental. It's a pretty clear signal that Buffett and his crew expect the spot price for crude oil to remain elevated.

Perhaps the biggest catalyst for oil is that global energy companies were forced to slash their capital expenditures (capex) for three years during the COVID-19 pandemic. Even though capex has returned to normal, increasing crude supply isn't going to happen overnight. When the supply of a high-demand commodity is constrained, it usually provides a lift to its spot price.

A higher spot price for crude is particularly impactful for Occidental Petroleum, which generates the lion's share of its revenue from its drilling operations. If the price of crude oil rises, operating cash flow for Occidental will disproportionately benefit, relative to its peers. Just keep in mind that the reciprocal is also true, with Occidental's cash flow being hit harder than other drillers when the spot price of crude declines.

Domino's Pizza

A third phenomenal business that Warren Buffett is betting big on in the new year is one of consumers' most beloved brands, Domino's Pizza (NASDAQ: DPZ). Domino's was the biggest buy made by Buffett and his crew during the September-ended quarter.

One of the business characteristics Domino's possesses that the Oracle of Omaha has previously emphasised the importance of to investors is trust. Roughly 15 years ago, Domino's marketing campaign admitted that its pizza wasn't very good and that it had to do better. Over time, the company's transparent marketing approach, along with process and product innovation, has worked wonders.

Something else that's finding the mark is Domino's five-year "Hungry for MORE" initiative. Introduced by CEO Russell Weiner in December 2023, Hungry for MORE emphasises a reliance on technology to improve output and product consistency, as well as leans on the company's franchisees to enhance the value of its brand.

The international opportunity for Domino's Pizza shouldn't be overlooked, either. The company is on track for its 31st consecutive year of international same-store sales growth. This speaks to its brand value and reliance on product innovation to drive growth.

Chubb

Another stock the Oracle of Omaha very clearly wants to own in 2025 is property and casualty insurance company Chubb (NYSE: CB). Chubb was the stock given "confidential treatment" that Buffett and his team built a sizable position in between July 2023 and March 2024.

What makes insurance stocks so desirable for value investors like Warren Buffett is the stability of their operating model and premium pricing power. When loss events occur, insurers like Chubb have reason to raise premiums. But they can also increase premiums when claim losses are low with the justification that catastrophe events are inevitable.

Chubb also benefits from the niche focus of its homeowner insurance segment. The company predominantly insures higher-value homes, which leads to more lucrative premiums. High earners are less likely than average-earning workers to adjust their spending habits or fail to pay their bills when economic disruptions occur.

Lastly, insurers like Chubb are reaping the rewards of the Federal Reserve undertaking its most aggressive rate-hiking cycle in four decades (from March 2022 through July 2023). Insurers invest their float — the premium collected that hasn't been paid out in claims — in safe, short-term Treasury bills. The higher the yield, the more interest income the company can generate.

Berkshire Hathaway

The fifth magnificent stock Warren Buffett is betting big on for 2025 is none other than shares of his own company, Berkshire Hathaway. Though the September-ended quarter marked the first quarter out of the last 25 that Buffett didn't repurchase Berkshire's shares, he's collectively bought back around $78 billion worth of his company's stock since mid-July 2018.

Since Berkshire Hathaway doesn't pay a dividend, buybacks serve a number of key purposes. For starters, they reward patient investors. A steadily declining share count gradually increases the ownership stake of existing shareholders. In short, it reinforces the long-term investing ethos that Buffett and the late Charlie Munger preached for decades.

Secondly, share repurchases can increase earnings per share (EPS) for companies like Berkshire Hathaway that have steady or growing net income. A 12.6% aggregate decline in Berkshire's outstanding share count since mid-2018 has increased the company's EPS and made it more attractive to fundamentally focused investors.

It could also be argued that ongoing share buybacks reinforce Buffett's belief in the company he's helped build over six decades. What better way to demonstrate to investors a belief that Berkshire is still undervalued than to purchase around $78 billion worth of stock in a little over six years.

Finally, with a record $325.2 billion in cash, cash equivalents, and U.S. Treasuries on Berkshire's balance sheet, the Oracle of Omaha has quite the buffer to repurchase his company's stock.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Today, at the time of writing, Domino's shares have surged a welcome 4.15% to $29.64.

According to US Securities and Exchange Commission (SEC) filings, Warren Buffett's Berkshire Hathaway Inc (NYSE: BRK) has bought up shares in the embattled pizza giant.

In terms of pizza sizes, there's no bigger slice than the 'Oracle of Omaha'. According to the filings, Buffett's firm owned 1.28 million shares as of 30 September.

Naturally, investors are wondering if The Buff sees something we don't. Known for his "buy when others are fearful" approach, his moves are often watched closely. Let's take a closer look.

Berkshire Hathaway's interest in Domino's shares

It's important to note Berkshire has purchased the US listing of Domino's shares. Filings showed the conglomerate made a new investment in Domino's Pizza Inc (NYSE: DPZ) as part of its third-quarter earnings.

Berkshire's acquisition was worth around USD $549 million at the time the filings were made at September's end.

The news sparked investor interest and led to a nearly 7% jump in the share price of Domino's US listing, according to Reuters.

It's also worth noting that Berkshire's filings don't specify if Buffett himself or his team were behind this decision.

Not that it really matters.

Berkshire's endorsement often carries weight, especially as Buffett is known for investing in consumer-focused businesses with strong brand appeal.

Does he see the same economic value in this case?

Could Domino's offer value for ASX investors?

While the Domino's shares Buffett invested in are listed in the US, ASX investors might wonder if a similar opportunity exists here.

After a rough year in which the stock has dropped more than 50%, some analysts believe Domino's on the ASX might be offering value.

Goldman Sachs, for instance, upgraded its rating on Domino's in a recent note, suggesting that management's efforts to improve profitability by closing underperforming stores could position the business for a rebound.

The broker said that Domino's focus on franchisee profitability, particularly in overseas markets, combined with easing inflation, made the current share price attractive.

It maintains a buy rating with a price target of $40, indicating a potential upside of 35% from the current level.

Beyond capital gains, Goldman projects dividend payments to rise to $1.19 per share in FY25 and $1.45 in FY26.

Time will tell if both Buffett and Goldman have their judgements right.

Foolish outlook

Although Domino's has faced challenges, including inflation and increased competition, interest is brewing in the stock again.

Berkshire's large purchase is worth considering if the company's track record of such investments is anything to go by.

In the last 12 months, Domino's stock is down 43%.

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