Warren Buffett’s secret stock could be revealed imminently. What it could be
Warren Buffett’s Berkshire Hathaway has been building a secret stock position with special confidential treatment for two quarters in a row. The mystery name could be revealed Thursday when the conglomerate releases its 13F filing. Berkshire’s second-quarter earnings report showed a $2.8 billion increase in cost basis to “commercial, industrial and other” equities, after a rise in the same category in the first quarter. It’s most likely that Berkshire has been accumulating the same stock, now worth about $4.7 billion. The Omaha-based conglomerate could keep the pick under wraps for another quarter. The confidential treatment allows Berkshire to quietly build up a position and limit price movement without stoking volatility. Still, chances are it will be revealed imminently, and here’s what it could be. To come up with the best guesses, we take into consideration the “most important” factor Buffett himself has said when it comes to picking a successful investment, which is judging the durability of a company’s competitive advantage, or “moat.” CNBC Pro used Morningstar to identify wide moat stocks in the industrial sector. Morningstar defines these stocks as companies whose competitive advantages are strong enough to fend off competition and earn high returns on capital for 20 years or more. We also looked at some other criteria based on Buffett’s preference for quality and value stocks: Market cap of at least $1 billion Industrial sector Forward price/earnings ratio of less than/equal to 20 (less than S & P 500) Traded in the U.S. Defense name Lockheed Martin , which is on the list, is also the guess from Bill Stone, Glenview Trust Company CIO and a longtime Berkshire shareholder. The stock is down about 10%, significantly underperforming the broader market. Another defense and industrial aerospace stock Huntington Ingalls Industries came up on the list. Railroad stocks Canadian National Railway , Canadian Pacific Kansas City and Union Pacific Corp also made the list. To be sure, it’s unlikely Buffett would buy into rival railroad names while owning BNSF. — CNBC’s Fred Imbert contributed reporting.
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