2 Dirt-Cheap Warren Buffett Stocks to Buy Right Now

Berkshire Hathaway CEO Warren Buffett is known for investing in value stocks — companies that trade at relatively low multiples compared to their earnings and growth potential. Kraft Heinz (NASDAQ:KHC) and Verizon (NYSE:VZ) are among those in his conglomerate’s holdings, and both could boost your portfolio from here. 

The case for Kraft Heinz

Trading at a forward price-to-earnings ratio (P/E) of just 14, Kraft Heinz is a quintessential Buffett value stock. Its operations are also relatively stable because of its focus on consumer staples like food and condiments. Though it’s a slow-growth business, Kraft Heinz is a solid investment because of its massive scale and industry-leading brands. 

Warren Buffett. Image source: The Motley Fool.

Kraft Heinz was formed in 2015 through a merger between Kraft Foods and Heinz, which gave it a broad catalog of well-known, segment-leading brands like Heinz Ketchup, Kraft cheese, and Jell-O. Buffett got involved with Heinz in 2013 and helped orchestrate the merger with Kraft.

Unfortunately for Buffett, the company has faced headwinds from irregular accounting and competition from newer healthier brands — which led to a staggering $15.4 billion write-down on the value of some of its assets in 2019. Buffett admitted in an annual shareholder meeting that he had made a mistake with the Kraft portion of Kraft Heinz.

Nevertheless, Berkshire still owns the stock. Moreover, with the stock price down by around 63% from its 2017 all time high of $97 per share, much of the downside looks priced in — especially considering the company’s many advantages. 

Brand dominance gives Kraft Heinz an economic moat — the ability to maintain a competitive advantage over rivals. Potential upstarts are unlikely to have the resources to unseat Heinz from the No. 1 spot in the ketchup segment, for example. As such, the company’s revenue streams look relatively safe.

And according to CEO Miguel Patricio, Kraft Heinz expects to come out of the pandemic “much stronger” than it entered by leveraging its massive scale to tackle challenges like inflation. With the Federal Reserve expecting annual inflation to hit 4.2% by the year’s end, Kraft Heinz’s economies of scale advantage could help it produce items more cheaply than rivals. 

Second-quarter sales fell 0.5% year over year to $6.62 billion, beating expectations by roughly $70 million. The company also boasts a dividend yield of 4.4%. 

The case for Verizon 

If you thought Kraft Heinz was cheap, Verizon’s valuation will blow your mind. Trading for just 10 times forward earnings, the telecommunications giant is a rare bargain. The company is poised to benefit from its significant moat in the telecommunications industry, and with a dividend payout ratio of 52% should have no trouble sustaining its large distributions to shareholders. 

Berkshire Hathaway purchased $8.6 billion worth of Verizon stock in the fourth quarter of 2020….