New Trade for July 24th, 2023

Warren Buffett is one of the most successful investors on Wall Street. The Berkshire Hathaway CEO is known for a long track record of market-beating returns, evident in the exemplary gains in Berkshire’s Class A shares since 1965. Over the past 57 years, the widely followed Berkshire Hathaway portfolio has generated returns of over 3.64 million percent. In other words, if you had invested $100 in Berkshire in 1965, that investment would be worth more than $3.64 million today. That works out to be an increase of around 20% compound annually, more than twice that of the S&P 500 over the same period. That stellar performance is why investors may want to take a page out of Buffett’s playbook and consider striking up a position in some Berkshire-held potential long-term winners themselves. 

Today we’re sounding the alarm on one of Buffett’s top value plays for the second half of the year…

Kroger Co (KR) 

Buffett’s “value play” is arguably Kroger (KR), the second-largest supermarket chain in the U.S., operating over 2,700 stores across 35 states. While growth was stagnant prior to the pandemic, KR swiftly adapted and experienced a sales boost by embracing digital strategies. With a renewed focus on fresh food, KR has been gaining momentum. KR’s affordable and high-quality company-branded food lines have garnered popularity, paving the way for further growth. Although comparable sales growth initially dropped after the pandemic surge, KR’s has since stabilized and is steadily increasing. 

KR stock is up by 6.35% year-to-date, is trading near the middle of its existing 52-week range, and comes with a safe beta score of 0.47. With an ROE of just over 25%, KR slightly missed on revenue at its most recent earnings call but reported EPS of $1.51 per share vs. $1.43 per share as predicted by analysts, exceeding their expectations by 3.97%. KR also shows year-over-year growth in crucial areas such as revenue (+1.27%), net income (+44.88%), EPS (+46.67%), and net profit margin (+42.95%) and is forecasted to report $34 billion in sales at $0.91 per share for the current fiscal quarter. KR has a 2.45% annual dividend yield and a quarterly payout of 29 cents ($1.16/year) per share. With a 10-day average volume of 4.42 million shares, KR has an average price target of $51.70, with a high of $65 and a low of $42, representing a potential price upside of over 37%. KR has 12 buy ratings and 12 hold ratings

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