3 Value Stocks Buffett Wishes He Could Buy

Warren Buffett

Key Points

  • Three stocks that would otherwise find their place in a mega value investor's - like Buffett's - portfolio could fall into the hands of retail investors. 
  • Trading at significant discounts from their 52-week highs, these names offer the same upside they had at their peak prices.
  • Analysts love them, and markets must see the P/E discounts they give peers.
  • 5 stocks we like better than BYD

The retail investor has one undeniable advantage over Wall Street’s professionals. The big guys need to show quarterly returns; otherwise, no performance fees can be collected. This places a severe investment horizon limit on the type of businesses they can buy. 

Another limitation comes through sizing. Value investors like Warren Buffett cannot buy companies that are below a certain market capitalization, as it would be an insignificant position failing to move the needle for the entire fund. Apart from their smaller market caps, three stocks would fit the value investment criterion today, yet the big funds cannot act upon them. 

Names like Abercrombie & Fitch Co. NYSE: ANF, Sociedad Quimica y Minera de Chile NYSE: SQM, and even FMC Co. NYSE: FMC could give retail investors their own Buffett moment without the need for billions of dollars in buying power. 

It’s Time For a Consumer Reset

Bank of America Today

Bank of America Co. stock logo
BACBAC 90-day performance
Bank of America
$39.29
+0.07 (+0.18%)
(As of 05/17/2024 ET)
52-Week Range
$24.96
$39.49
Dividend Yield
2.44%
P/E Ratio
13.60
Price Target
$38.70

First quarter 2024 earnings from financial stocks like Bank of America Co. NYSE: BAC show an inflation-choked U.S. consumer concerning credit card delinquency rates and declining FICO scores. However, consumers are shaking these trends off. 

With U.S. consumer sentiment reaching a 3-year high, it seems that expectations of lower interest rates ahead are causing a bullish psychological effect for the consumer sector. This is where the apparel industry comes into play.


With cotton futures falling by as much as 22% in the past month, investors may want to look into apparel’s potential new bull run. Not all stocks are created equal, though; here’s why Abercrombie & Fitch fits. 

Compared to the retail sector’s P/E valuation of 23.6x, Abercrombie & Fitch stock offers investors a 25% discount through its current 17.7x P/E valuation. 

More importantly, for those justifying a bargain stock, the company operates under industry-leading gross margin rates of over 60%, unseen by competitors like American Eagle Outfitters Inc. NYSE: AEO, whose financials show a gross margin of only 38.7%.

These margins allow management to efficiently invest leftover capital, generating returns on invested capital (ROIC) rates of up to 15% annually, significantly above American Eagle’s 8.3%.

Analysts at Jefferies Financial Group boosted Abercrombie's valuation to $155 a share, calling for a 40% upside from today's stock price. 

As consumer credit deteriorates, as proven by bank earnings, the Fed may look to lower interest rates sooner, helping boost the industry further after its recent breakout. 

FMC’s Run to Restock the World

CF Industries Today

CF Industries Holdings, Inc. stock logo
CFCF 90-day performance
CF Industries
$76.22
-1.10 (-1.42%)
(As of 05/17/2024 ET)
52-Week Range
$60.08
$87.90
Dividend Yield
2.62%
P/E Ratio
12.66
Price Target
$85.00

According to its fourth-quarter 2023 earnings report, FMC’s competitor, CF Industries Holdings Inc. NYSE: CF, states that the agriculture sector could be at a cyclical low. 

With stock-to-use ratios coming off their bottom in 2022, the world may need to start farming more aggressively, as the end of the winter season affects global supply. This is where FMC’s fertilizers and specialty chemicals come into play. 

The services PMI shows the agricultural sector pushing its third consecutive month of expansion, increasing the odds of rising quarterly earnings for stocks supporting this expansion (think FMC). 

Trading at only 46% of its 52-week high, the stock starts to fit the potential bargain profile. Its 5.5x P/E valuation today is 65% below the chemical industry’s average 15.6x multiple. Wall Street analysts, particularly those at the UBS Group, see a higher valuation for the stock.

These analysts slapped an $84 share price target on FMC. The stock would need to rally by 45% to prove these predictions right. More than that, the stock is 92% owned by institutions, giving investors a quality stamp. 

EVs Aren’t EVs Without Sociedad Quimica’s Lithium

BYD Today

$28.73
+0.03 (+0.10%)
(As of 05/17/2024 ET)
52-Week Range
$21.80
$36.27
P/E Ratio
20.67

After striking an exclusive deal with BYD Co. OTCMKTS: BYDDF, Sociedad Quimica y Minera is now the primary lithium provider for arguably the world’s leading electric vehicle (EV) manufacturer. 

Because BYD serves Asia’s fastest-growing middle classes, EV demand in the region could send new orders through the roof, boosting lithium demand as batteries cannot be made without the commodity. 

This is where Sociedad Quimica y Minera stock becomes a target, trading at only 55% of its 52-week high and having as much upside as ever. 

Analysts expect the stock to grow its earnings per share (EPS) by as much as 34.7% in the next 12 months. Investors can get exposure to this growth at only 6.4x P/E, a 45% discount to the mining industry’s average 11.7x valuation. 

With a consensus price target of $66 a share, this stock is set to advance by 46.7% from where it trades today, solidifying the market’s thesis behind the EV wave’s lithium demand.       

Like cotton, lithium prices declined by 82% from their 2022 peak prices, which could signal a potential cyclical bottoming for lithium. 

Should you invest $1,000 in BYD right now?

Before you consider BYD, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and BYD wasn't on the list.

While BYD currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Abercrombie & Fitch (ANF)
2.7392 of 5 stars
$139.55+2.8%N/A22.44Hold$135.71
Sociedad Química y Minera de Chile (SQM)
4.2383 of 5 stars
$47.85-0.3%1.15%6.79Hold$65.18
FMC (FMC)
4.7221 of 5 stars
$63.98-0.3%3.63%7.14Hold$70.56
Bank of America (BAC)
4.3506 of 5 stars
$39.29+0.2%2.44%13.60Moderate Buy$38.70
American Eagle Outfitters (AEO)
3.4595 of 5 stars
$23.53-0.4%2.12%27.36Hold$23.00
CF Industries (CF)
4.6553 of 5 stars
$76.22-1.4%2.62%12.66Hold$85.00
BYD (BYDDF)
0 of 5 stars
$28.73+0.1%N/A20.67BuyN/A
Compare These Stocks  Add These Stocks to My Watchlist 

Gabriel Osorio-Mazilli

About Gabriel Osorio-Mazilli

  • gosoriomazzilli@gmail.com

Contributing Author

Value Stocks, Asian Markets, Macro Economics

Experience

Gabriel Osorio-Mazilli has been a contributing writer for MarketBeat since 2023.

Areas of Expertise

Value investing, long/short trading, options, emerging markets

Education

CFA Level I candidate; Goldman Sachs corporate training; independent courses

Past Experience

Analyst at Goldman Sachs, associate at Citigroup, senior financial analyst in real estate


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