If you’re searching for sage advice on where to invest in 2024, few individuals rival the shrewd financial acumen of legendary investor Warren Buffett. Over nearly six decades, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) under his stewardship has outperformed the S&P 500 by a substantial margin, boasting an impressive compounded annual return of around 20% — double the average of the S&P 500.
Fortunately for prospective investors, Buffett’s holdings are readily accessible, as Berkshire is compelled to disclose its positions to the Securities and Exchange Commission each quarter. Based on Berkshire’s third-quarter holdings, there are two Buffett stocks poised for significant value in 2024.
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1. Bank of America
Revered as the Oracle of Omaha’s favored bank, Bank of America (NYSE: BAC) holds prominence as the first Buffett stock to seriously consider for 2024. Not only is it Buffett’s favored bank stock, but it also stands as Berkshire’s second-largest holding, trailing only Apple. Buffett has repeatedly extolled BofA CEO Brian Moynihan, expressing enormous admiration for him and commending him for his judicious decision-making.
With a career-long history of investing in financial institutions, the Berkshire chief’s foremost concern regarding banks revolves around their management, an area where Moynihan has excelled in rehabilitating Bank of America in the aftermath of the financial crisis.
Though Bank of America missed out on the stock market rally in 2023, this is attributed to a dip during the regional banking crisis in March which appears unjustified in hindsight. However, the prospects for 2024 look more sanguine for the stock. A recession seems increasingly unlikely, a sentiment echoed by BofA, with falling interest rates likely to buoy consumer and business spending. Moreover, the stock appears historically undervalued at a price-to-earnings ratio of 9.5. With the bank’s potential to significantly increase its dividend and a current yield of 2.9%, Bank of America seems poised for substantial gains in the year ahead.
2. D.R. Horton
Another contender poised to capitalize on the anticipated economic recovery in 2024 is D.R. Horton (NYSE: DHI), the largest homebuilder in the United States.
In the second quarter of 2023, Berkshire added D.R. Horton, along with Lennar and NVR, to its portfolio, signaling the stock’s well-paced valuation. Furthermore, the company is primed to benefit from a housing market hampered by a dearth of available inventory for sale.
Homeowners who capitalized on historically low rates during the pandemic are now hesitant to sell and forfeit those rates, particularly with mortgage rates hovering around 7%. Compounding this, the United States grapples with a substantial housing shortage, estimated at 4 million homes nationwide, for which resolution may take years or even decades, propping up home prices in the process.
Anticipated interest rate cuts from the Federal Reserve could reinforce the already robust demand for new homes, which bodes well for D.R. Horton. In its fiscal fourth quarter, revenue surged 9% to $10.5 billion while sales orders catapulted 39% to 18,939 homes, underscoring an immense backlog in demand.
With a significantly bolstered balance sheet over the past year, combined with strong demand for new homes and trading at a mere price-to-earnings ratio of 11, D.R. Horton appears to be an astute bet to continue its ascent in 2024.
