Growth stocks are getting some love again in 2023, and that normally means value investments get pushed to the back burner. Warren Buffett's Berkshire Hathaway (BRK.A 0.16%)(BRK.B 0.11%) holds many quality value stocks, and several of them are on sale right now.
Three Buffett/Berkshire stocks that are trading near their 52-week lows are Coca-Cola (KO +0.77%), Johnson & Johnson (JNJ 0.15%), and Paramount Global (PARA +0.00%). Let's examine why these three stocks are struggling right now and see whether any of them might be worth adding to your portfolio.
1. Coca-Cola
Berkshire first bought shares of Coca-Cola back in 1988 and it has been a staple in its portfolio since. Buffett is not only a fan of Coke but also a big customer; in the past, he has admitted to drinking five cans per day. Today, the stock remains one of Berkshire's top five holdings, although it hasn't been doing that great lately.
Year to date, shares of Coca-Cola are down 8%, underperforming the S&P 500, which is up around 16%. The consumer goods stock is within striking distance of its 52-week low of $54.02. There isn't a super obvious reason for the decline in Coca-Cola's stock because the business has been doing fairly well this year. Through the first six months of 2023, the company's net income of $5.7 billion was up 21% versus the same period last year.
NYSE: KO
Key Data Points
Investors, however, may be concerned about future quarters. Price increases have enabled Coca-Cola to withstand the effects of inflation and even thrive. But that company is going to stop raising prices in some markets, including the U.S., as it does see some growing apprehension from customers. It's a sign that more challenging quarters may be ahead for the business.
Shares of Coca-Cola trade at 24 times earnings, which isn't a cheap valuation for a company that doesn't normally generate much growth. That, combined with more growth challenges, could spell trouble for the stock. Coca-Cola can make for a good dividend stock to hold, offering a decent 3.2% yield. But given its high valuation and some potential headwinds to worry about, it's not an investment that growth investors may want to rush out and buy right now.
2. Johnson & Johnson
Johnson & Johnson is one of Berkshire's smallest holdings and the holding company has been reducing its investment in J&J over the years. It has, however, been consistently in Berkshire's portfolio since 2006. The company's stable business and consistent dividend growth make it very similar to Coca-Cola, and thus, it's not surprising why the billionaire investor might like the stock.
Unfortunately, Johnson & Johnson stock has also made for an underwhelming investment this year, falling nearly 9%, which isn't common for the usually stable healthcare stock. Its lackluster performance has put the stock within 8% of its 52-week low of $150.11. Like Coca-Cola, this is normally a stable dividend payer to own; Johnson & Johnson stock yields around 3%.
NYSE: JNJ
Key Data Points
The company is, however, pivoting more toward growth. It recently spun off its slow-growing consumer healthcare business to create Kenvue. Last year, it also completed a $16.6 billion acquisition of heart pump maker Abiomed, which will give its medtech business a potential growth catalyst.
Unfortunately, concerns about the legal liabilities of its talc products aren't going away despite the company's efforts to bankrupt a subsidiary that manages the talc segment and limit its exposure. And as long as that risk remains, investors will be hesitant to buy the stock. At 33 times earnings, this is an even more expensive stock than Coca-Cola and it's another Buffett stock that I wouldn't consider buying given the risks the business is facing.
3. Paramount Global
Paramount Global accounts for 0.4% of Berkshire's portfolio as it too is one of its smaller holdings, although it ranks higher than Johnson & Johnson. Berkshire only bought Paramount's stock in 2022 so it's also a relatively new holding. Buffett is intrigued with the emergence of streaming businesses and Paramount may offer a more balanced investment as it also has strong media assets. Plus, like the other two stocks on this list, it pays a dividend, which Buffett loves collecting.
It hasn't been a great year for Paramount Global stock, however, as it is the worst-performing stock on this list. Share prices are down 17% year to date and recently hit a new 52-week low of $12.84. The ongoing writers' strike in Hollywood and just generally poor financial results are some of the reasons investors have been bearish on this media stock.
NASDAQ: PARA
Key Data Points
Through the six-month period ending June 30, the company's revenue totaled $14.9 billion and declined by 1% year over year. Although its direct-to-consumer business generated 39% growth, its streaming service, Paramount+, added just 0.7 million subscribers in the most recent quarter, reaching 61 million total. Netflix, by comparison, has nearly 4 times that number, at over 238 million total subscribers.
Paramount is a bit of a contrarian pick, however, because if the writers' strike ends, that could make investors more bullish on the stock. And its streaming service, while well behind Netflix and other platforms, still has plenty of room to grow.
If it grows to the consensus analyst price target of just over $19, the stock could rise by around 35%. Although Paramount has posted a loss over the trailing 12 months, that is mainly due to programming charges it incurred as a result of merging the streaming services Showtime with Paramount+. Based on analyst estimates, Paramount is trading at only 10 times its future profits. This beaten-down streaming specialist could be one of the best Buffett stocks to buy right now.
