The mystery stock that Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) has been accumulating a position in over the last six months could soon be revealed when the company releases its 13-F securities filing for the first quarter of 2024. Then again, it might not. CEO Warren Buffett has received permission from the U.S. Securities and Exchange Commission (SEC) to keep the holding secret in Berkshire’s two previous 13-F filings. Buffett also declined to disclose the name of the stock at the firm’s recent annual meeting.
Warren Buffett often seeks privacy when building a stake in a stock, as he does not want other investors following his lead and pushing the share price up unnecessarily. Previously, he kept his investments in Chevron (NYSE:CVX) and Verizon (NYSE:VZ) confidential while accumulating stakes in those companies back in 2020. What is known for sure is that Berkshire Hathaway has bought $5 billion worth of shares in a mystery stock whose identity has triggered widespread speculation online.
What is Warren Buffett’s mystery stock? Here are my three guesses for names that could fit the bill.
Constellation Software (CNSWF)
Constellation Software (OTCMKTS:CNSWF) is a Canadian company and serial acquirer that buys small- and mid-sized software companies. In a model reminiscent of Berkshire Hathaway, Constellation leaves management in place at the companies it acquires, lets them operate independently and holds them for long periods. Many analysts and investors refer to Constellation Software as a “baby Berkshire.”
During the recent Berkshire Hathaway annual meeting, Buffett let slip that he has been circling a Canadian company in recent months. Constellation Software might fit the bill. Like Berkshire, the company’s stock has outpaced the market on a consistent basis and it has never split its stock. Also, Buffett’s successor, Greg Abel, is himself Canadian and knows the market up north well. If the mystery stock isn’t Constellation Software, it might be a Canadian energy company, as Abel currently runs Berkshire Hathaway Energy.
CNSWF stock has increased nearly 40% in the last 12 months, including a 11% gain so far this year.
Chubb (CB)
Another company that ticks a lot of the boxes Buffett looks for in stocks is Swiss insurer Chubb (NYSE:CB). Berkshire is heavily invested in insurance companies already as the owner of both Geico and General Re. Buffett has also said on many occasions that he loves the insurance industry, especially the float that is created from premiums collected.
Based in Zurich, Chubb is one of the world’s largest property and casualty insurers. Buffett knows the company well and its valuation would be attractive to the “Oracle of Omaha.”
Chubb stock currently trades at 11.6 times projected 2024 earnings. Buffett tends to look for stocks with a price-to-earnings (P/E) ratio of 15 or lower. Chubb also pays a decent dividend of 86 cents per share, giving it a yield of 1.36%. CB stock has been on an upswing lately, having gained 26% in the last 12 months and 11% so far in 2024.
Morgan Stanley (MS)
In addition to insurance, Buffett likes bank stocks. One of Berkshire Hathaway’s largest positions is in Bank of America (NYSE:BAC) stock. This has led to speculation that the mystery stock might be investment bank Morgan Stanley (NYSE:MS). After all, the lender recently got a new CEO in Ted Pick, its valuation is reasonable — trading at a forward P/E ratio of 14.8 times — and it pays a strong quarterly dividend that yields 3.42%.
Buffett might also like that Morgan Stanley has diversified into wealth management. This has made the firm less dependent on deals like mergers and acquisitions than its Wall Street peers.
MS stock has trailed the market over the past year, rising 21% in the last 12 months, including a 7% uptick so far this year. Buffett might have started accumulating shares when the stock was trading as low as $70 per share last fall.
On the date of publication, Joel Baglole held a long position in Toronto-traded shares of Constellation Software. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.