You may have heard whispers that Warren Buffett has a secret portfolio outside of Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B). This lesser-known holding company is called New England Asset Management, where Buffett oversees a relatively small but intriguing collection of investments. While the assets under management here pale compared to Berkshire’s empire, this secretive portfolio contains some fascinating stock picks with breakout potential.
New England Asset Management holds mostly ETFs and defensive positions currently, which makes sense given the uncertainty in the market. However, Buffett has tucked away shares of several beaten-down companies that could deliver multibagger returns once conditions improve. Most of these stocks have limited downside but ample room for upside. Let’s take a look at these secret Warren Buffett stocks!
PayPal (PYPL)
PayPal (NASDAQ:PYPL) is one of my favorite stocks in the current environment. Despite the company’s negative user growth, PayPal remains a solidly profitable cash cow with steady revenue growth of around 8% annually. However, Wall Street has largely ignored PayPal’s strengths and growth prospects, fixating on its slipping user growth rate temporarily dipping into negative territory.
That said, PayPal continues to beat earnings expectations and return billions to shareholders. Impressively, $12 billion in buybacks have been executed over the past three years. While user churn has increased, this trend seems concentrated among temporary pandemic-era users rather than PayPal’s sticky core user base that continues to spend. PayPal merchant acceptance rivals Visa (NYSE:V) and Mastercard (NYSE:MA), so I don’t expect the company to disappoint over the long-term.
Buying PayPal at a 48% discount to its pre-pandemic peak looks like a steal in my view. Once economic conditions improve, I believe PayPal could return to double-digit annual growth. But even its current steady 8% revenue growth rate remains impressive for a company of its scale. This company has built a powerful platform that should drive growth for years to come.
Crown Castle (CCI)
Crown Castle (NYSE:CCI) has been knocked down alongside many peers in recent years. While the 5G rollout brought more business for Crown Castle, major telecom companies slowed expansion plans amid rate hikes and economic uncertainty. Thus, CCI stock has plunged 55% since early-2022, with potential near-term pain ahead.
However, I believe New England Asset Management placed a savvy contrarian bet here. Once rates fall again, Crown Castle could turn around given its heavy $29.1 billion debt load and swelling interest expenses. Despite over $835 million in interest expenses last year, Crown Castle still delivered $1.5 billion in net income. A rate cut tailwind could turbocharge earnings and organically lift shares. The stock’s 6.6% dividend, though inflated by the decline, offers substantial income potential.
In short, I think Crown Castle was unfairly punished alongside its telecom peers, but its infrastructure is vital for the 5G to continue. The company can stomach short-term rate pressures. When the cycle turns, CCI stock could quickly swing from a laggard to a leader.
Molson Coors (TAP)
Molson Coors (NYSE:TAP) produces many beloved and iconic beer brands. While recent years have been solid, long-term returns for investors have lagged, with the stock still trading 43% below its 2016 peak. However, TAP stock’s current cheap valuation of around 11-times forward earnings could allow it to reclaim those old highs.
Molson Coors offers a healthy 2.8% dividend and forecasts for mid-single-digit earnings per share growth. These numbers are expected to be driven by low single-digit revenue growth. That may not seem exciting, but this company has shown consistent cash flow generation capabilities, and weathered the current economic environment well.
If Molson Coors can continue beating expectations, I believe the stock could double or surge even higher over the coming years as the market realizes its defensive strengths. Safety and dividends deserve a premium, and low-growth stalwarts often trade at 25-times earnings.
After years of lagging behind its peers, Molson Coors seems poised for a rally. Patience could be rewarded for investors willing to hold this underappreciated dividend stock as it makes its way back towards previous highs.
On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.