Greg Abel’s Berkshire Hathaway Tech Allocations Rise as Kroger Stock Offers Defensive Appeal Near 52-Week Low

Key Points

• Kroger joined the Berkshire Hathaway portfolio in 2019 and has shown resilience during market downturns.

• The consumer staples stock provides downside protection amid economic uncertainty.

• Kroger shares are currently near a 52-week low, presenting a potential entry point.

Greg Abel, Warren Buffett’s chosen successor, has already demonstrated a willingness to adjust Berkshire Hathaway’s portfolio since taking over as CEO. Notably, the company has increased its stake in Alphabet, which now represents approximately 9% of the portfolio and ranks among its top five holdings. Combined, Apple and Alphabet holdings account for nearly 30% of Berkshire’s total investments.

While tech giants dominate headlines, a less-discussed Buffett-era holding, Kroger Co. (NYSE: KR), may offer compelling value. Here’s why.

Image source: The Motley Fool.

Why Kroger stands out as a defensive investment

As the largest grocery retailer in the U.S., Kroger has been part of Berkshire Hathaway’s portfolio since 2019. The company held roughly 1.4% of the portfolio in the last quarter, with no recent buying or selling activity under Abel’s leadership. Groceries are a necessity regardless of economic conditions, positioning Kroger as a reliable performer during market volatility. During the 2022 bear market, Kroger shares declined just 1%, while the S&P 500 fell 19% and the Nasdaq Composite dropped 33%.

This defensive strength was evident in early 2023. When the Nasdaq entered a correction phase and the S&P 500 declined in Q1, Kroger stock rose approximately 21% to over $75 per share in March. However, as markets rebounded in April and May, the stock retreated to its current $58 per share level, down about 5% year-to-date. It reached a 52-week low of $55 at the end of June. Despite this, Kroger trades at 34 times earnings and 11 times forward earnings, with a five-year PEG ratio of 0.57—below the industry average—indicating undervaluation.

Potential for upside and steady dividends

With market volatility uncertain and economic indicators mixed, investors may seek stability through defensive assets. Kroger’s current valuation near 52-week lows offers a chance to acquire a reliable holding with downside protection. Wall Street analysts maintain a median price target of $72.50 per share, implying roughly 24% upside over the next 12 months.

The company also offers an attractive dividend yield of 2.63%, supported by a low payout ratio of 21%, suggesting room for future increases. Kroger has maintained a consistent upward dividend trajectory, achieving 19 consecutive years of annual dividend growth.

While Kroger lacks the flash of high-growth tech stocks, its defensive characteristics and valuation make it a timely opportunity for investors prioritizing portfolio stability.

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