Warren Buffett's Hand-Picked Successor, Greg Abel, Has 30% of Berkshire Hathaway's Portfolio Invested in Apple and Alphabet. But There's an Under-the-Radar Berkshire Stock That Is My Top Pick for July.

Kroger (KR) is trading near a 52-week low at about $55 (recently ~$58) and is framed as an undervalued defensive buy, with the article citing ~34x earnings vs ~11x forward earnings and a 5-year PEG of 0.57. Wall Street median target is $72.50, implying ~24% upside, and the stock offers a 2.63% dividend yield with a low ~21% payout ratio and 19 straight years of dividend increases. Overall, the piece emphasizes downside protection during market dips rather than major fundamental upside catalysts.

Analysis

Kroger is interesting here less as a standalone growth story and more as an embedded short-volatility proxy: it tends to monetize macro stress through relative multiple support rather than through strong earnings acceleration. The market is paying for stability only when that stability is scarce, so the setup works best if equity breadth deteriorates, credit spreads widen, or consumer confidence rolls over over the next 1-3 months. If the tape stays risk-on, the stock can remain optically cheap because low-growth staples rarely get rewarded with a durable premium in benign markets.

The main second-order effect is relative, not absolute: KR competes for defensive allocation with WMT and COST, which have stronger traffic/moat narratives and will likely soak up first-round staple inflows. That means KR can outperform in a selloff without being the best long in the group; it is a higher-beta defensive, not the cleanest compounder. On the downside, any margin compression from wage inflation, shrink, pharmacy reimbursement pressure, or aggressive price investment would invalidate the low forward multiple quickly because grocery operating leverage is fragile.

The contrarian view is that investors may be overestimating the Berkshire halo and underestimating how little strategic signaling a sub-2% portfolio weight actually creates. In other words, this is not an M&A or activist catalyst; it is a valuation-and-positioning trade that needs macro help. Absent a market wobble, the stock may simply drift, and the right question is not whether KR is cheap, but whether cheaper, higher-quality defensives will capture the flow instead.

Key Decisions for Investors

• Initiate a modest long KR position only on market weakness or a failed rally day in the S&P 500; target 10-15% upside over 3-6 months, but size small because the catalyst is macro rather than company-specific.
• Pair trade: long KR / short TGT for 1-3 months to express a defensive-rotation view; KR should hold up better if consumer data soften, while TGT remains more exposed to discretionary and margin pressure.
• Set a downside trigger at KR below the recent 52-week low area: if price loses that level on weak grocery margin commentary or a disappointing earnings guide, treat the thesis as broken and reduce exposure.
• If you want convexity, use a call spread instead of outright stock for a 3-6 month horizon; the payoff is best if the market corrects and defensive rotation arrives, but premium should be kept tight because implied move is likely limited in calm markets.
• Watch WMT and COST relative performance as the real tell: if they outperform while KR lags, the 'defensive staples' bid is likely going to higher-quality names first, which would argue against adding size to KR.