Warren Buffett's Secret Stock: Why UPS Could Be the Next Big Bet for Berkshire Hathaway

The investing world has been buzzing since Berkshire Hathaway's Q1 2025 13F filing revealed a $2 billion “mystery stock” hidden under a confidential treatment clause. Warren Buffett's history of quietly accumulating stakes in undervalued giants—think Chubb (CB) or Verizon (VZ)—hints that this latest move could be another masterclass in exploiting market inefficiencies. Among the top contenders? United Parcel Service (UPS), a logistics titan whose stock has been beaten down by short-term fears but remains a classic Buffett-style value play. Let's dissect why UPS could be the next big bet—and why investors should take note.

Buffett's Playbook: The Power of Confidential Purchases

Buffett's strategy of using confidential filings to mask purchases isn't new. In 2020, Berkshire quietly built a $6.7 billion stake in Chubb, a property-casualty insurer, before disclosing it in a 13F. The result? Chubb's stock surged as the market caught up to the news. Similarly, in 2019, Berkshire's $10.9 billion stake in Verizon—a then-undervalued telecom giant—was initially kept under wraps. Both moves exemplified Buffett's knack for buying when fear overshadows fundamentals, then letting the market's delayed reaction amplify returns.

The Q1 2025 filing suggests a similar playbook. The “Commercial, industrial and other” category saw its cost basis jump by $2 billion, while Berkshire trimmed financials like Bank of America (BAC) and Citigroup (C). This shift toward industrial stocks aligns with Buffett's long-standing belief in American manufacturing and infrastructure. Among the candidates, UPS ticks all the boxes.

Why UPS Fits the Buffett Mold

1. The Moat: Logistics Dominance

UPS isn't just a delivery company—it's a logistics fortress. Its global network, proprietary software, and relationships with Fortune 500 clients create a near-impossible barrier to entry. Even Amazon's (AMZN) recent decision to cut UPS volume by 20% hasn't shaken its core business. UPS still handles 18% of Amazon's shipments, and its e-commerce partnerships extend far beyond one customer. This resilience is Buffett's gold standard: a company that thrives through cycles.

2. Undervalued on Fear, Not Fact
UPS's stock (UPS) has lagged amid Amazon's cuts, but the fundamentals remain strong. The company's Q1 2025 revenue hit $21.5 billion, with adjusted EPS of $1.49—well above analyst expectations.
The market's panic overlooks UPS's diversified client base and cost-cutting efforts. In 2024, UPS saved $2.5 billion through automation and route optimization, proving its ability to adapt. Meanwhile, its 2.8% dividend yield offers a cushion—a hallmark of Buffett's conservative approach.

3. A Classic Value Trap Turned Opportunity
Buffett famously seeks companies trading below their intrinsic value due to temporary setbacks. UPS's current P/E of 14.5 is below its five-year average of 16.8 and far lower than FedEx's (FDX) 24.3. This discount ignores UPS's 15% ROE (return on equity), a metric Buffett prioritizes. The stock's $150 price tag is down 12% from its 2023 high—a bargain for a company with $40 billion in cash and a fortress balance sheet.

The Inefficiency: Overreacting to Amazon, Underreacting to Resilience

The market's focus on Amazon's cuts is myopic. Amazon's shift to its own delivery network is years away, and UPS remains indispensable to e-commerce's growth. Even if Amazon reduces UPS shipments further, the company's long-term contracts with retailers like Walmart and Target ensure stability. Meanwhile, UPS's expansion into healthcare logistics (think pharmaceuticals) and its $1 billion investment in electric vehicles position it for a low-carbon future—a trend Buffett has embraced through stakes in Chevron (CVX) and Occidental (OXY).

Investment Implications: Follow Buffett's Footsteps

If Berkshire's Q1 2025 move is indeed UPS, investors should take heed. Here's why this could be a winning call:
- Margin of Safety: The dividend yield of 2.8% provides downside protection.
- Catalysts Ahead: UPS's 2025 guidance calls for 5–7% revenue growth and 10% EPS growth—metrics that could force a reevaluation.
- Buffett's Track Record: When he quietly builds stakes in overlooked giants, the market eventually follows.

Risks to Consider

No investment is risk-free. UPS faces headwinds like labor negotiations and the lingering threat of Amazon's self-reliance. However, its balance sheet and pricing power suggest these are manageable speed bumps, not existential threats.

Final Take: A Buffett-Approved Buy

Warren Buffett's secret stock likely isn't a gamble—it's a calculated bet on a company with a durable moat, a mispriced stock, and a dividend that rewards patience. If UPS is indeed Berkshire's hidden gem, investors ignoring the opportunity might be the ones missing out. In a market obsessed with short-term noise, sometimes the best plays are the ones you don't hear about—until it's too late.