Greg Abel-Led Berkshire Hathaway Owns 3 Consumer Stocks. Here's the One I'd Buy First.

Picking up where predecessor Warren Buffett left off, Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) CEO Greg Abel is keeping the conglomerate invested in many of its existing consumer staples trades. Its biggest and best-known holding from this sector is, of course, the $34 billion position -- Berkshire's fourth biggest -- in Coca-Cola (NYSE: KO). Then there's struggling Kraft Heinz (NYSE: KHC), which Buffett admittedly laments.

There's a third consumer goods stock Berkshire has owned for a while now, however, that's often overlooked, largely due to the trade's small size. That's grocery store chain Kroger (NYSE: KR). Of these three names, Kroger's the one I'd be most interested in buying right now.

Investors flinched at the unexpected change

This won't always be the case. Coca-Cola is still arguably the best of the best among Berkshire's consumer-facing holdings. It's just gotten a little expensive due to a 60% run-up from its late October low. Meanwhile, Kraft Heinz is distracted by its plans announced last year to split up the company into smaller, more manageable pieces. Kroger is the proverbial pick of the litter at this time, largely thanks to its pullback from March's peak.

The correction makes enough superficial sense, to be clear. New CEO Greg Foran -- who only took the helm in February -- soon began slashing prices in an effort to become more competitive with the likes of Walmart and Aldi, stoking concerns that profit margins would narrow.

And it did, somewhat. In step with fiscal Q2's same-store sales growth of only 0.25% compared to the year-earlier 3.4% (leaving revenue short of estimates), gross margins slipped 10 basis points year over year. The company also, unsurprisingly, lowered its full-year sales guidance in last month's second-quarter report. Sensing this was coming, investors began pricing in this headwind all the way back in April.

In retrospect, though, the sellers may have overshot their target.

Not a mistake after all

Foran's strategies seem to be working. While price cuts are taking a bite out of revenue and a small toll on profit margins, Kroger's full-year guidance for operating profits, free cash flow, and per-share earnings wasn't changed last month when its same-store sales growth outlook was lowered.

Image source: Getty Images.

The stock's basic metrics have also turned attractive. The 20% pullback from March's high has inflated its forward-looking dividend yield to a healthy 2.6%. And that's based on a quarterly dividend payment that's now been raised for 20 consecutive years. By more than a little, too. With the most recent increase of 11%, Kroger's per-share payout has now more than tripled over just the past decade.

A combination of generous stock buybacks and persistent profits is a contributing factor. The number of outstanding Kroger shares has fallen by roughly one-third just since 2016, with no end to the streak in sight.

So, connect the dots. This rarely discussed Berkshire Hathaway holding may well be its best bet right now among all of its consumer staples names, particularly given that Abel stuck with it when he was cleaning out other consumer-facing names like Domino's and Constellation Brands earlier this year. That alone speaks volumes.

James Brumley has positions in Coca-Cola. The Motley Fool has positions in and recommends Berkshire Hathaway, Domino's Pizza, and Walmart. The Motley Fool recommends Constellation Brands, Kraft Heinz, and Kroger. The Motley Fool has a disclosure policy.