Investing

Besides Selling Everything, This Is What Warren Buffett Is Buying

Chris MacDonald

Published: August 21, 2024 11:04 am

Known as the “Oracle of Omaha,” Warren Buffett is renowned for investing in blue-chip companies. His holdings under Berkshire Hathaway (NYSE:BRK-B), where he is CEO, are closely watched by investors of all stripes. Those with any sort of value tilt, or those with a sincere desire to grow their analytical skill set, often pore through Berkshire’s annual 13-F filings for information around what Buffett is buying and selling, to determine whether they’re on the right track or not.

Of late, Warren Buffett appears to be mostly in selling mode, slashing his Apple (NASDAQ:AAPL) stake in half, and making other key divestitures as well. Maybe he thinks the market is overvalued as a whole, or perhaps the recessionary concerns we’re seeing are more prescient than many soft-landing enthusiasts seem to think. Whatever the case, Buffett doesn’t like what he sees right now, generally speaking.

That said, it’s not all doom and gloom for investors. As is the case in most quarters, Warren Buffett has found reason to either add to positions, or initiate positions, in a few key stocks. Let’s dive into which stocks he’s growing bullish on in this era of growing pessimism.

Key Points About This Article:

• Warren Buffett has mainly been in selling mode recently, with his most prominent move being slashing his Apple stake in half.
• However, the Oracle of Omaha has found a few stocks he clearly thinks are interesting, and has made some buys – here are three to consider.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Chubb (CB)

Chubb (NYSE:CB) is a global insurance firm, right up Warren Buffett’s alley. A top recession-proof stock pick of a number of analysts for this year, the company’s non-cyclical nature and diversification across 54 countries position it well for continued growth during economic downturns. Chubb recently declared a quarterly dividend of $0.91 per share, payable on October 4, 2024, to shareholders recorded by September 13, 2024. This marks the second dividend installment approved in May 2024. The payment will be in U.S. dollars, reflecting Chubb’s ongoing commitment to shareholder value.

Offering a wide range of insurance products, Chubb’s prudent underwriting has driven revenue and earnings growth, with Q2 FY24 revenue up 15% year-over-year to $13.83 billion and operating income up 7.5% to $2.20 billion. Chubb’s strong financials and global presence position the company well to navigate emerging risks.

Chubb provides homeowners insurance through its personal property and casualty division. While facing pressures in agriculture and U.S. property markets, the company benefits from high premiums and lower catastrophe payouts internationally. Diversified rate increases help Chubb earn investment income despite regional struggles, but its scale necessitates maintaining significant reserves for liquidity during major disruptions.

Occidental Petroleum (OXY)

Warren Buffett has shifted Berkshire Hathaway’s focus from Apple to Occidental Petroleum (NYSE:OXY). Known for his successful energy investments, Buffett has previously profited from selling PetroChina shares. Berkshire’s energy sector, including its 1999 acquisition of MidAmerican Energy, contributes significantly to its earnings. Despite Occidental’s flat stock performance over two years and concerns over potential lower oil prices affecting its debt reduction, Buffett’s confidence in energy investments remains evident.

Occidental Petroleum surpassed Wall Street’s second-quarter profit estimates by 34% following its $12 billion acquisition of CrownRock. Higher oil production in Colorado and a 5% rise in crude prices to $79.89 per barrel boosted results. Quarterly production reached 1.26 million barrels of oil equivalent per day, exceeding expectations. Additionally, Occidental reported adjusted earnings of $1.03 per share, beating the 77-cent forecast.

The company revised its production target to 1.315 million barrels of oil and gas per day, up from 1.250 million, to include CrownRock’s assets. Occidental’s Q3 production is expected to rise to 1.390 million boepd. The company’s CrownRock acquisition strengthened Occidental’s Permian basin presence, but increased its long-term debt to about $28 billion, adding to the burden from its 2019 Anadarko deal.

Heico (HEI)

HEICO Corporation (NYSE:HEI) specializes in aftermarket parts for commercial and military aircraft, including jet engine and component replacements. The company has benefited from steady travel growth and increased parts spending, driven by delays in aircraft retirements and production issues at Boeing and Airbus.

In the second quarter, Warren Buffett’s Berkshire Hathaway acquired shares in Heico Corp., according to a regulatory filing. The 13-F filing, which only shows portfolio holdings as of the quarter’s end, does not include transactions after June, such as the July sale of Bank of America shares. The filing also lacks details on gains or losses from sales. That said, Heico Corp.’s stock rose nearly 4% in after-hours trading following Buffett’s purchase of about a million shares.

Heico Corp’s stock reached a record high of $257.19, reflecting a 40.76% increase over the past year and strong investor confidence. Heico also received analyst upgrades, with Jefferies setting a $275 target and Stifel and BofA Securities raising their targets to $250. Additionally, Heico announced a higher semiannual dividend of $0.11 per share. I think analysts are right to price in a Buffett premium to this stock, and it could be headed even higher from here.