Buffett’s Stock Moves: Selling off Yet Holding Tight on Three Key Investments

Warren Buffett, chairman of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), has been cautious in the stock market lately. For eight straight quarters, he has sold more shares than he has bought in his company’s equity portfolio, including divesting from some of his most profitable positions.

Buffett’s Selective Selling: Apple and Bank of America

Since late last year, Buffett has been reducing his holdings in Apple, selling over two-thirds of Berkshire’s stake during the past year. Recently, he also began to decrease his shares in Bank of America, cutting 26% of what was once Berkshire’s second-largest position.

Buffett’s Core Holdings: Three Stocks to Hold Indefinitely

Despite these sales, Buffett still identifies three major stocks he plans to keep in the long run. He refers to these companies as “truly wonderful” and suggests they may be worth considering for your own portfolio.

Image source: The Motley Fool.

1. American Express: A Long-Term Bet

Buffett began investing in American Express (NYSE: AXP) over 30 years ago and has not sold a single share since then. Unlike most credit card companies that rely on third-party networks like Visa or Mastercard, American Express operates its own payment network. This is advantageous because it allows the company to keep all the transaction fees, which amounted to $8.8 billion last quarter, up 4% from the previous year.

While growth in payment volume has slowed, American Express has enhanced its appeal by offering premium cards that command higher fees. Card fees increased by 18% year over year, contributing $2.2 billion, while net interest income also grew by 16%, reaching over $4 billion.

The trend toward premium cards indicates a wealthier customer base, less likely to cut back on spending during economic downturns. This attractiveness draws in more merchants, enhancing the value of holding an Amex card.

Despite a 45% increase in stock price this year, American Express trades at a forward P/E ratio of about 18, reflecting cautious investor sentiment. If prices pull back, this could be a good buying opportunity.

2. Coca-Cola: A Portfolio Staple

Coca-Cola (NYSE: KO) is another one of Buffett’s long-term investments, which he established in the late 1980s. Its brand strength puts it ahead in the competitive beverage industry, boasting a portfolio that includes 11 other billion-dollar brands.

Amid inflation, Coca-Cola has successfully raised prices by 10%, although four percentage points of this came from heightened inflation in certain markets.

Coca-Cola’s global scale is another asset, allowing it to negotiate better deals with retailers and test new products effectively. The stock trades at roughly 22 times its forward earnings estimates, a reasonable rate for a market leader.

3. Occidental Petroleum: A Strategic Investment

Occidental Petroleum (NYSE: OXY) is a newer player in Berkshire’s portfolio, with Buffett investing $10 billion in preferred shares back in 2019 to assist with its acquisition of Anadarko. He has since taken a large stake in the common stock, currently holding about 27% of Occidental’s outstanding shares.

The company is closely linked to oil prices, especially given its position in the Permian Basin, where it has access to a cost-effective source of U.S. oil. With its recent acquisition of CrownRock, Occidental expects an increase of $1 billion in free cash flow, dependent on stable oil prices around $70 per barrel.

Currently, however, oil prices have dipped significantly, affecting Occidental’s stock price, which has fallen to levels not seen since early 2022. Interestingly, Buffett has not taken the opportunity to buy more shares at these lower prices. In his 2023 letter, he praised CEO Vicki Hollub’s unique talent in oil production but hasn’t increased his holdings since.

With an enterprise-value-to-EBITDA ratio of 5.3 and a current share price of about $50, Occidental remains an attractive option, especially if one believes oil prices will recover.

Don’t Miss Out on Potential Investment Opportunities

If you feel you missed out on buying successful stocks, there’s still hope. Experts occasionally call out stocks they believe are ready for growth, referred to as “Double Down” stocks. Now may be the best time to invest in promising companies before prices rise further. Here are a few recent successes:

• Amazon: A $1,000 investment in 2010 would now be worth $22,292!
• Apple: A $1,000 investment in 2008 would now be worth $42,169!
• Netflix: A $1,000 investment in 2004 would now be worth $407,758!

Currently, three new “Double Down” alerts are being issued for exceptional companies, so pay attention to this opportunity.

See 3 “Double Down” stocks »

*Stock Advisor returns as of November 4, 2024

Bank of America and American Express are advertising partners of The Ascent, a Motley Fool company. Adam Levy has positions in Apple, Mastercard, and Visa. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Mastercard, and Visa. The Motley Fool recommends Occidental Petroleum and the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.