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The Warren Buffett Effect: Three Stocks with Big Upside Potential for 2025
In 1973, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) held its first annual shareholder meeting in the cafeteria of one of its subsidiaries, attracting just a few dozen attendees. Fast forward nearly 50 years, and around 40,000 people now travel to Omaha each year for this event. This phenomenon is often referred to as the “Warren Buffett effect.”
Since becoming Berkshire Hathaway‘s CEO, Warren Buffett has achieved an extraordinary gain of more than 5,681,000% on Class A shares (BRK.A) as of the closing bell on January 17. This remarkable performance has far outstripped the S&P 500 return over the same period, solidifying Buffett’s status as a revered figure among professional investors and everyday individuals alike.
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Today, Buffett manages a diversified 44-stock portfolio worth $297 billion at Berkshire Hathaway. Yet, the outlook for these investments varies significantly.
According to price targets from select Wall Street analysts, three of Buffett’s stocks could yield returns of up to 50% for investors by 2025.
1. Sirius XM Holdings: Potential for 44% Gains in 2025
The first of Buffett’s picks with strong upside potential is Sirius XM Holdings (NASDAQ: SIRI). Analyst Matthew Harrigan from Benchmark predicts that Sirius XM shares could reach $32 each, reflecting an upside of 44% from last week’s closing prices.
Sirius XM faces challenges, such as competition from online and traditional radio, especially given the stagnation in vehicle sales over the last two years. The company relies on converting promotional subscriptions linked to new vehicle purchases into paying customers.
Despite these challenges, analysts believe that the $32 price target is achievable. Being the only licensed satellite-radio operator, Sirius XM maintains a monopoly, allowing it some pricing power that competitors lack.
Moreover, Sirius XM generates a significant majority of its revenue from subscriptions—approximately 77%—rather than advertising. This model stabilizes cash flow during economic downturns when advertisers cut spending, offering a more predictable income stream.
Interestingly, Sirius XM is currently trading for just over 7 times the forecasted earnings, which presents a compelling investment opportunity if management maintains fiscal discipline.
Image source: Getty Images.
2. Occidental Petroleum: Expecting 50% Growth by 2025
Another of Warren Buffett’s promising stocks is Occidental Petroleum (NYSE: OXY), a company that Buffett has actively accumulated over the past three years. Analyst John Freeman from Raymond James estimates that Occidental’s stock could surge to $78 per share, representing a 50% increase by next year.
For Occidental, the price of crude oil is crucial. While the company has diverse operations, its revenue heavily relies on oil drilling. Thus, a spike in oil prices could lead to greater profits compared to its competitors. However, a decline in oil prices would pose significant risks to its performance.
Current geopolitical tensions, particularly stemming from Russia’s actions in Ukraine, could increase demand for oil, providing potential price support. Nonetheless, Occidental still carries $25.5 billion in net debt as of September 30, 2024, raising concerns since Buffett typically avoids heavily indebted companies.
3. Apple: Anticipating 41% Upside in 2025
The final Buffett stock poised for growth is Apple (NASDAQ: AAPL), which is Berkshire Hathaway’s largest holding. Recently, Wedbush analyst Dan Ives raised Apple’s price target to $325 per share, suggesting a possible 41% increase in value by 2025.
Analysts are excited about Apple’s integration of artificial intelligence (AI) into its products. This enhancement is expected to boost consumer demand and increase brand loyalty as Apple’s AI features enhance user experience.
On top of product innovations, Apple’s Services segment, driven by subscriptions, is thriving. This growth helps stabilize revenue fluctuations, especially during major iPhone upgrade cycles.
Since 2013, Apple’s remarkable capital-return program has allowed the company to repurchase a significant amount of its stock, which has bolstered investor confidence and added value.
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Buffett’s Bold Moves: Berkshire Hathaway Lowers Apple Stake While Sirius XM Faces Scrutiny
Apple has bought back more than $725 billion worth of its common stock, resulting in a nearly 43% reduction in its outstanding shares. Companies that maintain or increase their net income while also decreasing their share count generally see a rise in their earnings per share (EPS), which is often looked upon favorably by investors.
Despite this, Apple’s stock remains historically expensive compared to its trailing-12-month EPS. Over the period between October 1, 2023, and September 30, 2024, Warren Buffett managed the sale of 67% of Berkshire Hathaway’s stake in Apple. Although the renowned investor appreciates Apple’s brand, leadership, and capital return strategies, he maintains his focus on value investing. Currently, labeling Apple as a “value” investment could be considered misleading.
Is Now the Right Time to Invest in Sirius XM? Here’s What You Should Know
Thinking about purchasing stock in Sirius XM? Take a moment to reflect on this:
The Motley Fool Stock Advisor analyst team has recently identified what they believe are the 10 best stocks for investors to consider right now, and Sirius XM did not make the list. The selected stocks are expected to offer significant returns in the coming years.
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Sean Williams holds positions in Sirius XM. The Motley Fool is invested in and recommends Apple and Berkshire Hathaway, as well as Occidental Petroleum. Please refer to their disclosure policy for more information.
The views and opinions expressed here are those of the author and do not necessarily reflect Nasdaq, Inc.’s perspectives.
