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Warren Buffett’s Smart Picks for 2025: A Look at 5 Key Stocks
No other money manager on Wall Street captures attention quite like Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett. In his six-decade tenure, he has generated a staggering cumulative return of over 5,460,000% on Berkshire’s Class A shares, as of the market close on January 2.
Mirroring Buffett’s investment moves, often revealed through Berkshire Hathaway’s quarterly filed Form 13Fs, has long been viewed as a reliable strategy for investors.
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Despite having offloaded $166 billion in stocks over eight quarters from October 1, 2022, to September 30, 2024, Buffett continues to buy into a select group of enduring businesses.
As we move toward 2025, Buffett shows strong interest in these five stocks.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Sirius XM Holdings: A Unique Investment
One stock Buffett has been accumulating recently is satellite-radio operator Sirius XM Holdings (NASDAQ: SIRI).
Sirius XM recently merged with Liberty Media’s tracking stock and executed a 1-for-10 reverse stock split. Most companies undertake reverse splits to avoid delisting, but Sirius XM’s move appears aimed at attracting institutional investors who usually avoid stocks under $5.
This operating model presents two significant advantages. First, SiriusXM holds a legal monopoly, facing no competition in satellite radio, allowing for robust subscription pricing power. Secondly, its subscription-based revenue stream makes its cash flow steadier, especially during economic downturns, as nearly 77% of its net sales come from subscriptions.
Moreover, with a valuation of just over 7 times its forward earnings and a near-record dividend yield of 5%, Sirius XM is an attractive option for value-focused investors.
Occidental Petroleum: A Strategic Energy Play
At the beginning of 2022, Berkshire held $10 billion worth of Occidental Petroleum (NYSE: OXY) preferred stock but no common shares. Over the past three years, Buffett and his team have now acquired 264,178,414 common shares.
Energy stocks have historically been a small part of Buffett’s portfolio. However, with over $30 billion now invested between Chevron and Occidental, it’s evident that he expects crude oil prices to stay high.
A driving factor in oil prices is the reduction of capital expenditures during the COVID-19 pandemic. While spending has returned to normal levels, a swift increase in crude supply is unlikely.
When demand remains high and supply is constrained, prices typically rise.
A higher crude price significantly impacts Occidental, which relies heavily on its drilling operations for revenue. Thus, rising oil prices can lead to disproportionately higher cash flows for the company, although a price drop would have the opposite effect.
Image source: Getty Images.
Domino’s Pizza: Innovation and Growth
Another favorite of Buffett’s for the upcoming year is Domino’s Pizza (NYSE: DPZ), which was the largest purchase made by Buffett’s team in the most recent quarter.
The company has a unique history, notably admitting around 15 years ago that its pizza needed improvement. This honesty, along with new strategies and innovations, boosted the brand’s reputation significantly.
Today, Domino’s is focused on its five-year “Hungry for MORE” initiative, introduced in December 2023 by CEO Russell Weiner. This program leverages technology to improve efficiency and product quality while empowering franchisees to enhance brand value.
Domino’s ongoing international growth is also noteworthy, as it is on track for its 31st consecutive year of international same-store sales growth, highlighting the brand’s strength and commitment to innovation.
Chubb: A Stable Insurance Investment
Lastly, Chubb (NYSE: CB) emerges as another significant investment for Buffett in 2025. Between July 2023 and March 2024, Buffett’s team quietly built a substantial position in Chubb.
This insurance company appeals to value investors due to its stable operating model and ability to command premium pricing. Chubb can raise premiums both after significant loss events or during low-claim periods, reinforcing a proactive approach to profitability.
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Chubb and Berkshire Hathaway: Leaders in Insurance Investments
Chubb’s Strategy for High-Value Homes
Chubb, a notable insurer, specializes in higher-value homes. This focus allows the company to charge more lucrative premiums. High-income earners tend not to change their spending habits or miss payments during economic downturns, providing Chubb with stability.
Benefits from Rising Interest Rates
The Federal Reserve’s recent aggressive rate hikes, the most significant in four decades from March 2022 to July 2023, have benefitted companies like Chubb. When insurers collect premiums but haven’t paid out claims, they invest this float in safe, short-term Treasury bills. Higher yields mean increased interest income, helping firms such as Chubb enhance their financial standing.
Berkshire Hathaway’s Ongoing Stock Buybacks
Warren Buffett continues to place his bets on his own company, Berkshire Hathaway. In the most recent quarter, he did not repurchase any shares for the first time in 25 quarters. However, since mid-July 2018, Buffett has spent around $78 billion buying back shares.
Berkshire Hathaway does not pay dividends, so buybacks serve several important roles. They reward long-term investors by reducing the total share count, thereby increasing the ownership stake for each remaining shareholder. This strategy reinforces the investing philosophy that Buffett and the late Charlie Munger have championed for many years.
Improved Earnings and Investor Confidence
Ongoing buybacks also boost earnings per share (EPS) for companies with steady or growing net income. Since mid-2018, Berkshire’s share count has shrunk by 12.6%, which has lifted EPS and attracted more investors focused on fundamentals. This trend showcases Buffett’s faith in the company’s value, as spending nearly $78 billion on stock indicates he believes Berkshire is still undervalued.
A Strong Financial Position
With a remarkable $325.2 billion in cash, cash equivalents, and U.S. Treasuries, Berkshire Hathaway has ample resources for further stock repurchases. This financial cushion enhances its strategic options moving forward.
Investment Considerations for Berkshire Hathaway
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Sean Williams holds positions in Sirius XM. The Motley Fool has positions in and recommends Berkshire Hathaway, Chevron, and Domino’s Pizza, while also recommending Occidental Petroleum. 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.
