Warren Buffett’s Stock Picks: A Closer Look at His Current Favorites

Many investors, including myself, have observed that Warren Buffett has amassed a significant cash reserve for Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B). Additionally, some may have noted that Buffett has been a net seller of stocks for seven straight quarters.

Does this signal that the legendary investor has run out of appealing stocks? Not necessarily. Although Buffett isn’t purchasing a large quantity of stocks, he is still buying selectively. So, which stock is currently at the top of Buffett’s list (aside from Berkshire Hathaway)?

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Identifying the Key Contenders

For clarity, I have excluded Berkshire Hathaway itself, which is arguably always Buffett’s favorite stock. In the first half of 2024 alone, he approved $2.9 billion worth of stock buybacks. Last year, Buffett allowed a remarkable $9.2 billion in share repurchases.

Apple stands out as a prime candidate for Buffett’s current buy. It is the largest single holding in Berkshire’s portfolio. At the annual shareholder meeting earlier this year, Buffett stated that Apple is “an even better business” than Coca-Cola, which he called “a wonderful business.” However, I do not believe Apple is his favorite stock at the moment, mainly because he sold a significant portion of Berkshire’s stake in the iPhone maker in the second quarter of 2024.

What about Berkshire’s new positions initiated in Q2, namely Heico and Ulta Beauty? It’s unclear whether Buffett personally directed these purchases or if they were selected by one of Berkshire’s two investment managers. The investment sizes—approximately $185 million for Heico and $266 million for Ulta—are relatively small considering Berkshire’s overall scale. Thus, I doubt either of these companies is his top pick at the moment.

Sirius XM Holdings (NASDAQ: SIRI) appears to be a more likely favorite. In Q2, Buffett significantly increased Berkshire’s stake in the satellite entertainment firm, enhancing it more than eightfold. He continued to purchase additional shares of Sirius XM this month.

Buffett’s Top Stock Choice

Is Sirius XM Buffett’s current favorite stock? Perhaps. Nevertheless, I believe an even stronger argument can be made for Occidental Petroleum (NYSE: OXY).

Berkshire’s investment in Occidental far exceeds its stake in Sirius XM, making Oxy the conglomerate’s sixth-largest position. Berkshire currently holds $13.2 billion worth of Occidental, approximately 4.4 times its investment in Sirius XM.

Buffett has also acquired shares of Occidental more consistently in recent years compared to any other stock, aside from Berkshire Hathaway itself. Since early 2022, there have been very few quarters where Buffett hasn’t added to Berkshire’s holding in Oxy.

Will this buying trend stop abruptly in the near future? It seems unlikely. In August 2022, Berkshire received regulatory approval to purchase up to 50% of Occidental and currently owns 27.3% of the company.

Occidental is also one of eight stocks Buffett highlighted in his latest letter to Berkshire shareholders as ones he expects to hold “indefinitely.” Notably, Sirius XM did not make this list. Buffett commended Occidental’s management and expressed his appreciation for the company’s extensive oil and gas assets within the United States. Furthermore, he endorsed Berkshire’s opportunity to “materially increase our ownership at a fixed price” through stock warrants.

Should Investors Consider Buying Oxy Stock?

The evidence points to Occidental Petroleum being Buffett’s favorite stock right now. But should you consider buying Oxy stock as well? It largely depends on your investment approach.

For income investors, Occidental’s forward dividend yield of only 1.7% might be dissatisfying, especially when many other oil stocks offer higher returns.

Growth investors may find more appealing choices within the tech sector. However, dismissing Occidental’s growth potential may be a mistake. CEO Vicki Hollub suggests there may be an oil supply shortage by the end of 2025, which could lead to significant gains in Occidental’s share price in the near future.

Additionally, the company is at the forefront of carbon capture and storage technology. If this technology lives up to its promise, Occidental could experience substantial long-term growth.

Lastly, value investors may find this stock attractive. Occidental shares are priced at 11.1 times forward earnings, well below the S&P 500 energy sector’s average forward earnings ratio of 13.9, which is already viewed as reasonably priced relative to other sectors of the S&P 500.

While Buffett’s favorite stock may not be my first choice, it could be an appealing option for many regular investors.

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Keith Speights holds positions in Apple and Berkshire Hathaway. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Ulta Beauty. The Motley Fool recommends Heico and Occidental Petroleum as well.

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