Three Shrewd Investment Opportunities Proposed by Warren Buffett at Present
Three Shrewd Investment Opportunities Proposed by Warren Buffett at Present
If you're in need of investment ideas, a good place to look is the portfolio of one of the world's most successful investors - Warren Buffett. Buffett periodically lists his favorite stocks every three months via Berkshire Hathaway's quarterly 13-F filing.
Although Buffett hasn't been actively buying stocks lately, preferring to accumulate a substantial cash reserve, some of the stocks he owns still hold potential. Here are three potential Buffett stocks you might consider:
1. Amazon
Amazon, represented by the symbol AMZN (-0.66%), is still performing exceptionally well. In Q3, the company's earnings surged by 54.5% year over year to reach $15.3 billion. Its free cash flow over the previous 12 months, up to September 30, 2024, more than doubled compared to the same period the year before.
Amazon's momentum is expected to continue. The company is still in the process of optimizing its cost structure, particularly in its e-commerce business. Amazon is also just starting to tap into advertising on Prime Video.
Moreover, Amazon's cloud unit remains its primary growth driver. Artificial intelligence (AI) is expected to provide a strong boost for several years, with Amazon Web Services (AWS) leading the charge by aggressively launching new machine learning and generative AI features.
Buffett and his team have not purchased any more Amazon shares since the second quarter of 2019. However, I believe this stock remains one of the best AI investment opportunities available.
2. Chevron
Chevron, represented by the symbol CVX (-0.54%), is one of Buffett's top holdings. At the end of Q3, Berkshire Hathaway owned over 118.6 million shares of the oil and gas giant, worth almost $19 billion today.
Chevron's outlook looks promising, especially with the incoming presidential administration expected to support the oil and gas industry. This could lead to fewer regulatory challenges for the company in expanding its operations.
Chevron aims to increase its free cash flow annually by more than 10% in the coming years. The company also plans to continue its share buyback program, reducing its outstanding shares by 3% to 6% each year.
Income investors might find Chevron an attractive option. Its forward dividend yield exceeds 4%, and the company has increased its dividend for 37 consecutive years. Soon, it may surpass this impressive streak. Chevron's dividend growth rate over the past five years has outperformed all its competitors and the S&P 500.
3. Occidental Petroleum
Occidental Petroleum, represented by the symbol OXY (-1.14%), could also benefit from the favorable dynamics affecting Chevron. Although smaller in size, Occidental is a key player in the U.S. oil and gas market.
Buffett has publicly expressed his admiration for Occidental, owning 27.2% of the company and having the option to acquire up to 50%. Buffett stated in his shareholder letter this year that Occidental is one of the investments he expects to hold indefinitely.
Buffett also commended Occidental CEO Vicki Hollub for her knack for extracting oil efficiently. Occidental's operations demonstrate her competence, such as its Wolfcamp XY/A development in New Mexico, which yielded oil at a rate 35% higher than the industry average in Q3.
One of Oxy's strengths is its focus on carbon capture and storage technology. Construction on the company's Stratos direct air capture (DAC) facility in South Texas is progressing, with the goal of capturing 500,000 tons of carbon dioxide annually. If the technology performs as expected, it could create a new revenue stream for Occidental over the next decade and beyond.
After considering Warren Buffett's investment portfolio, it's clear that he sees value in companies like Chevron. Buffett's firm, Berkshire Hathaway, holds a significant stake in Chevron, which could potentially yield high returns due to the incoming presidential administration's expected support for the oil and gas industry. [money, investing, finance]
Investors seeking a reliable income source might find Chevron appealing. With a forward dividend yield exceeding 4%, Chevron has increased its dividend for 37 consecutive years, and its dividend growth rate outperforms competitors and the S&P 500. [money, investing, finance]