Many investors (including me) have observed that Warren Buffett has built a massive cash stockpile for Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B). Many have also noticed Buffett has been a net seller of stocks for seven consecutive quarters.
Does this mean the legendary investor can no longer find any stocks he likes? Not at all. Buffett isn't buying many stocks, but he's still buying some. What is Buffett's favorite stock to buy right now (other than Berkshire Hathaway)?
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The top contenders
I excluded Berkshire Hathaway itself because it's 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 had the conglomerate repurchase a whopping $9.2 billion of its shares.
Apple could be considered a top contender for Buffett's favorite stock. After all, it's by far the largest holding in Berkshire's portfolio. At Berkshire's annual shareholder meeting earlier this year, Buffett said that Apple was "an even better business" than Coca-Cola, which he referred to as "a wonderful business." However, I don't think Apple is Buffett's favorite stock to buy right now for a simple reason: He sold a huge chunk of Berkshire's stake in the iPhone maker in the second quarter of 2024.
What about Berkshire's only new positions initiated in Q2 -- Heico and Ulta Beauty? I'm not sure if Buffett led the charge in buying these stocks or if one of Berkshire's two investment managers made the decision. Also, the sizes of the purchases of these stocks (around $185 million for Heico and $266 million for Ulta) are relatively small for Berkshire. Because of these reasons, I don't think either Heico or Ulta ranks as Buffett's favorite stock to buy now.
Sirius XM Holdings(NASDAQ: SIRI) looks like a more promising candidate, though. Buffett loaded up on the stock in Q2, increasing Berkshire's stake in the satellite entertainment provider by more than 8x. He also bought more shares of Sirius XM this month.
Buffett's favorite stock right now
So is Sirius XM Buffett's favorite stock to buy right now? Maybe. However, I think an even stronger case can be made for Occidental Petroleum(NYSE: OXY).
Berkshire has much more money invested in Occidental than it does in Sirius XM. Oxy is the conglomerate's sixth-largest position. Berkshire's stake in the oil and gas producer is worth $13.2 billion, roughly 4.4 times the size of its position in Sirius XM.
More importantly, Buffett has bought Occidental more regularly in recent years than any other stock (except Berkshire Hathaway itself). There haven't been many quarters since the beginning of 2022 that Buffett didn't add to Berkshire's position in Oxy.
Could this buying trend come to a screeching halt soon? I don't think so. In August 2022, Berkshire secured regulatory approval to acquire up to 50% of Occidental. It currently owns 27.3% of the company.
Occidental is also one of eight stocks Buffett mentioned in his latest letter to Berkshire shareholders that he said he expects to hold "indefinitely." Sirius XM wasn't on the list. Buffett praised Occidental's management. He wrote that he likes Oxy's "vast oil and gas holdings in the United States." Buffett also noted that he likes Berkshire's option to "materially increase our ownership at a fixed price" via stock warrants.
Should you buy Oxy stock, too?
I think the evidence points to Occidental Petroleum being Buffett's favorite stock to buy right now. But should you buy Oxy stock, too? It depends on your investing style, in my opinion.
Income investors probably won't be overly enamored with Occidental's forward dividend yield of only 1.7%. Other oil stocks offer much juicier dividends.
Growth investors can no doubt find more attractive alternatives in the tech sector. However, don't dismiss Occidental's growth prospects. CEO Vicki Hollub predicts a supply shortage of oil by the end of 2025. If she's right, Occidental's share price could be in store for big gains in the not-too-distant future.
The company is also a leader in carbon capture and storage. If this technology achieves its potential, Occidental could deliver exceptional growth over the long term.
Finally, I suspect many value investors will love this stock. Occidental's shares trade at 11.1 times forward earnings. That's well below the S&P 500 energy sector's average forward earnings multiple of 13.9, which is itself cheap relative to other S&P 500 sectors.
Buffett's favorite stock to buy right now isn't my favorite stock to buy right now. However, it does look like a good one for many investors who aren't billionaires to consider.
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Keith Speights has 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. The Motley Fool has a disclosure policy.
