Do you want to give your portfolio a big advantage? Buy what Warren Buffett buys. His portfolio has been beating the market for decades, and choosing from stocks he’s already bought will give your portfolio an instant competitive edge.
Right now, two Buffett stocks in particular seem too cheap to ignore. The former is a great option for oil bulls. But the second is a good choice regardless of your investing style.
Bullish on oil? Look at this stock.
Oil prices have been on a rollercoaster ride in recent years. In 2020, they fell below $25 per barrel. But two years later they peaked above $125 a barrel. Right now they are back around $70 a barrel. If you think prices will rise again – whether due to emerging market demand or geopolitical uncertainty – there’s one stock you should take a closer look at: Western petroleum (NYSE:OXY).
Buffett has been investing in Occidental for several years. But he has bought consistently over time, gradually increasing his stakes to enormous levels. Last quarter he bought more than 7 million shares from his holding company, Berkshire Hathawaybringing the position value to $16 billion.
What does Buffett like most about Occidental? It could have an impact on rising oil prices. As an oil company primarily exposed to upstream activities, Occidental is primarily exposed to changes in oil prices. And after its $12 billion acquisition of shale producer CrownRock, the company could see its value rise if oil prices rise again.
According to Occidental’s management team, cash flow would increase by about $260 million for every $1 increase in the price of oil. At its peak in 2022, that could result in enough additional cash flow to finance the entire CrownRock acquisition. Of course, oil prices are about $50 per barrel lower than they will be in 2022. But as history has proven, a lot can change in two years. If you believe in rising oil prices, Occidental is a good choice. Keep in mind that the upside potential will be equally matched by the downside potential if oil prices were to weaken further.
This Buffett stock is a growth superstar
You don’t have to be optimistic about oil prices to love Now Holdings (NYSE: NOW). Buffett got in on this little-known growth stock early, but he has yet to sell a single share of his $1.4 billion position.
What does Nu do? If you lived in Brazil, Mexico or Colombia, you would probably already know the answer. The fintech company operates exclusively in these markets, digitally providing a range of financial services – from credit and debit cards to crypto trading and personal insurance. There was clearly demand for this business model. Over the past decade, Nu has essentially gone from zero to over 100 million customers.
Now’s biggest growth days are behind us, but turnover is still growing by more than 50% per year. And with more than 600 million inhabitants in Latin America, there is still plenty of room for growth.
At first glance, Nu shares aren’t particularly cheap. Shares trade at 47 times earnings. But growth is happening so quickly that these high premiums can quickly look like a bargain. This year, profits are expected to grow by more than 70%, while analysts expect profits to continue growing at around 50% per year for the next five years. Assuming this is true, Nu stock could be valued at less than ten times 2028 earnings.
It will take some patience for this stock to look like a bargain, but shares are undeniably cheap if you’re willing to hold on through this period of sustained growth.
Should You Invest $1,000 in Occidental Petroleum Now?
Consider the following before purchasing shares in Occidental Petroleum:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Occidental Petroleum wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $839,122!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns October 14, 2024
Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Berkshire Hathaway. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
2 Incredibly Cheap Warren Buffett Stocks to Buy Now was originally published by The Motley Fool
