Imagine one of the greatest investors of all time sends you a list of the stocks he likes the most. The good news is that you don’t have to use your imagination. In reality it happens every three months.
Warren Buffett undoubtedly qualifies as a legendary investor. While Buffett won’t personally email you a list of his favorite stocks, he will do the next best thing. Every quarter the company he leads is Berkshire Hathawaydiscloses its stock holdings to the U.S. Securities and Exchange Commission (SEC). Any investor looking for ideas from the so-called Oracle of Omaha need only scan Berkshire’s latest 13-F filing.
Granted, some of the stocks on this list were better choices when Buffett first bought them than they are now. Others, however, remain great candidates for investors. Which Buffett stock would I buy in October if I could only choose one?
Several good options
Before I make my top picks among the stocks that Buffett owns, I must readily admit that it’s not an easy decision. Given Buffett’s acumen in stock selection, this should come as no surprise.
For example, I’m pretty much on the same page as Buffett Apple. He thinks it’s a great company, and so do I.
Of course, Buffett has reduced his stake in the stock in recent quarters. However, Apple remains by far Berkshire’s largest holding. It’s also my largest stock position (although I have more invested in ETFs). I expect Apple’s generative AI initiatives to lead to more iPhone sales and boost its stock price in the coming years.
Even though Buffett has not personally called for buying shares Amazonit’s one of his best stocks in my opinion. Amazon’s investments in technology should boost profitability. The Amazon Web Services unit has huge growth opportunities as organizations migrate to the cloud.
I also agree with Buffett’s bullish view Western petroleum. He likes the company’s leadership, oil and gas reserves and focus on carbon capture technology. Tensions in the Middle East could serve as a tailwind for the stock in the short term.
Buffett’s top choice
But if I could buy just one Buffett share in October, I’d go for it Lennar (NYSE: LEN). The company is one of the largest homebuilders in the US (Berkshire also owns another top homebuilder – NVR.)
I think now is the perfect time to buy Lennar stock, in part because of the Federal Reserve’s interest rate cut. Stuart Miller, executive chairman and co-CEO of Lennar, said in his company’s third-quarter results press release that the Fed’s actions “should improve affordability and support the already strong demand for both new and existing housing should accelerate.”
Miller’s optimism is, in my opinion, fully justified. I imagine a row of dominoes, with one falling domino leading to a ripple of other falling dominoes. Lower interest rates should lead to lower mortgage rates, which would lead to more home purchases, which would lead to greater revenues and profits for Lennar.
Lennar isn’t just ready for a short-term boost, though. The US faces a persistent, chronic housing shortage. Miller addressed this shortage several times in his comments during Lennar’s Q3 call. He noted that it is “well documented” and “the result of years of underproduction.” The solution to a problem caused by underproduction is obviously more production – good news for Lennar’s long-term prospects.
This outlook is not fully reflected in Lennar’s valuation. The stock’s price-to-earnings ratio is just 12.4, well below the stock’s earnings multiple of 18.3. SPDR S&P Homebuilders ETF.
One wild card
Lennar could also benefit from a wild card. Miller alluded to this in the Q3 earnings call, saying: “[E]Even the national narrative is beginning to recognize the need for programs that activate supply.”
The presidential candidates of both major political parties have spoken about the need for more housing. Vice President Kamala Harris wants to provide financial support to first-time homebuyers and tax breaks to homebuilders. Meanwhile, former President Donald Trump wants to make more federal land available for housing development.
It is possible that new federal policies will be enacted during the next presidential term that will directly help Lennar. This isn’t a sure thing, but it’s a wild card that makes this Buffett stock even more attractive.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Amazon, Apple and Berkshire Hathaway. The Motley Fool holds positions in and recommends Amazon, Apple, Berkshire Hathaway, Lennar, and NVR. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
If I could only buy one Warren Buffett stock in October, this would be it, originally published by The Motley Fool
