Warren Buffett has built up a cash reserve of nearly $277 billion for Berkshire HathawayIt’s fair to say that he doesn’t have to worry about the price of the shares he buys.
Some people do have to pay attention to stock prices. There’s good news if you’re in that group: Berkshire Hathaway’s portfolio offers several great ideas for cash-strapped investors. Here are my picks for the three best Buffett stocks to buy right now at $120.
1. Bank of America
You can scoop up one share Bank of America (NYSE: BAC) for less than $40. It is one of the largest financial services companies in the world, with a market capitalization of over $300 billion.
Should you be worried that Buffett sold nearly 9% of Berkshire’s stake in Bank of America in the second quarter of 2024? I don’t think so. BofA still makes up 11.8% of Berkshire’s portfolio. And more importantly, it’s still a good stock.
Bank of America is fairly valued in a market where many stocks are not. Its shares trade at a forward earnings multiple of less than 11.8. The big bank offers an attractive dividend, with a forward yield of almost 2.7%.
Certainly, the prospect of the Federal Reserve cutting interest rates could cause BofA’s net interest income to decline. However, the company could also benefit from rate cuts if demand for loans increases. In the long run, I expect an investment in Bank of America to pay off handsomely.
2. Mitsui
It only costs about $21 of your original $120 to buy a share Mitsui (OTC: MITSF) (OTC: MITSY). Note that the Japanese conglomerate trades through two over-the-counter stocks. One of them (ticker symbol MITSF) is much cheaper than the other (ticker symbol MITSY).
Berkshire has stakes in five Japanese conglomerates. I could have easily chosen any of the other four to include in our list. However, I chose Mitsui because it is the most attractively valued, with shares trading at a price-to-earnings ratio of just 8.3 over the past 12 months.
Buffett wrote to Berkshire Hathaway shareholders earlier this year that he expects to hold Mitsui (and the other four Japanese stocks) “indefinitely.” He praised the diversification the conglomerates provide, and the “shareholder-friendly policies” of their management teams.
I’ll add one more thing investors like about Mitsui: the dividend. The company’s forward dividend yield is over 3.1%. The dividend payout ratio is a super low 23.5%, which indicates there’s plenty of financial flexibility to increase the dividend in the future.
3. Occidental Petroleum
After buying one share each of Bank of America and Mitsui, you’ll be left with about half of your original $120. There’s another Buffett stock that I think would be an ideal investment for your remaining cash: Occidental petroleum (NYSE: OXY).
Buffett continues to buy Occidental stock by the fistful. It is now Berkshire’s sixth-largest position. I expect Buffett to buy more of the oil and gas producer’s stock in future quarters.
Like Mitsui, Occidental is a stock Buffett plans to own “indefinitely.” He’s enamored with the company’s vast oil and gas assets in the U.S. The legendary investor also has a lot of respect for Occidental CEO Vicki Hollub. In his last letter to Berkshire shareholders, Buffett wrote, “Under Vicki Hollub’s leadership, Occidental is doing the right things for both its country and its people.” And its owners.”
Occidental stock should do well if oil prices rise in the coming years — something Hollub predicts will happen. The company is also a leader in developing carbon capture and storage technology. If its efforts on this front are successful, Occidental should be a huge winner in the coming decade and beyond.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Keith Speights has positions in Bank of America and Berkshire Hathaway. The Motley Fool has positions in and recommends Bank of America and Berkshire Hathaway. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
The Best Warren Buffett Stocks to Buy Now at $120 was originally published by The Motley Fool
