Aside from holding Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) stock, which is a conglomerate holding some of the best-quality businesses in the world, investors have a number of ways to ride the coattails of Warren Buffett to long-term gains.
Of course, investors can always simply buy the entire basket, and opt for Berkshire stock outright. That’s a strategy I, and many others, have taken.
That said, I think there is also value in paring down Mr. Buffett’s portfolio into categories or sectors. This approach is one I think is worth considering, because it indicates directionally how Buffett is thinking about the market at a particular time.
Investors will certainly want to note, for example, that Warren Buffett has been re-orientating his portfolio toward energy for the better part of the past two years. Buffett’s view appears to be that energy exposure is a great hedge against inflation and more geopolitical conflict. Additionally, many energy companies are excellent operators and produce incredible cash flows and dividends (which he’s historically preferred).
Then there’s the tech sector, dominated by a company we’ll get to on this list. It’s important to have some component of high-quality growth in one’s portfolio, and there’s plenty to be found in Berkshire right now.
Finally, directional exposure to the U.S. consumer makes sense for most long-term investors. Finding companies that continue to grow alongside the broader economy is a great way to grow one’s wealth.
These three stocks are perhaps among the best in Buffett’s portfolio right now, representing excellent wealth-generating assets for long-term investors.
Occidental Petroleum (OXY)
Houston-based hydrocarbon exploration company Occidental Petroleum (NYSE:OXY) has been among the biggest additions Warren Buffett has made over the past year. This move has proven to be prudent, given Occidental’s price performance increase of more than 130% this year. Notably, Buffett has been adding millions of shares for several quarters now, suggesting that he’s betting that the energy trade is far from over.
Of course, one of the primary reasons oil stocks have outperformed the market is the relatively high prices at which crude oil has been trading. There’s always some risk that oil prices will decline, if demand is hit hard enough by central banks. However, Warren Buffett appears to be sticking with this pick, and buying on weakness.
Investors will hope for Occidental Petroleum to show strength as it approaches its next earnings release. The company is expected to report earnings per share of $2.48, a 185.06% increase over the prior-year quarter. The most recent consensus forecast calls for quarterly revenue of $9.35 billion, a 37.25% increase over the previous year.
Valuation is also important, so investors should be aware that Occidental Petroleum currently has a forward price-earnings ratio of 10.35 times. Occidental Petroleum ranks eighth in the Oil & Gas-Exploration and Production industry group and seems to be an exciting buy option for investors right now. At least, Warren Buffett thinks so.
American Express (AXP)
American Express earns a decent living by charging these subscription fees on several card programs, such as its Platinum and Gold cards. Apart from the company’s credit card lending business, American Express also operates an end-to-end payments network that facilitates payment transactions between consumers and merchants. The revenue from these transactions is the company’s largest revenue generator.
The New York City-based company expects full-year earnings to exceed its forecast of $9.25 to $9.65 per share. Analysts are already forecasting full-year earnings of around $9.92 per share.
American Express maintains its full-year revenue growth forecast of 23% to 25%. This statement came after American Express reported higher revenue in the previous quarter. For those looking for long-term exposure to the American consumer, there’s perhaps no better way to go than AXP stock right now.
No list of Warren Buffett stocks is complete without discussing Apple (NASDAQ:AAPL), the most valuable company in the world for much of the past decade. This is one of the Oracle of Omaha’s best bets in recent years, and it’s also his biggest holding (for good reason).
In fact, Berkshire Hathaway’s Apple holdings increased in value by $9.8 billion during the first half of 2022. This was driven in part by a surge in Apple stock of nearly 7% following a strong earnings report. While the stock’s recent performance hasn’t been great (along with the entire market), this is a long-term winner for Warren Buffett. Berkshire Hathaway began buying Apple stock in 2016 and now owns 887,136,000 shares of the iPhone maker. This is more than 5% of Apple’s outstanding stock.
Apple pays out regular dividends, which Buffett considers appealing to his investing philosophy. Buffett has also argued that Apple’s iPhone ecosystem is “sticky”. This encourages customers to upgrade regularly, making it a safer investment as a consumer company rather than a tech company.
Furthermore, Apple’s revenue increased 8% year-over-year to $90.1 billion in Q4 2022, with multiple segments outperforming Q4 2021. Its iPhone segment revenue of $42.63 billion surpassed the previous year’s $38.87 billion, while Mac revenue of $11.51 billion increased from $9.18 billion in Q4 2021. With several PC companies experiencing decreased demand, Apple’s 25% growth in its Mac segment demonstrates the potency of its products.
On the date of publication, Chris MacDonald has a LONG position in BRK-B and AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.