There’s a good reason to follow Warren Buffett stock picks. According to his most recent annual shareholder letter, Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) generated 3.7 million percent returns for investors since 1965 after he became CEO. In contrast, the S&P 500 returned 24.7 thousand percent. No wonder he’s called the Oracle of Omaha.
As of June 28 there are 54 stocks in Buffett’s portfolio that are valued at almost $377 billion. Many of these stocks will undoubtedly continue to increase in value over the coming years. The following companies are three of Warren Buffett’s best stocks to buy in July.
Warren Buffett Stock Picks: Floor & Decor (FND)
The housing market slowdown will impact a business like Floor & Decor (NYSE:FND). It sells hard-surface flooring options like tile, wood, laminate, vinyl and natural stone. It also sells decorative accessories and wall tile.
While it operates 200 warehouse stores and five design studios across 36 states, it believes there is room for as many as 500 locations over time.
Fiscal first-quarter sales rose 9% for Floor & Decor, but comparable sales fell 3.3% as transactions tumbled 10% year-over-year. Customers purchased less square footage of flooring, and they opted for lower-priced options.
Floor & Decor expects the remainder of the year to be challenging but believes it is still best positioned to capture consumer demand. It sources products from 24 countries and has over 240 suppliers. That gives it the ability to deliver the low-priced products consumers want.
Additionally, during their Q1 2023 earnings call, the company said it expects the second quarter to be a “trough earnings” period, indicating now could be a great time to buy the stock. Although it goes for 37 times trailing earnings, that’s less than the average valuation since going public in 2017. The market seems to be looking past current conditions and is willing to pay for future growth.
Buffett owns 4.8 million shares of Floor & Decor for a 4.5% position in the stock. This could be one of the Warren Buffett stock picks to buy in July for you, too.
Occidental Petroleum (OXY)
Oil and gas giant Occidental Petroleum (NYSE:OXY) is another Buffett-approved stock, but one that sports an exceptionally cheap valuation. Shares go for just six times trailing earnings, 10 times next year’s estimates, and less than twice sales. It also trades at a bargain basement five times the free cash flow it produces.
Currently trading at just under $60 per share, investors could purchase Occidental stock at virtually the same price Buffett accumulated his shares at. For example, during the first quarter, he spent $1 billion dollars on the stock for prices around $57 a share. Buffett now owns one-fourth of the oil company.
Why should you buy? Because the demand for fossil fuels is not going away. Crude oil prices are likely to remain elevated, and Europe is in the midst of an energy crisis. The war in Ukraine hurts, and short-sighted energy policies plague it. In the midst of an energy shortage, for example, Germany shut down its last three nuclear power plants in April. In the U.S., bans and limits on drilling have helped raise prices, too.
Buffett says the investment into the oil company is “a bet on the fact that the Permian Basin is what it is cracked up to be.” The Permian Basin is an oil-producing region in West Texas and New Mexico where Occidental runs some of the “top performing wells in the industry.”
It’s a position tough to argue against, and Occidental Petroleum could be one of Warren Buffett’s best stocks to buy.
Warren Buffett Stock Picks: Berkshire Hathaway (BRK-A, BRK-B)
While this might not fully qualify for a list of Warren Buffett stock picks because Buffett’s Berkshire portfolio doesn’t “own” any Berkshire stock. However, it has been buying it back at a significant rate. In the first quarter, Berkshire Hathaway repurchased $4.4 billion worth of Class A and Class B shares.
That’s noteworthy because it was only relatively recently that Buffett and executive vice chairman Charlie Munger were able to buy Berkshire stock. Previously the stock could only be repurchased if it fell to 120% of its book value. That was a high hurdle to reach. Beginning in 2017, however, the board said so long as Buffett and Munger agreed the stock is trading below its intrinsic value. This meant that since Berkshire holds at least $30 billion worth of cash, equivalents and Treasury bills, they can buy back shares.
There is risk in buying Berkshire stock, of course. At 92 years old, Buffett is at the end of his life. While his brain and wit are as sharp as ever, there’s no denying the clock is ticking. Berkshire has an adept trading team to take over, but they’re not Warren Buffett.
Still, it may still be worthwhile to enjoy the benefit of the Oracle while we still have him. Moreover, buying Berkshire Hathaway stock also gives you access to all of Warren Buffett’s stock picks. This is definitely one stock to buy in July.
On the date of publication, Rich Duprey did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
