What Warren Buffett buys often makes news. But what he holds is just as essential as new or increased investments. Buffett’s a buy-and-hold champion, with many of his core investments decades old. So, investors should pay attention when the Oracle of Omaha sells off some stocks but keeps others (particularly in the same sector).
Buffett’s 2023 moves may seem contrarian initially. Each of the three industries (energy, consumer credit and commercial banking) experienced sector-specific turbulence this year. But each of these firms has Buffett’s stamp of approval for good reason. Investors interested in replicating his massive portfolio can start with these three stocks.
Occidental Petroleum (OXY)
Buffett’s still boosting his bullish bet on Occidental Petroleum (NYSE:OXY) and owned nearly 25% of the company stock at the end of June. In total, that’s a nearly $12 billion bet, so investors following the Oracle’s moves should take notice.
Buffett is bullish on the oil company’s long-term prospects, including their adaptation to sustainable energy. But the move may also pay off short-term. Oil markets have been shaky most of the year. Major production countries are playing chicken with one another, with some threatening to cut off supply. In reaction, others imply they’ll ramp up production to keep global pricing low.
But one thing is sure: oil demand is high and will keep climbing. The U.S. Energy Information Administration projects slightly higher consumption for the remainder of the year and a jump to 56.5 million barrels per day in 2024. Demand might soon outpace that unsteady supply if varied government officials keep tweaking output to maximize their political advantage.
Of course, this supply/demand mismatch means available oil becomes increasingly pricy. OXY’s dominant position in the Permian Basin, one of the most oil-rich fields globally, means the company will continue pulling oil to compensate for OPEC+ and other national production cuts. Combine continued production with higher pricing, and OXY is swimming in cash. The company will be poised to buy back shares and juice the stock price or increase dividends – both of which Buffett likely expects to happen.
American Express (AXP)
American Express (NYSE:AXP) is one of Buffett’s oldest positions, and he hasn’t touched the allocation in 25 years despite seeing more than $26 billion in unrealized gains on the investment. American Express isn’t slowing down, either, despite a sluggish economy.
In the company’s recent filing, revenue jumped 22% to $592 billion, largely on the back of ballooning consumer credit card debt and the commensurate higher interest rates. Likewise, the stock climbed 13% this year, rewarding Buffett and other investors for their patience. Management is targeting another 15% to 17% revenue increase by the end of the year.
Investors, afraid they missed the boat, shouldn’t be scared off, either. Beyond American Express’ growth prospects, the company also benefits value-driven investors. American Express consistently pays a dividend that, although relatively small at a 1.6% yield, is reliable and growing over time. Still, investing in American Express is fundamentally a growth move. And, like Buffett’s seen, a growth play that will pay off over time.
Bank of America (BAC)
Buffett’s been bearish on bank stocks this year, having cut his position in Bank of New York Mellon (NYSE:BK) and U.S. Bancorp (NYSE:USB). But Buffett, amid global banking uncertainty, maintained his Bank of America (NYSE:BAC) holdings. At a shareholder meeting, he gave the stock a (for him) enthusiastic endorsement. He told investors, “We’re very cautious…about ownership of banks and we do remain with one bank… I like Bank of America and I like the management.”
Buffett’s stake is around 13%, worth over $32 billion. Older investors may remember his 2011 deal with the bank, where he infused the company with $5 billion in cash amid a debt ceiling crisis. Without that help, Bank of America may have gone under. Ultimately, the move emphasizes Buffett’s commitment to the bank’s underlying strength and market position.
That move, like many Buffett’s made, paid off. Today, Buffett’s continued holding amid a sell-off of other bank stocks is a strong stamp of approval.
On the date of publication, Jeremy Flint did not hold (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.
