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Warren Buffett’s Potential Buys for Q3 2024
Warren Buffett, the renowned investor, has been notably cautious with his stock purchases recently, opting to be a net seller for seven consecutive quarters. Despite this trend, there are still a few stocks that have caught his eye. While we won’t be privy to his exact trades in the third quarter of 2024 until the regulatory filings are released in November, I anticipate that Buffett is likely focusing on three key stocks.
Berkshire Hathaway
Investment in Self
Berkshire Hathaway (-0.20%)(-0.09%) is an expected choice for Buffett’s investment portfolio. In the second quarter of 2024, the conglomerate committed approximately $345.1 million to stock buybacks, following a substantial $2.6 billion repurchase in the first quarter. Although Berkshire’s share price has surged over 20% this year, with a forward price-to-earnings ratio standing at 19.6, Buffett might consider his company’s shares pricey. However, history suggests that he may continue stock buybacks in Q3, even at a premium valuation.
Buyback Flexibility
One significant advantage for Buffett is the autonomy he holds in repurchasing shares. The Berkshire stock repurchase program allows him to buy either Class A or Class B shares when he believes the price is below intrinsic value, provided that Berkshire’s cash reserves (including cash, equivalents, and U.S. Treasuries) remain above $30 billion.
Chubb Limited
A Strategic Addition
Chubb Limited (-0.80%) was among the few stocks Buffett acquired in Q2, aside from Berkshire Hathaway shares. With Berkshire holding a 6.7% stake in Chubb, it’s plausible that Buffett is keen on increasing his investment. Chubb’s forward earnings multiple, a relatively low 11.9 despite a 30% rise in stock value this year, positions it as an attractive purchase for Buffett, who is finding few bargains in the current market.
Alignment with Buffett’s Expertise
Buffett’s familiarity with the insurance sector, given Berkshire’s existing insurance holdings, likely makes Chubb an appealing choice. The company boasts a robust management team and solid financials, consistently outperforming peers on a core underwriting metric—the combined ratio, which measures incurred losses and operating expenses as a percentage of earned premiums.
Occidental Petroleum
Consistent Acquisition
Occidental Petroleum (0.31%) is another stock that Buffett may have continued to acquire in Q3. Having initiated a position in early 2022, he has consistently added shares almost every quarter since. Buffett’s letter to Berkshire Hathaway shareholders earlier this year highlighted Occidental as a long-term hold, with Berkshire owning warrants to purchase additional shares at a fixed price.
Strategic and Managerial Confidence
Buffett is likely to exercise more of these warrants, attracted by Occidental’s extensive oil and gas reserves in the U.S. and its pioneering carbon capture and storage initiatives. He holds CEO Vicki Hollub in high regard, noting her exceptional leadership and technical expertise. This admiration, coupled with Occidental’s attractive valuation at 11.2 times forward earnings, suggests it remains a strong candidate for further investment.
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