If you need investing ideas, one place to turn is the portfolio of one of the world's greatest investors. Warren Buffett provides a list of his favorite stocks every three months via Berkshire Hathaway's quarterly 13-F filing.
Granted, Buffett hasn't been buying many stocks, preferring instead to build up a record amount of cash. That doesn't mean some of the stocks he owns aren't still good picks, though. Here are three no-brainer Buffett stocks to buy right now, in my opinion.
1. Amazon
Amazon(NASDAQ: AMZN) continues to fire on all cylinders. The company's earnings jumped 54.5% year over year in Q3 to $15.3 billion. Its free cash flow over the trailing 12 months ending Sept. 30, 2024, more than doubled from the same period in the prior year.
This momentum could continue. Amazon hasn't finished reducing its cost structure through outbound regionalization of its e-commerce business. The company remains in the early innings of advertising on Prime Video.
But Amazon's biggest growth driver is still its cloud unit. And artificial intelligence (AI) should provide a huge tailwind for years to come. Amazon Web Services (AWS) is grabbing this AI opportunity by the horns, releasing almost twice as many machine learning and generative AI features over the last 18 months as the other top cloud providers combined.
Buffett and his investment managers haven't added any shares of Amazon since the second quarter of 2019. However, I think this stock remains one of the best AI picks on the market.
2. Chevron
Chevron(NYSE: CVX) ranks as Buffett's fifth-largest holding. Berkshire Hathaway owned over 118.6 million shares of the oil and gas giant at the end of Q3 worth nearly $19 billion today.
The outlook for Chevron looks quite good. With an incoming presidential administration likely to be supportive of the oil and gas industry, Chevron could see fewer regulatory hurdles to expanding its operations over the next few years.
Chevron expects to grow its free cash flow on average by more than 10% annually in the coming years. The company plans to continue its stock buybacks, reducing its outstanding shares by 3% to 6% per year.
Income investors should find this Buffett stock especially attractive. Chevron's forward dividend yield tops 4%. The oil and gas leader has increased its dividend for 37 consecutive years and could soon extend that streak. It has boosted the dividend payout by a compound annual growth rate over the last five years that's higher than all of its peers and the S&P 500.
3. Occidental Petroleum
The favorable dynamics for Chevron also work to the advantage of Occidental Petroleum(NYSE: OXY). Although it's only a fraction of the size of Chevron, Oxy is a leader in the U.S. oil and gas industry.
It's no secret that Buffett really likes Occidental. Berkshire owns 27.2% of the company already and has a regulatory green light to acquire up to 50%. Buffett wrote to Berkshire shareholders earlier this year that Occidental was one of a handful of investments he expects to "maintain indefinitely."
He also noted that Occidental CEO Vicki Hollub has "an uncommon talent" of knowing "how to separate oil from rock." Occidental's operations back up Buffett's positive opinion. For example, in Q3 the company's Wolfcamp XY/A development in New Mexico produced average oil per 1,000 feet of drilling length that was greater than 35% higher than the industry average.
One big plus for Oxy is its innovation in carbon capture and storage technology. Construction is underway on the company's Stratos direct air capture (DAC) facility in South Texas. Occidental plans to capture 500,000 tons of carbon dioxide per year at the facility. If the company's DAC technology works as well as it hopes, carbon capture could become an important new market for Occidental over the next decade and beyond.
Should you invest $1,000 in Amazon right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Keith Speights has positions in Amazon, Berkshire Hathaway, and Chevron. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, and Chevron. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
