It's no secret that Warren Buffett doesn't find many stocks attractive enough to buy these days. He's been a net seller of stocks for seven consecutive quarters.
However, Buffett has still been buying a few stocks. We probably won't know what trades the legendary investor made in the third quarter of 2024 until regulatory filings in November. But I predict Buffett is buying three stocks the most in Q3.
1. Berkshire Hathaway
The obvious pick is Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) itself. The giant conglomerate spent roughly $345.1 million on stock buybacks in the second quarter of 2024. It repurchased nearly $2.6 billion of stock in Q1.
Granted, Berkshire's share price has jumped more than 20% this year. The stock now trades at a forward price-to-earnings ratio of 19.6. Buffett may view his own company's shares as too expensive.
My guess, though, is that Berkshire will again report more stock buybacks in Q3. Buffett has opted to repurchase shares in the past when the stock was valued at a relatively high premium.
Importantly, he doesn't need special authorization from the board of directors to buy back shares. Berkshire's stock repurchase program allows Buffett to buy either Class A or Class B shares any time he believes the prices is below the company's intrinsic value -- as long as Berkshire's cash position (including cash, cash equivalents, and U.S. Treasuries) doesn't drop below $30 billion.
2. Chubb Limited
Chubb Limited(NYSE: CB) was one of only seven stocks Buffett bought in Q2 (aside from repurchases of Berkshire Hathaway shares). Berkshire now owns a 6.7% stake in the large property and casualty insurer. I have a hunch Buffett wants to own even more.
Unlike most stocks on the market, Chubb is priced attractively. Its forward earnings multiple is a relatively low 11.9 even after the stock has soared nearly 30% this year. Buffett can't find many bargains right now, which could make Chubb stand out to him even more.
Insurance is right up Buffett's alley. Berkshire already owns several insurance companies. He undoubtedly feels comfortable with his understanding of Chubb's business. That's a critical factor in his decision-making process before buying a stock.
Chubb checks off other boxes for Buffett, too. It has a strong management team. The company's financials are rock-solid. Chubb consistently outperforms its peers on a core underwriting metric for insurers -- the combined ratio (incurred losses and operating expenses as a percentage of earned premiums).
3. Occidental Petroleum
I'd wager Buffett kept scooping up shares of Occidental Petroleum(NYSE: OXY) in Q3 as well. He initiated a new position in the oil stock in early 2022 and has added more shares nearly every quarter since then.
Buffett highlighted Occidental in his letter to Berkshire Hathaway shareholders earlier this year. He said it was one of a select few stocks that he expected to "maintain indefinitely." He also noted that Berkshire owns warrants that give it the option to purchase additional shares at a fixed price.
I fully expect Buffett will exercise more of those warrants in Q3 (if he hasn't already). He likes what he referred to in the latest shareholder letter as Occidental's "vast oil and gas holdings in the United States." Buffett also appreciates Oxy's pioneering carbon capture and storage initiatives.
The legendary investor especially admires and respects Occidental CEO Vicki Hollub. He wrote to Berkshire shareholders, "Under Vicki Hollub's leadership, Occidental is doing the right things for both its country and its owners." He added that she knows "how to separate oil from rock, and that's an uncommon talent, valuable to her shareholders and to her country."
Buffett's track record of buying Occidental stock and his appreciation of its business and management doesn't mean he'll buy more shares in Q3. However, I think he will with Oxy trading at only 11.2 times forward earnings.
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Keith Speights has positions in Berkshire Hathaway and Chubb. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
