Warren Buffett has amassed a cash stockpile of nearly $277 billion for Berkshire Hathaway. It's fair to say he doesn't have to worry one bit about the share price of any stock he buys.
Some people do have to consider share prices, though. There's good news if you're in that group: Berkshire Hathaway's portfolio offers several great ideas for cash-strapped investors. Here are my picks for the three best Buffett stocks to buy with $120 right now.
1. Bank of America
You can scoop up one share of Bank of America(NYSE: BAC) for less than $40. It ranks as one of the largest financial services companies in the world, with a market cap of over $300 billion.
Should you be concerned that Buffett sold nearly 9% of Berkshire's stake in Bank of America in the second quarter of 2024? I don't think so. BofA still makes up 11.8% of Berkshire's portfolio. More importantly, it's still a good stock.
Bank of America is reasonably valued in a market where many stocks aren't. Its shares trade at a forward earnings multiple of below 11.8. The big bank offers an attractive dividend, with a forward yield of nearly 2.7%.
Sure, the prospects of the Federal Reserve reducing interest rates could cause BofA's net interest income to decline. However, the company could also benefit from rate cuts if the demand for loans increases. Over the long run, I expect an investment in Bank of America will pay off nicely.
2. Mitsui
It will only take another $21 or so of your initial $120 to buy a share of Mitsui(OTC: MITSF)(OTC: MITSY). Note, though, that the Japanese conglomerate trades via two over-the-counter stocks. One of them (ticker symbol MITSF) is much cheaper than the other (ticker symbol MITSY).
Berkshire owns stakes in five Japanese conglomerates. I could have easily chosen any of the other four to include in our list. However, I picked Mitsui because it's the most attractively valued, with shares trading at a trailing-12-month price-to-earnings ratio of only 8.3.
Buffett wrote to Berkshire Hathaway shareholders earlier this year that he expects to own Mitsui (as well as the other four Japanese stocks) "indefinitely." He likes the diversification these conglomerates offer, as well as their management teams' "shareholder-friendly policies."
I'll add one other thing for investors to like about Mitsui: its dividend. The company's forward dividend yield tops 3.1%. Its dividend payout ratio is a super-low 23.5%, indicating plenty of financial flexibility to increase the dividend in the future.
3. Occidental Petroleum
After buying one share each of Bank of America and Mitsui, you'd have around half of your initial $120 left. There's another Buffett stock I think is ideal to use your remaining money to buy: Occidental Petroleum(NYSE: OXY).
Buffett continues to buy Occidental stock hand over fist. It now ranks as Berkshire's sixth-largest position. I fully expect Buffett will buy even more shares of the oil and gas producer in future quarters.
Like Mitsui, Occidental is a stock Buffett plans to own "indefinitely." He likes the company's massive oil and gas assets in the U.S. The legendary investor also holds Occidental CEO Vicki Hollub in high regard. In his latest letter to Berkshire shareholders, Buffett wrote, "Under Vicki Hollub's leadership, Occidental is doing the right things for both its country and its owners."
Occidental stock should perform well if oil prices rise over the next few years -- something Hollub predicts will happen. The company is also a leader in developing carbon capture and storage technology. If its efforts on this front are successful, Occidental should be a huge winner over the next decade and beyond.
Should you invest $1,000 in Occidental Petroleum right now?
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Keith Speights has positions in Bank of America and Berkshire Hathaway. The Motley Fool has positions in and recommends Bank of America and Berkshire Hathaway. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
