We recently compiled a list of the 8 Best Warren Buffett Stocks to Buy According to Analysts. In this article, we are going to take a look at where Chevron Corporation (NYSE:CVX) stands against the other Best Warren Buffett Stocks to Buy.
2024 will go down in history as the year that legendary investor Warren Buffett started showing signs of slowing down after an illustrious career in the investment world. After losing his best friend and longtime partner, Charlie Munger, the Oracle of Omaha increasingly shows signs of relinquishing control of his investment empire.
Even with his investment company becoming the first non-tech giant to hit the $1 trillion mark on market cap, Buffett is slowly relinquishing control after years of tremendous success. Handpicked Greg Abel is now responsible for taking over the Buffett Empire after more than 60 years in the limelight.
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As Abel assumes control in making key investment decisions, Buffett continues sending shockwaves. Nevertheless, he has become a net seller, having trimmed stakes in some high-profile holdings, all but raising concerns about the market outlook.
At 94, Buffett has seen it all, having outperformed the S&P 500 over the years and generated significant returns for his investors. Since 1965, the billionaire investor has averaged returns of 19.8% through his investment firm, nearly double the 10.2% return of the S&P 500 over the same period. Nevertheless, he appears to have hit the peak of his investment career as he became a net seller after one of the longest bull runs.
The recent sales have taken Buffett’s cash haul to the $300 billion mark, which he can use to purchase a good chunk of the S&P 500 companies. Nevertheless, the billionaire investor has shown reluctance to invest in the cash-sitting valuations that have gotten out of hand.
Since Buffett has yet to carry out a massive investment this year, it does not come as a surprise. The advocate of value investing, which involves analyzing the market for undervalued stocks likely to generate long-term value, has been skeptical about valuations.
His reluctance also comes on outperformance in recent years, becoming extremely difficult due to the sheer size of Buffett’s investment portfolio. “We have no possibility of eye-popping performance” given that “there remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others,” Buffett is quoted as saying in an interview with CNBC.
With the S&P 500 up by more than 20% for the year, Buffett has indicated that the market might be too expensive to pursue opportunities at current levels. Consequently, he has opted to stay in cash while locking in profits through buybacks and dividends in some of his top investment plays.
Nevertheless, the market is still full of some of the best Warren Buffett stocks that analysts see material upside to. In the aftermath of the US Federal Reserve cutting interest rateby 50 basis points and indicating the prospects of further cuts before year-end, opportunities are increasingly emerging around some of Buffett’s top investment plays
Even as Buffett waits for the market to correct to deploy the more than $300 billion at his disposal, there are still opportunities to pursue as interest rates trend down. With that, let’s look at the 8 best Warren Buffett stocks to buy according to analysts.
Our Methodology
To compile the list of the best Warren Buffett stocks to buy according to analysts, we sifted through Berkshire Hathaway’s Q2 2024 13F portfolio. We scanned all the 13F holdings and picked the 8 stocks that had the highest upside potential, as of September 24. We have ranked the stocks in ascending order based on their upside potential.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Chevron Corporation (NYSE:CVX)
Warren Buffett’s Q2 2024 Stake: $18.55 Billion
Analyst Upside Potential, as of September 26: 23%
Number of Hedge Fund Holders: 64
Chevron Corporation (NYSE:CVX) is one of Buffett’s investment plays for exposure in the energy sector. While the company has felt the full brunt of oil prices plunging from above the $80 barrel level, it remains one of the companies well poised to navigate the challenging environment.
Chevron Corporation (NYSE:CVX) operates as an integrated energy firm throughout the industry, meaning it is involved in all aspects of the energy sector. This includes involvement in oil and natural gas exploration and production (upstream), the transportation of energy (midstream), and the processing of chemicals and refining (downstream). At any given moment, each of these areas of the industry can show varying levels of performance.
The company’s competitive edge stems from having a balance sheet capable of weathering down any energy industry cycle while continuing to reward investors with dividends. Additionally, the company boasts of one of the lowest debt-to-equity ratios of 0.15 as it pays more attention to its balance sheet.
Chevron Corporation (NYSE:CVX) can increase its financial strength when the oil price falls, enabling the company to keep investing in its operations and distributing dividends. It’s worth noting that the dividend has risen for an impressive 37 years straight, marking an extraordinary achievement considering Chevron’s competitive industry.
As oil prices rise again, as they invariably do, Chevron Corporation (NYSE:CVX) decreases its financial exposure to prepare for the next economic slump. For conservative investors seeking a reliable energy stock that can weather any storm, finding a more attractive alternative than Chevron’s 4.5% dividend yield would be challenging. The stock commands an average buy rating on Wall Street with a $177.08 price target, implying 23% upside potential.
In the second quarter of 2024, 64 hedge funds held positions in the stock, with total stakes reaching $22.41 billion. By June 30, Berkshire Hathaway was the largest shareholder, holding a position valued at $18.55 billion.
In its fourth quarter 2023 investor letter, Diamond Hill Capital’s Diamond Hill Large Cap Strategy commented on Chevron Corporation (NYSE:CVX):
“Other bottom contributors included Chevron Corporation (NYSE:CVX), Carrier Global and Becton, Dickinson. Shares of integrated oil and gas company Chevron were pressured as global oil production is growing — particularly in the US, which has now surpassed its past production levels — in turn pressuring oil prices and company profit margins.”
Overall CVX ranks 3rd on our list of 8 Best Warren Buffett stocks to buy according to analysts. While we acknowledge the potential of CVX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CVX, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
