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 Occidental Petroleum Corporation (NYSE:OXY) 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.
READ ALSO: Carl Icahn Stock Portfolio: 7 Best Stocks to Buy and 10 Best Performing Warren Buffett Stocks in 2024.
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.
Source: pexels
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).
Occidental Petroleum Corporation (NYSE:OXY)
Warren Buffett’s Q2 2024 Stake: $16.09 Billion
Analyst Upside Potential, as of September 26: 37.79%
Number of Hedge Fund Holders: 62
Occidental Petroleum Corporation (NYSE:OXY) is an energy company that engages in acquiring, exploring, and developing oil and gas properties. Buffett started investing in the company in 2022 and has continuously bolstered his stakes.
The legendary investor is optimistic about the future trajectory of oil prices. Occidental Petroleum Corporation (NYSE:OXY) possesses the operational advantage needed to thrive in such circumstances while keeping a financial structure that can withstand adverse situations, at least temporarily.
Additionally, he has consistently emphasized the significance of effective management, of which Occidental has always ticked the box. This is particularly true in the field of resource extraction, where the proper allocation of capital and the efficiency of operations are crucial.
A competent management team with a strategic perspective can make a significant difference. Thanks to proper management, Occidental Petroleum Corporation (NYSE:OXY) boasts a breakeven price for oil below $60 per barrel, ensuring it makes a profit with oil prices above the $70 barrel level.
The company has also engaged in several multi-billion-dollar acquisition deals as it continues to expand its footprint and strengthen its competitive edge. It acquired CrownRock’s holdings assets in the Midland Basin and, conversely, strengthened its assets. Thanks to the contribution from CrownRock, the midpoint of OXY’s overall company output and forecasts have risen from 1.25 million barrels of oil equivalents (BOE) to around 1.32 million BOE daily.
Occidental Petroleum Corporation (NYSE:OXY) has also bought back billions of dollars of its shares and paid out a substantial dividend, which, given the current stock prices, offers around a 1.7% return, affirming why it is one of the best Warren Buffet stocks to buy, according to analysts given its high shareholder returns.
Based on analysts’ average price target, Occidental Petroleum Corporation (NYSE:OXY) has a 37.79% upside potential. The stock holds a consensus rating of Moderate Buy, derived from 6 buy ratings, 10 hold ratings, and 1 sell rating. According to 17 Wall Street analysts, the average 12-month price target is $70.44, with a high estimate of $81.00 and a low estimate of $59.00.
By the end of the second quarter of 2024, the number of hedge funds holding stakes in Occidental Petroleum Corporation (NYSE:OXY) rose to 62 from 61, with the total value of these stakes exceeding $18.52 billion.
Overall OXY ranks 1st on our list of 8 Best Warren Buffett stocks to buy according to analysts. While we acknowledge the potential of OXY 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 OXY, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
