In this article, we discuss the 5 stocks that Warren Buffett is buying on the dip. If you want to see more stocks in this selection, click Warren Buffett is Buying the Dip on These 3 Stocks.
Berkshire Hathaway’s Warren Buffett went on a buying spree despite the turmoil in the global equity markets. In addition to doubling down on his energy bets like Occidental Petroleum Corporation (NYSE:OXY) and Chevron Corporation (NYSE:CVX), Buffett also added to his favorite Apple Inc. (NASDAQ:AAPL) stake, scooping up about 5 million shares in the second quarter of 2022.
Buffett has often advised investors to buy quality stocks when they are on sale, which means taking advantage of declining stock prices and reasonable valuations before the market reaches its equilibrium. He employed a similar strategy in the first half of 2022, when the S&P 500 plummeted about 20%, and the billionaire poured approximately $44 billion in the stock market during the dip. Warren Buffett has said on multiple occasions that his favorite holding period for a quality stock is forever, and he buys more when top names are selling on a discount, thus reaping high profits. Buffett’s fund made net stock purchases of only about $3.8 billion in the second quarter, and his company, Berkshire Hathaway Inc. (NYSE:BRK-A), also spent less on share buybacks as compared to Q1 2022.
The buying spree by Warren Buffett suggests that large cap tech stocks will rebound in the near-term, and energy prices will remain potentially elevated for the foreseeable future. The market weakness which boosted Buffett’s purchasing power is also hurting Berkshire Hathaway Inc. (NYSE:BRK-A)’s Q2 results, given the firm reported a net loss of $43.8 billion on the back of a $53 billion investment loss. However, Warren Buffett remained nonchalant about the loss, categorizing it as a function of accounting standards and saying that the numbers don’t show the true picture of the company’s performance.
Our Methodology
We used Warren Buffett’s Q2 2022 portfolio for this analysis, selecting the stocks that have suffered share price losses year to date, but where Buffett strengthened his position during the June quarter.
We have arranged the list according to the hedge fund sentiment around the stocks as of Q2 2022, which was gauged from Insider Monkey’s database of about 900 elite funds.
Warren Buffett is Buying the Dip on These Stocks
5. Celanese Corporation (NYSE:CE)
Number of Hedge Fund Holders: 36
YTD Percentage Decline in Share Price as of August 18: 30.64%
Celanese Corporation (NYSE:CE) was founded in 1918 and is headquartered in Irving, Texas. It is a technology and specialty materials company that manufactures and supplies high performance engineered polymers in the United States and internationally. The company operates through Engineered Materials, Acetate Tow, and Acetyl Chain segments. Warren Buffett acquired a position in Celanese Corporation (NYSE:CE) in Q1 2022, buying 7.8 million shares worth $1.12 billion. In the June quarter, Buffett raised his stake by 17% in Celanese Corporation (NYSE:CE), holding 9.15 million shares valued at $1.07 billion, representing 0.35% of the total holdings. The shares have declined about 31% year to date as of August 18, and it is a prominent name that Warren Buffett is stockpiling on the dip.
Celanese Corporation (NYSE:CE) reported above consensus Q2 results on July 28. In the third quarter, the company expects adjusted earnings of $4.00 to $4.50 per share, compared to a consensus of $4. On July 13, Celanese Corporation (NYSE:CE) declared a quarterly dividend of $0.68 per share, in line with previous. The dividend was distributed to shareholders on August 8. The stock delivers a dividend yield of 2.34% as of August 18.
On August 2, Barclays analyst Michael Leithead maintained an Overweight rating on Celanese Corporation (NYSE:CE) and lowered the price target on the shares to $165 from $190. The analyst believes Q2 was another solid quarter for Celanese Corporation (NYSE:CE). The only negative in the June quarter was soft margins in the Acetate Tow segment, the analyst told investors.
According to Insider Monkey’s data, 36 hedge funds were bullish on Celanese Corporation (NYSE:CE) at the end of June 2022, with combined stakes worth $1.82 billion. Thomas E. Claugus’ GMT Capital is a notable position holder in the company, with 1.30 million shares valued at $153 million.
In addition to Occidental Petroleum Corporation (NYSE:OXY), Chevron Corporation (NYSE:CVX), and Apple Inc. (NASDAQ:AAPL), Warren Buffett loaded up on Celanese Corporation (NYSE:CE) during the second quarter of 2022.
Here is what Vltava Fund has to say about Celanese Corporation (NYSE:CE) in its Q1 2022 investor letter:
“We then used the money freed up to, among other things, open three new positions. The stock price declines during the Russian invasion brought a lot of good prices to the market. Out of all the possibilities we considered, we picked the stocks of Celanese (CE).
Celanese is the world’s largest producer of acetic acid and its chemical derivatives, including vinyl acetate monomers and emulsions. Their applications are used in a wide range of industries, such as automotive tobacco, coatings, construction, energy, telecommunications, food, and medical. Celanese recently closed the acquisition of a large part of DuPont’s business, which will make Celanese an even bigger player in the industry while reducing the cyclicality of its business. The acquisition is quite large and should deliver significant value to shareholders that in our view is not at all presently reflected in the share price. Celanese is a business that stands more or less aside from the main interests of most investors, but it is a company with very high returns on capital, strong free cash flow, and historically very efficient resource allocation.”
4. Ally Financial Inc. (NYSE:ALLY)
Number of Hedge Fund Holders: 42
YTD Percentage Decline in Share Price as of August 18: 25.24%
Ally Financial Inc. (NYSE:ALLY) was founded in 1919 and is based in Detroit, Michigan. It is a digital financial services firm that offers multiple financial products and services to individual, commercial, and corporate customers in the United States and Canada. Warren Buffett purchased a stake in Ally Financial Inc. (NYSE:ALLY) in Q1 2022, acquiring roughly 9 million shares valued at $390 million. In Q2 2022, Buffett poured into Ally Financial Inc. (NYSE:ALLY) aggressively, upping his position by 235%. This resulted in the Berkshire portfolio holding 30 million shares worth $1 billion. Ally Financial Inc. (NYSE:ALLY) shares have declined over 25% year to date as of August 18, and it is one of the notable stocks that Warren Buffett is buying on the dip.
On July 19, Ally Financial Inc. (NYSE:ALLY) reported a Q2 non-GAAP EPS of $1.76, falling short of analysts’ estimates by $0.11. The revenue of $2.22 billion jumped 3.3% year-over-year, beating market consensus by $30 million. The net financing revenue came in at $1.76 billion, up $217 million on a year over year basis, supported by ongoing strength in auto pricing, sales volumes, reduced funding costs, and the deployment of surplus cash.
Piper Sandler analyst Kevin Barker downgraded Ally Financial Inc. (NYSE:ALLY) on July 25 to Underweight from Neutral, slashing the price target to $34 from $45. The analyst said that auto market headwinds and inflated funding costs were the primary reasons for the downgrade. The current macro outlook will likely cause “material headwinds” for Ally Financial Inc. (NYSE:ALLY) due to increasing default rates and a sharp rise in funding costs, the analyst told investors in a research note. He also cited negative catalysts developing for Ally Financial Inc. (NYSE:ALLY) given its high leverage compared to peers.
According to the second quarter database of Insider Monkey, 42 hedge funds were long Ally Financial Inc. (NYSE:ALLY), compared to 49 funds in the earlier quarter. Harris Associates held a notable position in the company, comprising 26.75 million shares worth $896.4 million.
Like Occidental Petroleum Corporation (NYSE:OXY), Chevron Corporation (NYSE:CVX), and Apple Inc. (NASDAQ:AAPL), Warren Buffett strengthened his hold on Ally Financial Inc. (NYSE:ALLY).
Here is what Oakmark Fund has to say about Ally Financial Inc. (NYSE:ALLY) in its Q2 2022 investor letter:
“As for Ally Financial, fears of a recession drove the stock price down more than 20% for the period, but business fundamentals have remained strong and the shares now trade for just a mid-single-digit multiple of current earnings. We believe today’s price ignores the funding cost improvements and well-capitalized nature of Ally’s balance sheet. We continue to own both investments given their significant discounts to our estimates of business value.”
Click to continue reading and see Warren Buffett is Buying the Dip on These 3 Stocks.
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Disclosure: None. Warren Buffett is Buying the Dip on These 5 Stocks is originally published on Insider Monkey.
