Even without the data from the last three months, 2023 has been a selling year for Warren Buffett. Berkshire Hathaway (NYSE:BRK.B) has exited a number of stock investments and has a huge cash pile to show for it.
While selling shares in banks, consumer goods businesses, and healthcare companies, Berkshire has also been using its money elsewhere. That indicates two stocks I think Warren Buffett will buy in 2024.
Occidental Petroleum
One stock Buffett has been consistently buying in 2023 is Occidental Petroleum (NYSE:OXY). Berkshire’s stake in the oil company has grown from 194m shares to around 253m.
This isn’t an ordinary stock market transaction, though. As part of a deal to help Occidental finance an acquisition in 2019, Berkshire received warrants that allow it to buy Occidental stock at $56.62.
Whenever the stock is trading above that level, Buffett is able to buy the stock at a discount to the market price. And this has been the case fairly consistently in 2023.
Berkshire isn’t obliged to exercise its warrants. But with enough contracts to acquire another 83m shares, I wouldn’t be at all surprised to see Buffett adding to his company’s stake in Occidental in 2024.
Despite the unsual structure, this clearly demonstrates Buffett’s views on the outlook for oil prices over the long term. And that’s something for ordinary investors to consider in 2024.
Berkshire Hathaway
The other stock that Buffett has been consistently buying is Berkshire Hathaway. During the first three quarters of 2023, the Oracle of Omaha’s company spent around $7bn on repurchasing its own stock.
There are a couple of things worth noting here. One is that Buffett has stated before that Berkshire will only repurchase its own stock when the company believes it is undervalued.
Of course, anyone can be wrong about the intrinsic value of a company’s shares. But it seems natural to me to think that the people closest to its inner workings would be able to offer the best estimate.
The other is that Berkshire’s stock sales this year means it has a larger cash pile to try and figure out a use for. And unless something more attractive presents itself, I’d expect this to continue into 2024.
At today’s prices, a $7bn share buyback amounts to a 1% return for investors. That’s not a lot, but I think the consistency is what gives the clearest signal that the stock is one Buffett is likely to keep buying.
How to invest like Warren Buffett
With the Occidental Petroleum purchases, Buffett is taking advantage of a special situation that Berkshire Hathaway’s size allows it to exploit. There’s no way for an ordinary investor like me to do the same thing by myself.
What I can do, though, is buy Berkshire Hathaway shares. That allows me to participate in Buffett’s investments. I’m obviously aware that the CEO won’t be around forever, which is a risk I need to consider.
Even beyond the CEO, though, the company has some very high-quality operations. That’s why it’s the largest investment in my stock portfolio – investing along side one of the best of all time is a nice bonus.
