The 5 Stocks Warren Buffett Is Buying Now

It’s that time again—13F filings are out, and Warren Buffett’s latest stock picks are catching everyone’s attention. Let’s dive into the five stocks the Oracle of Omaha has been buying, starting with his favorite these days: Occidental Petroleum.

1. Occidental Petroleum (OXY)

Buffett has been snapping up shares of Occidental Petroleum like it’s going out of style. Through Berkshire Hathaway, he now owns 30% of the company. That’s huge! What’s intriguing is that Occidental’s performance over the last five years has been relatively modest, with only 37% growth. Considering the broader market has been doing better, this raises eyebrows.

Buffett is known for emphasizing Return on Invested Capital (ROIC), and here’s the kicker—Occidental’s ROIC is quite low. So why is Buffett so heavily invested? The 25 million shares he holds are currently valued at $14.6 billion. Along the way, he sold 19 million shares in early 2020 for around $20 a share, but quickly got back into the game as time passed.

For me, Occidental Petroleum doesn’t quite add up. The low ROIC and 2.5% dividend don’t excite me. Sure, their free cash flow looks much better than their net income, and the company’s price-to-free-cash-flow ratio is attractive, but I just don’t get it. There’s a lot of volatility in revenue, and commodity-based businesses like Occidental tend to fluctuate wildly depending on oil prices.

Buffett sees something in it that I don’t, and that’s okay. The lesson here is you don’t need to follow anyone else’s picks, even if it’s the world’s best investor.

2. HEICO Corporation (HEI)

Next up is HEICO, an aerospace and defense contractor. Buffett has a small position here, owning just 1.04 million shares valued at $188 million. He only started buying recently, so what’s the appeal?

Looking at the eight pillars analysis, it’s puzzling. Five X’s and three checks with a lot of debt and a low ROIC? Honestly, I’m surprised. The five-year PE ratio is also high, which doesn’t scream value investment. There’s nothing here that excites me, and I’m left wondering what Berkshire sees in HEICO.

But remember, Buffett gives his team full autonomy, and it’s likely that one of his managers picked this stock. They might see something technical in the charts or the company’s future growth. Analysts are forecasting some significant EPS growth, but for now, this one’s a head-scratcher for me.

3. Ulta Beauty (ULTA)

Now, Ulta Beauty is a company I can wrap my head around. I actually own shares of Ulta myself. Whether Buffett or one of his managers bought it, I’m not sure, but here’s why I like it.

Ulta has strong same-store sales growth, which is crucial. They aren’t just growing for the sake of it—they’re being strategic. With a focus on the women’s market, which remains strong, and partnerships with Target, Ulta is setting itself up for continued success.

The company’s valuation is reasonable with a high ROIC, and analyst estimates project double-digit growth in EPS, from $26 to $41 a share. Ulta was recently trading as low as $318, which is a steal compared to its all-time high of $575. Even now, at $378, my analysis shows the potential for a solid 12% return. This is a stock that makes sense to me, both from a value and growth perspective.

4. Sirius XM Holdings (SIRI)

On to Sirius XM, another stock that Buffett’s team has been buying. Berkshire owns 133 million shares valued at $425 million, which is pocket change for them, given they have $270 billion in cash. In fact, just the interest on their cash would outpace the value of this investment.

Sirius XM is an interesting case. They’ve been buying and selling shares, sometimes within months. This kind of trading activity is odd, especially for a company with so much cash on hand. Why sell 4 million shares, only to buy 96 million later? It seems inconsistent.

That said, Sirius does have a strong ROIC and a dividend yield of 3%, which is decent. Their free cash flow is decreasing, however, and their business model leaves me wondering whether Sirius XM is really the radio of the future.

5. Chubb Limited (CB)

Finally, we have Chubb, an insurance giant. When it comes to insurance, Berkshire Hathaway knows its stuff, and this is one stock where I’d consider following their lead. Berkshire owns 27 million shares, valued at $7.5 billion. They’ve been buying since the stock was at $200, and now it’s trading at $250.

Insurance is Berkshire’s bread and butter. They use the float from premiums to invest, and it’s a model that’s worked for them since the 1960s. With Chubb, I trust Berkshire’s judgment. Insurance isn’t going anywhere, and Chubb is well-positioned to deliver returns for years to come.

Final Thoughts

Warren Buffett’s portfolio is always fascinating, but remember—the key takeaway isn’t to copy his picks. You have to understand the businesses you invest in. For me, Ulta and Chubb make sense, while Occidental, HEICO, and Sirius XM leave me scratching my head. Always do your own research, and if something doesn’t add up, it’s okay to sit it out.

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