There’s arguably not a money manager on Wall Street that has the ability to command the attention of professional and everyday investors quite like Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett. In his six decades as CEO of Berkshire, he’s overseen a cumulative return in his company’s Class A shares of more than 5,460,000%, as of the closing bell on Jan. 2.
Mirroring the Oracle of Omaha’s trading activity, which can be done using Berkshire Hathaway’s quarterly filed Form 13Fs, has been a seemingly surefire investment strategy for decades.
As we turn the page to 2025, Buffett is betting big on the following five stocks.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
One of the most interesting stocks that Berkshire’s chief can’t stop buying of late is satellite-radio operator Sirius XM Holdings(NASDAQ: SIRI).
Sirius XM completed a merger with Liberty Media’s Sirius XM tracking stock following the close of trading on Sept. 9, and also effected a 1-for-10 reverse stock split. Whereas most companies conducting reverse splits do so to avoid delisting from a major stock exchange, Sirius XM was in no danger of delisting. Rather, its split seems solely focused on getting its stock back on the radar of institutional investors who won’t purchase stocks trading below $5 per share.
The beauty of Sirius XM’s operating model is twofold. First, it’s a legal monopoly. There are no other licensed satellite-radio operators, which, more often than not, affords the company strong subscription pricing power.
The other attractive aspect of Sirius XM’s operating model is that its primarily subscription driven. Whereas terrestrial and online radio companies rely almost exclusively on advertising revenue to keep the proverbial hamster on its wheel, Sirius XM generated close to 77% of its net sales from subscriptions and roughly 20% from advertising through the first nine months of 2024. The advantage of Sirius XM’s approach is that its cash flow remains steadier during periods of economic uncertainty.
Additionally, Sirius XM stock is historically cheap, which is something the value-oriented Oracle of Omaha can appreciate. Amid a historically pricey stock market, Sirius XM is valued at just over 7 times forward-year earnings and its dividend yield is approaching an all-time high of 5%.
When 2022 began, Berkshire Hathaway held $10 billion worth of Occidental Petroleum(NYSE: OXY) preferred stock (yielding 8% annually), but not a single common share of stock. Over the last three years, Buffett and his top advisors, Ted Weschler and Todd Combs, have acquired 264,178,414 common shares of Occidental stock.
Historically, energy stocks haven’t accounted for a sizable percentage of the portfolio Buffett oversees at Berkshire. But that’s changed, with over $30 billion, combined, currently invested in Chevron and Occidental. It’s a pretty clear signal that Buffett and his crew expect the spot price for crude oil to remain elevated.
Perhaps the biggest catalyst for oil is that global energy companies were forced to slash their capital expenditures (capex) for three years during the COVID-19 pandemic. Even though capex has returned to normal, increasing crude supply isn’t going to happen overnight. When the supply of a high-demand commodity is constrained, it usually provides a lift to its spot price.
A higher spot price for crude is particularly impactful for Occidental Petroleum, which generates the lion’s share of its revenue from its drilling operations. If the price of crude oil rises, operating cash flow for Occidental will disproportionately benefit, relative to its peers. Just keep in mind that the reciprocal is also true, with Occidental’s cash flow being hit harder than other drillers when the spot price of crude declines.
Image source: Getty Images.
A third phenomenal business that Warren Buffett is betting big on in the new year is one of consumers’ most-beloved brands, Domino’s Pizza(NYSE: DPZ). Domino’s was the biggest buy made by Buffett and his crew during the September-ended quarter.
One of the business characteristics Domino’s possesses that the Oracle of Omaha has previously emphasized the importance of to investors is trust. Roughly 15 years ago, Domino’s marketing campaign admitted that its pizza wasn’t very good and that it had to better. Over time, the company’s transparent marketing approach, along with process and product innovation, has worked wonders.
Something else that’s finding the mark is Domino’s five-year “Hungry for MORE” initiative. Introduced by CEO Russell Weiner in December 2023, Hungry for MORE emphasizes a reliance on technology to improve output and product consistency, as well as leans on the company’s franchisees to enhance the value of its brand.
The international opportunity for Domino’s Pizza shouldn’t be overlooked, either. The company is on track for its 31st consecutive year of international same-store sales growth. This speaks to its brand value and reliance on product innovation to drive growth.
Another stock the Oracle of Omaha very clearly wants to own in 2025 is property and casualty insurance company Chubb(NYSE: CB). Chubb was the stock given “confidential treatment” that Buffett and his team built a sizable position in between July 2023 and March 2024.
What makes insurance stocks so desirable for value investors like Warren Buffett is the stability of their operating model and premium pricing power. When loss events occur, insurers like Chubb have reason to raise premiums. But they can also increase premiums when claim losses are low with the justification that catastrophe events are inevitable.
Chubb also benefits from the niche focus of its homeowner insurance segment. The company predominantly insures higher-value homes, which leads to more lucrative premiums. High earners are less likely than average-earning workers to adjust their spending habits or fail to pay their bills when economic disruptions occur.
Lastly, insurers like Chubb are reaping the rewards of the Federal Reserve undertaking its most-aggressive rate-hiking cycle in four decades (from March 2022 through July 2023). Insurers invest their float — the premium collected that hasn’t been paid out in claims — in safe, short-term Treasury bills. The higher the yield, the more interest income the company can generate.
The fifth magnificent stock Warren Buffett is betting big on for 2025 is none other than shares of his own company, Berkshire Hathaway. Though the September-ended quarter marked the first quarter out of the last 25 that Buffett didn’t repurchase Berkshire’s shares, he’s collectively bought back around $78 billion worth of his company’s stock since mid-July 2018.
Since Berkshire Hathaway doesn’t pay a dividend, buybacks serve a number of key purposes. For starters, it’s a reward for patient investors. A steadily declining share count gradually increases the ownership stake of existing shareholders. In short, it reinforces the long-term investing ethos that Buffett and the late Charlie Munger preached for decades.
Secondly, share repurchases can increase earnings per share (EPS) for companies like Berkshire Hathaway that have steady or growing net income. A 12.6% aggregate decline in Berkshire’s outstanding share count since mid-2018 has increased the company’s EPS and made it more attractive to fundamentally focused investors.
It could also be argued that ongoing share buybacks reinforce Buffett’s belief in the company he’s helped build over six decades. What better way to demonstrate to investors a belief that Berkshire is still undervalued than to purchase around $78 billion worth of stock in a little over six years.
Finally, with a record $325.2 billion in cash, cash equivalents, and U.S. Treasuries on Berkshire’s balance sheet, the Oracle of Omaha has quite the buffer to repurchase his company’s stock.
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Sean Williams has positions in Sirius XM. The Motley Fool has positions in and recommends Berkshire Hathaway, Chevron, and Domino’s Pizza. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
