If I could only buy 1 Warren Buffett stock in October, this would be it

Imagine one of the greatest investors of all time sending you a list of the stocks he likes the most. The good news is that you don’t have to use your imagination. In a real sense, it happens every three months.

Warren Buffett undoubtedly qualifies as a legendary investor. While Buffett doesn’t personally email you a list of his favorite stocks, he does the next best thing. Every quarter, the company he leads, Berkshire Hathawaydiscloses its stock holdings to the US Securities and Exchange Commission (SEC). Any investor looking for ideas from the so-called Oracle of Omaha need only scan Berkshire’s latest 13-F filing.

Of course, some of the stocks on this list were better picks when Buffett first bought them than they are now. However, others remain great candidates for investors. Which Buffett stock would I buy in October if I could only pick one?

Some good options

Before I get to my top pick of the stocks Buffett owns, I’ll readily admit that it’s not an easy decision. Given Buffett’s stock-picking acumen, this should come as no surprise.

For example, I’m pretty much on the same page as Buffett about Apple. He thinks he has a great deal, and so do I.

Sure, Buffett has reduced his holdings in the stock in recent quarters. However, Apple remains by far Berkshire’s main holding. It’s also my biggest holding (although I’ve invested more in ETFs). I expect Apple’s generative AI initiatives to boost iPhone sales over the next few years and propel the stock higher.

Even though Buffett didn’t personally make the call to buy shares of Amazonit’s one of his best actions in my view. Amazon’s investments in technology should boost profitability. Its Amazon Web Services unit has a huge opportunity for growth as organizations migrate to the cloud.

I also agree with Buffett’s optimistic interpretation Occidental Petroleum. He likes company management, oil and gas reserves and focuses on carbon capture technology. Middle East tensions could serve as a short-term tailwind for the stock.

Buffett’s best bet

But if I could buy just one Buffett stock in October, I’d go with Lennar (LEN -2.49%). The company is one of the largest homebuilders in the US (Berkshire also owns another top homebuilder — DVR.)

I think now is the perfect time to buy Lennar stock, in part because of the Federal Reserve’s interest rate cuts. Lennar Executive Chairman and Co-CEO Stuart Miller said in his company’s third-quarter earnings release that the Fed’s moves “should begin to increase affordability and accelerate already strong demand for both new and for the existing ones”.

In my opinion, Miller’s optimism is fully justified. I imagine a line of dominoes, where one falling leads to a wave of others falling. Lower interest rates should lead to lower mortgage rates, which leads to increased home purchases, which leads to higher revenue and profits for Lennar.

Lennar isn’t just ready for a short-term boost, though. The US has an ongoing chronic housing shortage. Miller talked about that shortfall several times in his comments during Lennar’s Q3 earnings call. He noted that it is “well documented” and is “the result of years of underproduction”. Of course, the solution to a problem caused by underproduction is more production — great news for Lennar’s long-term prospects.

These perspectives are not fully reflected in Lennar’s valuation. The stock’s price-to-earnings ratio is just 12.4, well below its 18.3 earnings multiple SPDR S&P Homebuilders ETF.

A wild card

Lennar could also benefit from a wild card. Miller alluded to this in the Q3 earnings call, saying, “Even the national narrative has started to recognize the need for programs to activate supply.”

Presidential candidates of both major political parties have talked about the need for more houses. Vice President Kamala Harris wants to provide financial assistance to first-time home buyers and tax credits to home builders. Meanwhile, former President Donald Trump wants to make more federal land available for housing development.

New federal policies that directly help Lennar are likely to be enacted in the next presidential term. That’s not a sure thing, but it’s a wild card that makes this Buffett stock even more attractive.