Prediction: Here are the 3 stocks Warren Buffett is buying the most in Q3

It’s no secret that Warren Buffett doesn’t find many stocks attractive enough to buy these days. It has been a net seller of stocks for seven consecutive quarters.

However, Buffett bought a few more shares. We probably won’t know what trades the legendary investor made in the third quarter of 2024 until the regulatory filings in November. But I predict that Buffett buys at most three stocks in Q3.

1. Berkshire Hathaway

The obvious choice is Berkshire Hathaway (BRK.A -0.34%) (BRK.B -0.96%) itself. The conglomerate giant spent about $345.1 million on share buybacks in the second quarter of 2024. It bought back nearly $2.6 billion of shares in Q1.

Of course, Berkshire’s stock price is up more than 20% this year. The stock is now trading at a forward price-earnings ratio of 19.6. Buffett may view his own company’s stock as overpriced.

However, I think Berkshire will again report more share buybacks in Q3. Buffett has opted to buy back shares in the past when stocks were valued at a relatively large premium.

Importantly, it does not need special authorization from the board of directors to buy back shares. Berkshire’s stock buyback program allows Buffett to buy either Class A or Class B shares whenever he believes the prices are below the company’s intrinsic value – as long as Berkshire’s cash position (including cash, cash equivalents and US Treasuries) does not decrease. under 30 billion dollars.

2. Chubb Limited

Chubb Limited (CB 0.03%) it was one of seven stocks Buffett bought in Q2 (aside from the Berkshire Hathaway share buybacks). Berkshire now owns a 6.7 percent stake in the major property and casualty insurer. I suspect Buffett wants to own even more.

Unlike most stocks on the market, Chubb is attractively priced. Its forward earnings multiple is a relatively low 11.9 even after the stock is up nearly 30% this year. Buffett can’t find many bargains right now, which could make Chubb stand out even more.

Insurance is right up Buffett’s alley. Berkshire already owns several insurance companies. He’s no doubt comfortable with his understanding of Chubb’s business. This is a critical factor in his decision-making process before buying a stock.

Chubb also checks other boxes for Buffett. It has a strong management team. The company’s financial statements are sound. Chubb consistently outperforms its peers on a key underwriting metric for insurers — the combined ratio (losses incurred and operating expenses as a percentage of premiums earned).

3. Occidental Petroleum

I bet Buffett kept picking up stocks Occidental Petroleum (OXY -0.75%) and in Q3. He initiated a new position in the oil stock in early 2022 and has added more shares nearly every quarter since then.

Buffett singled out Occidental in his letter to Berkshire Hathaway shareholders earlier this year. He said it was one of a select few stocks he expected to “hold indefinitely.” He also noted that Berkshire holds warrants that give it the option to buy additional shares at a fixed price.

I fully expect Buffett to exercise more of these warrants in Q3 (if he hasn’t already). It likes what it referred to in its most recent shareholder letter as “various oil and gas holdings in the United States of America.” Buffett also appreciates Oxy’s pioneering carbon capture and storage initiatives.

The legendary investor particularly admires and respects Occidental CEO Vicki Hollub. He wrote to Berkshire shareholders: “Under Vicki Hollub’s leadership, Occidental is doing the right thing for both its country. and its owners.” He added that she knows “how to separate the oil from the rock, and that is an unusual talent, valuable to her shareholders and to her country.”

Buffett’s track record of buying Occidental stock and his appreciation of the business and management doesn’t mean he’ll buy more stock in Q3. However, I think Oxy will trade at just 11.2 times forward earnings.