3 Best Warren Buffett Stocks to Buy With $5,000 Now

Warren Buffett’s portfolio at Berkshire Hathaway has been an excellent source of ideas for generations of investors. Even though the Oracle of Omaha is pulling back to cash heavily this year, there are still some fantastic stocks being held at Berkshire that appear undervalued and bear watching.

Here are three of the best Buffett stocks to look into if you have a few thousand dollars to put to work in today’s market.

SiriusXM

In a year that has seen Buffett sell far more than he’s bought, internet radio company SiriusXM (NASDAQ:SIRI) stands out as one of his few new positions.

Buffett started by buying tracking stocks that were set to be merged into a combined SiriusXM stock. After the merger, though, he bought up additional shares that ultimately put him in control of about a third of the company.

While Buffett found something of a one-time opportunity in the merger, there still could be decent value in SiriusXM. At 5.5x cash flow and 0.8 to book value, the company still looks cheap enough to be of interest to value investors.

While analysts are somewhat divided on the stock’s future, the median target price for SIRI shares over the next 12 months implies an upside of about 5%. The real value of the stock, however, is in its long-term earnings growth potential.

Like most Buffett stocks, SiriusXM enjoys a solid moat within its industry. The company commands about 60% of the internet radio broadcasting market and is essentially a default brand within the market.

This, in combination with the company’s ongoing partnerships with various automakers to include its services when consumers purchase cars, could allow SiriusXM to continue growing for a long time to come.

Over the next 3-5 years alone, analysts predict that earnings per share could rise at an annualized rate of over 30%. As a result, there’s a very good chance that Buffett saw SiriusXM as an undervalued stock with significant future growth potential and an attractive competitive advantage.

Occidental Petroleum

Occidental Petroleum (NYSE:OXY) is only the sixth-largest holding in the Berkshire Hathaway portfolio, accounting for a bit under 5% of the total.

The oil company has become one of Buffett’s favorite buys in recent years. Berkshire has been steadily building its position in OXY over the last several years, including a buying spree in June that saw the company add over 7 million shares in just a few trading days.

Even today, Occidental’s valuation looks quite attractive. The stock trades at about 15x forward earnings and 4.2x cash flow, both of which are quite low for a company with an established position in the Permian Basin oil fields.

Occidental also produces highly reliable cash flows that, in the words of Indian investment legend Mohnish Pabrai, allow Buffett to “clip coupons.” By this, Pabrai meant that Buffett can predict with a very high degree of accuracy the future cash flows of the business.

So far, Buffett has shown a significant appetite to keep holding OXY as the price has fluctuated, meaning that it’s likely still a good value. Berkshire has continued buying everywhere from $44 to $64, a range in which the stock still resides.

Even more telling is the fact that Buffett seems to want to keep this buying habit up well into the future. Berkshire has regulatory approval to buy as much as 50% of the company. Although Buffett claims he doesn’t have any plans of buying quite that much, it’s clear that he wants to keep the option to buy OXY on the table for the foreseeable future.

OXY is also reasonably attractive as an income source, as the stock yields about 1.7% and pays $0.88 per share annually. While this isn’t a massive yield, it does handily beat the S&P 500 average yield of 1.2%.

Between the reliability of its cash flows, its position in a well-proven oil production region and a reasonably high dividend, OXY has many of the makings of what Buffett’s longtime partner, Charlie Munger, might call a wonderful business at a fair price.

Citigroup

Last but not least is Citigroup (NYSE:C), a relatively recent addition to the Berkshire portfolio.

Buffett bought the vast majority of his $3.9 billion stake in Citigroup in 2022, adding slightly to it in 2023. Though Buffett hasn’t kept buying Citigroup shares in 2024, it also isn’t among the list of stocks he decided to sell as the market crept steadily higher this year.

By several metrics, Citigroup still looks quite cheap at today’s prices. The stock is priced at about 8x cash flow and 12x forward earnings. These metrics would look good on their own, but they are augmented by the fact that C shares trade at 0.7x book value and 0.8x expected earnings growth.

By most standards, shares of the financial services company look quite cheap, though it’s worth noting that its debt-to-equity ratio of 1.6x is a bit on the high side.

Citigroup stands out from many Buffett stocks in the sense that investors can still access something close to the Oracle of Omaha’s own cost basis.

Many longtime Buffett holdings were fantastic values when they were added to the Berkshire portfolio but have since risen enough that investors aren’t getting quite the deal that Buffett did. In Citigroup’s case, though, Buffett has a cost basis of about $61.80 and the stock is trading just 16% higher.

Citigroup pays a dividend that is even higher than OXY’s at 3.2% but this generous payout is only one of the ways that Citigroup likes to pass cash back through to its shareholders. The other is a slow buy steady buyback program that has been pulling shares off the market since 2014.

Over time, this buyback effort has had a significant impact, reducing the number of outstanding shares from 3.04 billion at the end of 2013 to 1.94 billion as of the end of Q3 2024.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.