What Is Warren Buffett Buying Now?

What Is Warren Buffett Buying Now? The Oracle of Omaha knows how to take advantage of a good opportunity when he sees one. The recent bear market has created enormous potential for long-term returns, so it is no surprise that Buffett and his partners at Berkshire Hathaway have been snatching up stocks on sale.

If you have cash in hand, now is a great time to buy. But where should you put your money? Perhaps following the Oracle of Omaha isn’t a bad idea given his Berkshire Hathaway holding company has outperformed the market so significantly over past decades, returning 20% annually on average vs 10% for the broader market.

Here are some top stocks Warren Buffett is buying now.

Floor & Decor (FNR)

Floor & Decor has grown rapidly over the last few years. In 2017. it had 83 warehouse stores. By 2021, it had nearly twice as many, with 160 warehouse stores throughout the United States.

The company’s total sales have also grown impressively. In 2017, Floor & Decor generated $1.38 billion in revenue. It has steadily increased that amount each year. In 2021, it reported $3.43 billion.

In some ways, Floor & Decor doesn’t seem like the type of company Warren Buffett would commit to. FNR sells flooring products to consumers. Its biggest sellers include laminate and vinyl plank flooring, tile flooring, and wall tiles.

Typically, you would expect to find Buffett buying shares of electronics, energy, and healthcare companies. Why care about a warehouse store that sells flooring systems?

Because Floor & Decor (NYSE:FND) has a wonderful business model and a focused plan for growth. During the pandemic, a lot of people used time in isolation to remodel their homes. Floor & Decor provided a broad range of flooring systems at fair prices. The company has committed the money it made during the beginning of the pandemic to opening new locations and growing its design services.

Despite opening so many new locations over the last five years, same-store sales have grown for at least 13 consecutive years. In other words, the company has managed to open a lot of new retail stores without competing against itself.

Should You Buy Floor & Decor?

Floor & Decor isn’t a cheap stock to buy. Last October, shares traded for about $135. That might not sound like a lot, but it trades at 23 times its earnings. That’s quite a bit above the average public company.

Still, the company has so much potential for growth that it may justify a purchase – certainly Buffett thinks so. The company becomes even more attractive when you realize how much share prices have dropped recently. 

When looking at the company through the lens of valuation, you can see what Buffett likes. The consensus analyst estimate pegs fair value at $102.86 per share, around 30% higher than where the share price sits now.

Occidental Petroleum (OXY)

Occidental Petroleum has been a Buffett favorite for years. Recently, Berkshire Hathaway increased its holdings by 16.3%, a $500 million purchase that shows ongoing faith in the company’s long-term success.

Why has Buffett chosen now as the time to make such a major recommitment to Occidental Petroleum?

In three words: higher oil prices. Buffett is clearly forecasting persistently high oil prices that should benefit Occidental Petroleum for some time to come. Plus, OXY has stellar revenue growth, up 45.7% between 2020 and 2021, and the company plays a critical role in the world’s energy supply.

Despite its success, OXY shares have slipped recently. As petroleum companies earn record profits, OXY stands out as an attractive company to buy with 47.1% upside potential to fair value based on a discounted cash flow forecast analysis. That would translate to a share price potential of $84.62 if realized.

HP Inc (HPQ)

A quick look at HP Inc’s recent stock history could easily send you running away as fast as you can. In the last year alone the share price has experienced nearly a dozen significant peaks followed by sudden drop-offs. Buying shares might feel more like playing a game of chance than making an informed decision.

So, why did Berkshire Hathaway spend over $4 billion buying 121 million shares?

HP has had a rough time since Russia invaded Ukraine. The company shut down its Russia operations in protest of the military invasion. It refuses to cooperate with the Russian government or any of Russia’s businesses. Few companies are making their opinions as well known as HP.

HP’s leaders certainly knew cutting ties with Russia would hurt its bottom line. But it will only hurt for a short time. Sooner or later, the situation between Russia, Ukraine, and the rest of the world will get sorted. Depending on how long that takes, HP will return to normal operations or find a way to thrive without Russia.

From a valuation perspective, when we ran the numbers the margin of safety was large and upside potential was enormous also. We calculated upside to $49.83 per share, representing as much as 41.4% gain potential.

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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.