In 2022’s final week, the NASDAQ was down by over 35%. So naturally, we’ve got tons of headlines spreading doom and gloom, investors panicking, and all the usual stuff…But while everyone is scared and trying to pull out of their positions as soon as possible, Warren Buffett is going in big. Because guess what? Buffett’s a long-term investor. He’s been around long enough to know the stock market isn’t going anywhere. So when stocks go down, he doesn’t see reasons to panic. He sees opportunities.
And today, we’ll take a closer look at some of those opportunities, namely his top five picks.
Two brand new additions; one is a new semiconductor company.
Buffett’s Top Five Picks
- CVX – Chevron Corp – Added 3.92 million shares; Total stake $23.76 billion (8.02% of portfolio)
- OXY – Occidental – Added 35.80 million shares; Total stake $11.94 billion (4.03% of total portfolio)
- TSM – Taiwan Semiconductor – Added 60 million shares; Total stake $4.12 billion (1.39% of total portfolio)
- PARA – Paramount Global – Added 12.79 million shares; Total stake $1.74 billion (0.59% of total portfolio)
- LPX – Louisiana Pacific – Added 5.8 million shares; Total stake $296 million (0.10% of total portfolio)
Chevron Corp (CVX)
We’re starting off with the biggest position on the list – Chevron Corp.
Chevron (ticker symbol CVX) is an oil and gas giant that scored some solid sales growth despite economic difficulties. Like most companies in their field, Chevron is in a position to benefit from the fuel shortage created by the conflict, and Buffett is (as always) not sleeping on the potential here. Berkshire Hathaway added over 3.9 million shares to this position, which puts the total CVX stake at nearly 24 billion dollars and a solid 8.02% of the portfolio.
For 2022, the growth estimates for Chevron were in the upper 40, with nearly 47% expected sales growth. But analysts don’t expect this to last in the long-term, both because the shortages have to end sooner or later and because the future is green.
What we have here is a situation that you could call a “shorter long term”. What I mean by this is that Chevron is looking great right now and will more than likely remain a very solid player on the global field for the next few years. And looking at the shares Buffett is buying, he seems to have the same idea. However, in the “long long-term”, oil and gas will be losing steam until they eventually get replaced by sustainable energy. Then again, CVX is also putting good money into renewable energy, so they’re doing well on the diversification front as well.
And all of this didn’t go unnoticed by investors around the world – CVX is currently trading just under its all-time high and also happens to be the only stock on our list today that’s trading more expensive than its sector.
Next up on Buffett’s five buys landed in the second position, we’ve got…
Occidental (OXY)
Occidental (ticker symbol OXY) is another oil and gas company.
Now, I’m a big fan of green energy, but Buffett clearly sees potential here. It’s important to note that the switch to renewables can’t happen overnight, and the old energy companies will still play a significant role in the economy in the near future. This, coupled with the oil price spikes and the recent energy shortages, allow OXY to remain relevant and enjoy significant growth – nearly 43% sales growth for 2022. And while sales in 2023 are projected to drop by about 9%, OXY is still going to be a major player in the global market.
Why Buffett likes this stock:
- Oil & gas prices spiked massively
- Green energy is not quite there yet – phasing out the old methods will take a while
Now, for number three, there’s…
Taiwan Semiconductors (TSM)
Taiwan Semiconductors (ticker symbol TSM) is… Well, a chip manufacturer. It does exactly what it says on the tin. Now, you know my stance on semiconductors – they’re not going out of style anytime soon – and it seems like Buffett agrees with me here. He’s added over 60 million TSM shares, placing his total stake at over $4.12 billion or 1.39% of the entire portfolio. And keep in mind that this is a stock that went down by nearly 49% in 2022.
The thing with chips is that there’s practically always a shortage of them, and with every technological advancement, the demand goes up. They’re used in everything from smartphones and computers to EVs, IoT and VR tech. And with the Metaverse just around the corner and the big push for EVs worldwide, semiconductor companies have a bright future ahead of them.
TSM has been doing really well recently, with great revenue and an excellent bottom line. However, for 2023 the company is expected to slow down a bit, with a very modest sales growth estimate of 2.80%. But sustaining the sort of growth TSM demonstrated during these last few years is not really reasonable in the long term.
Moving on to number four of Buffett’s five buys, we’re looking at…
Paramount Global (PARA)
Paramount Global (ticker symbol PARA) is a US-based media and entertainment company.
Buffett added 12.79 million shares (increase of 16%) to his PARA position, placing his total stake at $1.74 billion. Now, PARA has been steadily dropping recently – 19% for 2021 and over 44% in 2022, but Buffett clearly has faith in the company. Breaking into the streaming service market is difficult, especially when you’ve got companies like Disney, Netflix and Amazon as your competition. And I really share Buffett’s optimism here because streaming is definitely here to stay (the market is growing by about 20% each year). Paramount has a solid catalogue boasting high-value IPs like Transformers, Indiana Jones and Halo, along with a ton of content from Nickelodeon, CBS and MTV.
Why Buffett likes it:
- Lots of valuable IPs and originals
- Big growth potential
- Low valuation – about 50% under the sector
- Safe dividend yield – 5.76% (20% payout)
And, finally, at number five of Buffett’s five buys, we’ve got…
Louisiana Pacific (LPX)
Louisiana Pacific (ticker symbol LPX) is a construction products company and one of the new additions to the Berkshire Hathaway portfolio. Now, like most construction businesses, LPX is closely tied to the overall state of the economy – when the money’s tight, there are naturally going to be fewer building projects. After suffering a significant drop in performance in 2019, LPX has been recovering steadily over the last couple of years thanks to the stimulus checks and cash injections. However, this will likely change in the near future because, as we’ve discussed here on this channel – just printing more money is not a long-term fix for the economy. So, the numbers for LPX are expected to drop, respectively, by 12% and 22.8% in the coming years.
So, why does Buffett like this stock?
Because it’s the type of long-term buy-and-hold stock that’s not likely to go away anytime soon.
- Safe long-term stock – great for buy-and-hold because they aren’t going anywhere anytime soon
- Cheap valuation – about 68% cheaper than the sector
- Safe dividend ratio – 6.35 (but the dividend yield is pretty low!)
In closing
2022 was a pretty rocky year for the stock market, and I personally didn’t follow it as closely as I usually do because of that. Now, those of you who are familiar with my approach to stocks and my long-term strategy know what this means. I always aim to make calm long-term decisions. I add to my positions when the price is right, and I hold for the long term. When there’s a lot of volatility and uncertainty, I prefer to hold onto my shares and look for opportunities. And that’s exactly what I did in 2022. I took a step back from all the chaos and focused more on growing my other projects while also calmly adding to my long-term winning positions. I don’t want to get bogged down in all the negativity and panic, and I certainly don’t mean to sell my positions, so that was the most logical step.
Now, for 2023, I believe that the market will begin to stabilise. So I expect things to more or less go back to “normal” by the summer. But until then, I’ll keep doing what I always do – look for good long-term companies and slowly build up my portfolio.
And that’s about it for today, guys.
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Thank you all for being with me today and until next time!
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Recommended books for further reading:
- Rule #1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week
- How to Day Trade for a Living: A Beginner’s Guide to Trading Tools and Tactics, Money Management, Discipline and Trading Psychology
- How to Make Money in Stocks: A Winning System In Good Times And Bad
- Rich Dad’s Guide to Investing: What the Rich Invest in, That the Poor and the Middle Class Do Not!
- Intelligent Investor: The Definitive Book on Value Investing – A Book of Practical Counsel
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