Warren Buffett, well-known as the Oracle of Omaha, is considered one of history’s most successful investors. He is the Chairman and CEO of Berkshire Hathaway Inc. (BRK.A) (BRK.B). Buffett’s investment strategy involves betting on stocks with pricing power, long-term growth prospects, attractive dividends, and discounted valuations.
Buffett’s portfolio has been an investment guide for several investors for decades, given its impressive track record of outperforming the market,
Warren Buffett’s Berkshire Hathaway recently got approval from U.S. regulators to purchase up to 50% of Occidental Petroleum Corporation (OXY), a leading oil and gas company that operates in the United States, the Middle East, Africa, and Latin America. OXY jumped nearly 10% on the news. Also, the stock has gained 138.1% year-to-date.
This year, Buffett’s Berkshire drastically increased its stake in the oil company. Berkshire currently owns 188.5 million shares of OXY, representing 20.2% of the entire company. In addition, Berkshire holds $10 billion of Occidental preferred stocks and has warrants to purchase another 83.9 million common shares for $5 billion as part of the 2019 deal that helped OXY finance its purchase of Anadarko Petroleum.
Since OXY has rallied significantly this year and analysts expect the company’s revenue and earnings to decline in fiscal 2023, it could be wise to wait for a better entry point in the stock. However, Warren Buffett's holdings Celanese Corporation (CE) and The Coca-Cola Company (KO) could be solid additions to your portfolio, given their superior growth prospects. These stocks are rated Buy in our proprietary rating system.
Celanese Corporation (CE)
CE is a technology and specialty materials company that manufactures and sells high-performance engineered polymers in the United States and internationally. The company operates through three segments: Engineered Materials; Acetate Tow; and Acetyl Chain.
Buffett’s Berkshire Hathaway holds nearly 8 million shares of CE. The company represents about 0.3% of Berkshire’s portfolio.
On August 8, CE paid its stockholders a quarterly cash dividend of $0.68 per share. The stock’s dividend payouts have grown at a 5.5% CAGR over the last three years and a 10.7% CAGR over the past five years. Its current dividend translates to a 2.37% yield annually, while its four-year average dividend yield is 2.07%. The company’s dividend has grown for 12 consecutive years.
In July, CE announced the pricing of an additional €1.50 billion (approximately $1.5 billion) in permanent financing for the acquisition of most of DuPont’s Mobility & Materials business. CE’s subsidiary, Celanese US Holding LLC, priced an offering of €1.50 billion of euro notes with 4-year and 6.5-year maturities at 4.78% and 5.34%, respectively.
“We are pleased to have secured permanent financing for the M&M acquisition. We were purposeful in optimizing the maturity profile of our debt to provide us with ample flexibility to rapidly deleverage over the next few years and refinance at potentially lower borrowing rates in the future,” said Scott Richardson, executive vice president, and chief financial officer.
In the fiscal 2022 second quarter ended June 31, 2022, CE's net sales increased 13.1% year-over-year to $2.49 billion. Net cash provided by operating activities came in at $495 million, up 15.9% year-over-year. The company's free cash flow improved 19.1% from the prior-year period to $368 million. As of June 30, 2022, CE’s cash and cash equivalents stood at $783 million, compared to $536 million as of December 31, 2021.
The $2.35 billion consensus revenue estimate for the fiscal 2022 third quarter, ending September 2022, represents a 3.7% improvement from the same period in 2021. Analysts expect CE’s revenue for the current year (ending December 2022) to increase 12.8% year-over-year to $9.63 billion. The company has topped the consensus revenue estimates in each of the trailing four quarters.
The stock has declined 2.8% over the past month to close the last trading session at $111.01.
CE’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CE has a grade of B for Quality. Within the A-rated Chemicals industry, it is ranked #47 of 89 stocks.
To see additional POWR Ratings (Growth, Value, Quality, Stability, Sentiment, and Momentum) for CE, click here.
The Coca-Cola Company (KO)
KO is a leading beverage company that manufactures, markets, and sells various nonalcoholic beverages worldwide. The company operates through a network of independent bottling partners, wholesalers, distributors, retailers, and bottling distribution operators.
Buffett’s Berkshire Hathaway owns over 400 million shares of KO. It currently constitutes nearly 8% of Berkshire’s investment portfolio.
On July 21, KO declared a quarterly dividend of 44 cents per common share, payable on October 3, 2022. It pays $1.76 as dividends annually, which yields 2.70% on the current price. Its 4-year average dividend yield translates to 3.11%. Its dividends have increased at a CAGR of 2.9% over the past three years and 3.6% over the past five years.
In addition, the company’s annual dividend has grown for 59 consecutive years.
KO's net operating revenues increased 11.8% year-over-year to $11.33 billion in the fiscal 2022 second quarter ended July 1, 2022. Its gross profit grew 2.4% from the year-ago value to $6.50 billion. As of July 1, 2022, the company’s cash and cash equivalents came in at $8.98 billion, and its current assets stood at $23.14 billion. In addition, cash inflow from operating activities amounted to $4.55 billion.
Analysts expect KO's revenue for fiscal 2022 (ending December 2022) to come in at $42.23 billion, representing a rise of 9.2% from the previous year. The $0.66 consensus EPS estimate for the ongoing year indicates a 6% increase year-over-year. The company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
KO’s shares have gained 8.3% year-to-date and 13.8% over the past year to close the last trading session at $64.20.
KO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, equating to a Buy in our proprietary rating system.
KO has a grade of B for Stability, Sentiment, and Quality. Within the A-rated Beverages industry, it is ranked #21 of 34 stocks.
Click here to see additional POWR Ratings (Value, Growth, and Momentum) for KO.
OXY shares were trading at $73.97 per share on Tuesday morning, up $4.94 (+7.16%). Year-to-date, OXY has gained 156.25%, versus a -12.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
Buffett Gets OK to Buy 50% OXY; 2 Other "Buy" Rated Stocks in His Portfolio StockNews.com
