Warren Buffett is known as one of the greatest investors of all time. Indeed, since becoming CEO of Berkshire Hathaway in 1965, he has managed to deliver a return of 3,600,000% for the company’s shareholders. This has far outperformed the S&P 500.
That is not to say that all of Buffett’s investments have been great. For example, a few years before the pandemic, he made investments into all four major US airlines, before selling them at the lows of the pandemic. Since this moment, the airlines have recovered well. He also admitted that he paid far too much for Kraft Heinz, which was one of his largest purchases. Therefore, I do not blindly follow Buffett’s investments. Instead, I opt to do my own thorough research. Here’s one of his investments I would buy and one I am staying clear of.
One of Warren Buffett’s most successful investments
Warren Buffett first started building a stake in Apple (NASDAQ: AAPL) in 2016 and has made around a 400% return since then. Recently, he has been adding to his position, buying around another $600m worth of Apple stock in Q1. I believe that now is a good time to add to my own position.
The group is performing excellently right now. In the recent second quarter, it posted record revenues of $97.3bn, up 9% year on year. At the same time, net income reached over $25bn, up from $23.6bn the year before. This demonstrates that Apple has dealt well with inflationary pressures and continued reporting strong growth.
However, the company is not immune to macroeconomic worries. For instance, it has warned that due to strict Covid-19 lockdowns in China and supply constraints, revenue is likely to be hit by around $4bn to $8bn in the third quarter.
Even so, I am happy to buy more Apple stock in the next few months. The company is in excellent financial shape, as shown by a recent $90bn increase to the share repurchase programme. I am also encouraged by its further move into finance, through its new buy now, pay later service. This could offer a further form of growth.
An investment I would avoid
Buffett has continued to buy Occidental Petroleum (NYSE: OXY) over the past few months. As the price of oil has surged, the oil giant has been able to post extremely large profits. For instance, in Q1, the company reported net income of $4.7bn, which was a record for the company. Without the inclusion of a $2.6bn non-cash tax benefit, adjusted income reached $2.1bn, far higher than the $346m loss reported in the same period last year.
These excellent results allowed the company to repay $3.3bn of debt. Once it manages to pay an additional $1.7bn of debt, the company’s focus will be to expand the $3bn share repurchase programme. This may help boost the Occidental share price further.
However, despite these excellent results, I am staying away from oil stocks right now. In fact, as recognised by Occidental themselves, it sees “the potential for market conditions to dampen slightly in the second half of the year”. Further, with climate change one of the most pressing issues in society, I believe that the long-term future of oil stocks is unstable. As I invest for the long term, I will, therefore, not be adding Occidental shares to my portfolio.