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.  

One quote in which the billionaire neatly summarises his timeless investment approach is to “be fearful when others are greedy and greedy when others are fearful“. With that in mind, let’s look at two stocks Warren Buffett has been buying this year and whether now is a time for me to be fearful or greedy.

A new Warren Buffett stock

Warren Buffett first acquired shares in Occidental Petroleum (NYSE: OXY) in 2019, but he’s considerably increased his stake since late February 2022. It’s a top 10 holding in Berkshire Hathaway’s stock market portfolio today.

In total, Berkshire owns 143m shares. It’s proved an excellent investment. The Occidental Petroleum share price has soared by 124% this year.

Occidental stock could by buoyed by a promising outlook for higher oil prices, at least in the short term. Brent crude is tipped to soar to from $119 to $140 per barrel over the coming months, according to the latest Goldman Sachs forecast. Berkshire’s investment gives Buffett exposure to this trend.

What’s more, the oil company looks reasonably valued to me with a price-to-earnings (P/E) ratio around 10.5. On the other hand, the stock’s dividend yield is less remarkable at 0.75%. Indeed, it’s worth noting Berkshire owns preferential shares that pay an annual dividend of 8%.

When it comes to my own portfolio, I’m wary of the risk that the stock price may have climbed to artificial highs following news of Warren Buffett’s investments.

An old favourite

Apple (NASDAQ: AAPL) is the top Warren Buffett stock. At nearly 43% of Berkshire’s entire portfolio, the US tech giant dwarfs the company’s other holdings. Owning a stake of 887m shares, Berkshire is Apple’s third-largest investor.

The Apple share price is down nearly 15% over the past six months. During this drawdown, Buffett has been adding to his existing position.

Apple’s most recent quarterly results are encouraging. Total revenue saw an 8.59% year-on-year increase to $97.28bn. The company generated over $28bn in operating cash flow and it returned nearly $27bn to shareholders during the quarter.

However, disruptions to global supply chains caused by lockdowns in China and the war in Ukraine are headwinds for Apple stock. So too are rising inflation rates across the world if cost-conscious consumers cut back on Apple products. The iPhone 14’s sales performance, following an anticipated release later this year, will be crucial.

Fear or greed?

There’s plenty of fear around at the moment. Gloomy predictions of global recessions make it easy to be bearish. Yet times like these often reward greed in successful stock market bargain hunters, demonstrated by Warren Buffett’s recent spending spree.

I won’t be buying Occidental or Apple shares at present for the reasons I’ve outlined above. Plus, I already own Berkshire Hathaway stock. Nonetheless, learning from Warren Buffett’s approach encourages me to seek out other long-term investment opportunities that align with my portfolio goals.

Here, I’m going to reveal what Buffett has been buying. I’ll also discuss whether I’d buy the stocks he’s bought.

Warren Buffett is buying oil stocks

The first big purchase was Occidental Petroleum (NYSE: OXY). It’s an American energy company that has operations in the US, the Middle East, Africa, and Latin America. Buffett first invested here in 2019, however he has upped his stake significantly and now owns around 15% of the business.

I can see why Buffett is interested in this stock at present. For starters, he likes value and OXY is dirt-cheap. Right now, its forward-looking P/E ratio is just eight. Secondly, with oil prices at high levels, the company is generating a ton of cash flow ($3.2bn in the last quarter). As a result, it has been able to pay down debt, strengthen its balance sheet, and increase its dividend.

This isn’t a stock I’d buy though. Energy stocks are highly cyclical, meaning they tend to experience boom and bust cycles. Meanwhile, there’s uncertainty over the long-term outlook now the world is moving towards renewable energy. So I won’t be following the stock market legend here.

His largest deal since 2016

Buffett has also splashed his cash on Alleghany. It’s a diversified American company predominantly focused on insurance (one of his favourite sectors) and reinsurance, but also owns some industrial businesses. Here, he spent $11.6bn to buy the entire business. It’s his largest deal since 2016.

Given that Buffett is set to acquire all outstanding Alleghany shares, I’m not planning to buy the stock. However, there are a few UK insurance companies I’d be happy to invest in.

One is Prudential. It has recently streamlined its business and, as a result, is now purely focused on Asia and Africa – two markets with substantial growth potential.

I also like the look of Legal & General Group. It appears to be doing well at the moment and recently raised its dividend. Yet its valuation remains low.

I’ll point out, however, that these stocks can be quite volatile. So I’d be investing for the long term.

Buffett is buying more technology stocks

Finally, Buffett has also bought a large number of shares in HP. It’s the second largest manufacturer of personal computers in the world, behind Lenovo. He picked up 121m shares here, spending about $4.2bn on stock.

HP shares look quite interesting at the moment, in my view. For the quarter ended 31 January, the group generated revenue growth of 9% and earnings came in well above guidance. As a result, the company returned $1.8bn to shareholders in buybacks and dividends. Yet the stock remains dirt-cheap. At present, it has a P/E ratio of just 8.2, which is extremely low.

If I was to buy a technology hardware stock today though, I’d probably go for Apple (which is actually Buffett’s largest holding). It’s more expensive than HP, which adds a bit of risk. However, it has a more powerful brand and a better ecosystem. Additionally, it’s moving into high growth markets such as payments and healthcare.

Buffett’s most recent purchases were made at an average price of $56.60. On the face of it, this is a strange time to be buying shares in oil companies. The price of oil is high and oil stocks are up as a result. So why is he buying Occidental stock at $56 when he wasn’t buying earlier this year at $33?

Oil

Buffett has said before that an investment in Occidental Petroleum is a bet on two things. The first is the price of oil. The second is the Permian Basin, where most of Occidental’s operations are based. I think that Buffett’s most recent investment is the result of his belief that the outlook for US oil just got a lot better than it was earlier this year.

Last week, the US announced a ban on imports of coal, oil, and gas from Russia. Similar measures have been taken by the UK and Australia. Russia is the world’s third-biggest producer of oil, behind the US and Saudi Arabia. Banning Russian imports is therefore likely to mean that the US has to rely more on oil extracted domestically.

I believe this is the catalyst for Buffett’s purchase last week. I think he is taking the view that the market is not adequately appreciating what US decision to ban imports of Russian oil means for Occidental’s business. If I am right, the answer to the question of why he is buying Occidental shares now when he wasn’t in January is that the company’s prospects have improved dramatically.

Airlines

As I see it, the Occidental buy is similar to Buffett’s decision to sell Berkshire Hathaway’s airline holdings in 2020. Surprisingly, this happened at a time when travel restrictions were weighing on airline share prices. So it resulted in a substantial loss for Berkshire’s shareholders.

By way of explanation, Buffett pointed out that the outlook for the airlines themselves had been significantly worsened by the pandemic. They had substantial amounts of debt and had to raise funds by issuing shares. Worse, they had fixed costs that would cause them to keep losing money until full demand returned. In other words, Buffett sold the airlines because a sudden change meant that they were no longer attractive from an investment perspective.

I think Buffett’s most recent investment in Occidental is the result of a judgement that the company’s prospects have suddenly improved. Just as his decision to sell airlines wasn’t influenced by where the share price had been or might go, I don’t think considerations about the price of Occidental stock earlier this year influenced his decision to buy the company’s shares last week.

From the perspective of my own portfolio, I don’t anticipate following Buffett into Occidental Petroleum. As I don’t have his insight into oil, I’m unlikely to buy shares in Occidental, or even Royal Dutch Shell or BP. Personally, I’d rather buy Berkshire Hathaway shares and let the Oracle of Omaha look after investing in oil for me!