Warren Buffett, the legendary investor, may have stepped back from daily operations at Berkshire Hathaway, but he continues to serve as the board chairman and has significantly shaped the company’s current portfolio of stocks and investments. His successor, Greg Abel, has already begun implementing substantial changes in his first quarter as CEO. The company’s existing portfolio features a diverse mix of technology giants dubbed the “Magnificent Seven,” as well as leading banks and financial entities, consumer staples, and energy companies.
In the current environment, two stocks associated with Buffett have emerged as compelling buys this May.
Chevron (NYSE: CVX)
Amidst rising gas prices, fueled by geopolitical tensions such as the ongoing war in Iran and the closure of the Strait of Hormuz, Chevron’s recent performance has been noteworthy. Despite a modest 2% increase in revenue in the first quarter, the company’s earnings dipped by 37%. However, these numbers are largely influenced by shipping and accounting factors.
The real success story lies in Chevron’s oil production, which surged by approximately 500,000 barrels per day, including a notable increase of 388,000 barrels per day in the U.S. This production boost translates to about a 15% year-over-year growth. Looking ahead, Chevron anticipates a production growth of 7% to 10% for the fiscal year, indicative of its strong operational foundation. Furthermore, Chevron’s dependency on U.S. oil production mitigates risks associated with international disruptions.
With adjusted free cash flow reported at $4.1 billion for Q1 and a year-to-date stock price increase of 28%, Chevron’s outlook appears solid. The company’s forward price-to-earnings (P/E) ratio stands at a favorable 14, contributing to its attractiveness as a defensive investment during economically uncertain times. Additionally, Chevron’s commitment to returning value to shareholders is evident as it recently increased its dividend for the 39th consecutive year, now standing at $1.78 per share, yielding approximately 3.63%.
Apple (NASDAQ: AAPL)
Apple remains a central figure in Buffett’s investment strategy, with Berkshire holding around 228 million shares, making it the largest position in the portfolio. Recently, Abel chose not to sell any additional Apple shares, highlighting confidence in the tech giant, which has seen its stock rise about 10% in 2023 and an impressive 42% over the past year.
The company recently reported record fiscal Q2 revenue, largely driven by the successful launch of the iPhone 17. With a revenue boost of 17% and earnings soaring by 22%, Apple anticipates further growth in the upcoming June quarter, projecting revenue increases between 14% to 17%. This outlook surpasses analysts’ expectations.
The timing of buying Apple shares could be particularly advantageous in May, leading up to the annual Worldwide Developers Conference (WWDC) on June 8, where Apple typically showcases new products and services. This year, the company is set to introduce several AI capabilities designed to enhance user experience across devices. Furthermore, organizational changes within Apple’s hardware development division signal a renewed focus on accelerating product launches.
Investors should consider the dynamics surrounding Apple stock carefully. Although there is often a buying trend preceding WWDC, historical patterns suggest there may be a reactionary sell-off following the event. However, with a reasonable valuation and ongoing growth, along with the leadership transition to new CEO John Ternus later this year, momentum for Apple appears favorable.
In summary, Chevron and Apple present enticing investment opportunities. As companies with deep roots in Warren Buffett’s investment strategy, both are positioned to potentially thrive in the current market landscape. Investors looking at these stocks may want to weigh them against other options, particularly those highlighted by platforms such as The Motley Fool, which offers a broader list of stocks for consideration in the current financial climate.
