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Where Warren Buffett is Finding Great Values in This Market

In his 1986 Berkshire Hathaway Chairman’s Letter, Warren Buffett famously talked about fear and greed as “two super-contagious diseases.”

He explained, “The timing of these epidemics will be unpredictable. And the market aberrations produced by them will be equally unpredictable… Therefore, we never try to anticipate the arrival or departure of either disease.”

Instead, Buffett said, “we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

This is perhaps Buffett’s most well-known line because it captures his contrarian investment style in a nutshell…

Buffett and his team like to buy stocks that are undervalued by the market and hold them for years until they become fairly valued or overvalued.

Well, it seems Buffett is finding some undervalued companies out there because his firm was busy making a number of new buys and adding to other positions in the first quarter of the year as stocks were dropping sharply.

So, today, I want to take you through some of them to see where The Oracle of Omaha is finding opportunities.

Buffett Buys Energy

During the first quarter, Berkshire bought up millions of shares of Occidental Petroleum Corporation (OXY).

This is the Houston, Texas-based oil and gas exploration and production (E&P) company with US and global assets.

It also has additional businesses in transportation and storage as well as distribution, making it an integrated petroleum company.

Daily Chart of Occidental Petroleum Corporation (OXY) – Source: TradingView

With the price of crude oil on the rise this year, OXY is up over 123% year-to-date.

Berkshire also added significantly to its stake in Chevron Corporation (CVX).

Both energy companies are seeing massive free cash flows to fund business expansion, paying increasing dividends and buying back billions of dollars’ worth of stock, which is what Buffett is all about.

Finding Financials

Berkshire also found some financials it likes during the first quarter. The company initiated positions in Citigroup Inc. (C), Markel Corporation (MKL) & Ally Financial Inc. (ALLY).

Daily Chart of Citigroup Inc. (C) – Source: TradingView

While Citigroup is a major global banking and financial services company, Markel is primarily in the property and casualty insurance business, which has been one of the more successful groups of companies and stocks recently.

The position in Ally Financial was smaller but still shows Buffett’s commitment to investing in the financial sector and the online banking space in particular.

Mixed Buys

In a recent issue, I wrote recently that basic materials was one of the groups showing strength in an otherwise weak market.

Buffett must’ve noticed the same thing, as his firm bought a new position in Celanese Corporation (CE) during the first quarter.

Daily Chart of Celanese Corporation (CE) – Source: TradingView

Celanese manufactures high performance polymers that are used in automotive, medical, industrial and consumer electronics applications.

But Buffett is really interested because of the company’s commitment to returning cash to shareholders through dividends and stock buybacks. No surprise there.

Speaking of medical and consumer electronics, Berkshire also took a stake in McKesson Corporation (MCK), which is a healthcare services company, and HP Inc. (HPQ), which makes personal computers and other computer hardware.

Daily Chart of McKesson Corporation (MCK) – Source: TradingView

Both companies produce ample free cash flow that is set to make its way back to shareholders.

And lastly, Berkshire also took a new stake in Paramount Global (PARA), which is the entertainment company formed by the merger of Viacom and CBS.

While this might seem out of place, the company is undervalued on a price-to-sales and price-to-book basis, and it pays a solid 2.8% dividend at current levels that should keep Buffett happy.

Stick to the Strategy

Berkshire also added to several of its existing positions during the first quarter, including those in General Motors Company (GM), RH (RH), Floor & Decor Holdings, Inc. (FND), Formula One Group (FWONK), Apple Inc. (AAPL) and Activision Blizzard, Inc. (ATVI).

While this may seem like a somewhat random collection of companies, this is really just Buffett sticking to his strategy of buying undervalued companies that are returning value to shareholders through free cash flow, dividends and buybacks.

Buffett is clearly sticking to the strategy that’s rewarded him over his decades in the market, which is a lesson we should all be able to learn from.

When the markets are spiraling downward, stick to the strategy you’re familiar with, be patient and look for opportunities that meet all of your investment criteria.

Most importantly, be fearful when others are greedy, and be greedy only when others are fearful.

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Ross Givens
Editor, Stock Surge Daily

Ross Givens
Ross Givens

I bought my first stock when I was 12 years old. It was Microsoft. I’ve been a registered financial advisor. I’ve worked as a stock broker. I ran a managed fund. I was a Vice President at JP Morgan with Series 7, Series 66 and Series 3 securities licenses. I’ve been featured on Fox Business, CNBC, Bloomberg, and a bunch of other networks. The only thing I enjoy more than making money, is helping YOU make money.

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