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Dear Fellow Investor,
Like most investors, one of your top goals has been to enjoy financial freedom at whatever age you choose. So, it stands to reason that your money should ideally generate above-market returns with below market risk.
One of the best ways to do that is to follow the Warren Buffett model.
In fact, if you want to invest in companies attractive to the billionaire, make sure they are:
- Simple companies that are easy to understand
- Companies with predictable and proven earnings
- Companies that can be bought at a reasonable price
- Companies with “economic moat,” or a unique advantage over its competition.
“I look for companies that have a business we understand; favorable long-term economics; able and trustworthy management; and a sensible price tag. We like to buy the whole business or, if management is our partner, at least 80%,” says Warren Buffett.
So, which stocks have been favored by the billionaire? Read on for two…
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Company: Occidental Petroleum (SYM: OXY)
Warren Buffett loves energy stocks, like Occidental Petroleum.
His Berkshire Hathaway recently bought 8.9 million shares for about $405 million in late December. At this rate, it would be easy to assume that Buffett wants to buy the whole company. However, according to Buffett, that’s not the case.
“Though we very much like our ownership, as well as the option, Berkshire has no interest in purchasing or managing Occidental. We particularly like its vast oil and gas holdings in the United States, as well as its leadership in carbon-capture initiatives, though the economic feasibility of this technique has yet to be proven. Both of these activities are very much in our country's interest,” he wrote in a 2023 shareholder letter.
Buffett also believes OXY is being run the “right way,” he mentioned to CNBC. “I read every word [of its earnings call], and said this is exactly what I would be doing.”
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Company: Verisign (SYM: VRSN)
Warren Buffett’s Berkshire Hathaway just increased its stake in the VRSN stock by picking up another 377,736 shares for about $74 million in late December. The firm now owns more than 13 million shares of VRSN, which makes Berkshire the company’s largest shareholder.
Why is the firm so confident?
For one, VRSN has a gross margin of 87.6%, a 71% operating margin and a 52% net income margin at the moment. All of which are up year over year. Two, Verisign owns the digital real estate space, controlling registrations for dot-com and dot-net in our online world.
In short, Buffett is simply buying part of the Internet’s backbone.
Plus, it looks like Buffett isn’t the only one willing to share in the optimism for this stock’s potential upside. Jim Simons’ Renaissance Technologies bought another 474,270 shares this month, as well. Nordea Investment Management also picked up an $81 million position in the VRSN stock just this month. Birch Capital Management also picked up another 3,996 shares.
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