Warren Buffett, at the helm of Berkshire Hathaway, is not only invested in publicly traded stocks but also fully owns the company itself. Let’s dive into two noteworthy investment picks from his diverse portfolio.
1. Clear Skies for Chevron
Chevron, a significant player in the energy sector, operates across the entire energy value chain—from production to refining and distribution. This broad reach helps mitigate the volatility often seen in commodity markets. With a well-balanced portfolio, Chevron focuses on investing in areas that promise the best returns. It’s generally regarded as a well-managed enterprise.
Yet, the company has faced some challenges in recent years. Issues such as long-term acquisitions, like HESS, and uncertain investments in Venezuela have muddied the waters a bit for stock prices. The situation with ExxonMobil is also noteworthy; while this merger has now concluded, the broader issues around Venezuela remain unresolved.
However, as conditions improve, Chevron emerges as a particularly appealing energy stock in Buffett’s collection. Notably, Chevron offers a 4.3% dividend yield, which outshines Exxon’s 3.5%. If you’re thinking long-term and lean toward dividend investments, following Buffett’s strategy with Chevron could be worthwhile. The company has consistently raised its dividends for 38 years!
2. Investing in the Middle Class with Enterprise
Buffett’s strategy goes beyond just owning public companies; he also invests heavily in sectors that resonate with the middle class. This approach is logical for Buffett, as the stable cash flow from pipeline operators who transport energy is significant. Overall demand for transportation services typically outweighs the actual prices of goods passing through pipelines.
While you can’t invest directly in Buffett’s middle-class ventures via Berkshire Hathaway, you can consider Enterprise Product Partners, a leader in this space. One of its main attractions for income investors is the impressive 6.9% distribution yield, which has risen annually for 26 consecutive years.
Enterprise isn’t just about a solid history of yields, though; it maintains an investment-grade balance sheet and boasts a diversified cash flow that comfortably covers its strong distribution by 1.7 times. There’s ample room for challenges before any distribution cuts might become necessary. Plus, the company is earmarking $5.6 billion for capital investments to ensure its growth continues.
You might not be able to invest directly in Buffett’s middle-class initiatives, but Enterprise allows you to align with similar values. It stands out as a reliable income stock, providing a semblance of Buffett’s investment style, even if you can’t fully replicate it.
Think Long-Term, Like Buffett
The essence of Buffett’s strategy? Buy stocks and hold them for the long haul, harnessing the growth of the businesses he invests in. When considering stocks like Chevron or Enterprise, view them not as short-term plays. That would miss the core of Buffett’s philosophy. Instead, think of these high-yield energy stocks as foundational assets that are likely to reward you over time, through both good and bad market conditions.
