Market Insights on Key Stocks
Moody’s financial analytics arm appears to hold promise across various market situations.
Verisign’s operations seem equipped to endure broader economic challenges.
Occidental Oil’s stock is unlikely to recover until crude prices appreciate.
As Warren Buffett prepares to resign as CEO of Berkshire Hathaway by year’s end, there’s growing curiosity about whether Greg Abel, his successor, can uphold the stellar legacy of the company’s investment strategies.
Rather than fixate on whether Abel can replicate Buffett’s undeniable prowess as a stock picker, it might be more insightful to reflect on the long-term picks that Buffett championed. Let’s explore some classic choices that remain worthwhile, along with a few to steer clear of.
Moody’s stands as one of the predominant financial data and analytics firms in the U.S., renowned for its extensive array of services ranging from credit ratings to analytical data that numerous leading corporations and financial entities depend on for sound financial judgments. It competes closely with S&P Global.
The nature of its business positions Moody’s as a resilient option regardless of market fluctuations. Between 2014 and 2024, its earnings per share (EPS) grew at an annual rate of about 9%—partly fueled by rising interest rates that stimulated growth in the credit rating sector during 2022 and 2023, as new debt offerings became less appealing.
Analysts project that from 2024 to 2027, EPS could increase at a rate of 12%. Even if its stock isn’t particularly cheap, trading at 37 times anticipated future earnings, it still presents an appealing haven for investors in today’s uncertain market. Berkshire Hathaway has held onto its stake in Moody’s since 2013, with its $12 billion investment constituting a 13.7% ownership in the company, accounting for 4.2% of Berkshire’s overall equity portfolio.
Verisign, specializing in domain name registration for top-level domains like .com and .net, seems similarly positioned for stability. It provides these registrations through major registrars like GoDaddy and Network Solutions, and as long as these businesses continue to renew their domain names, Verisign’s earnings should remain robust.
In fact, from 2014 to 2024, registrations for .com and .net domains soared from 130.6 million to 169 million, despite low numbers in earlier decades. Verisign recently renewed two .com contracts with the U.S. government, extending their agreement for another six years, although these contracts have faced scrutiny from various political and advocacy groups. Over the last decade, Verisign has also bought back roughly 29% of its shares, with a current dividend yield of around 1.1%.
Looking forward, analysts anticipate that Verisign’s EPS may rise at a combined annual rate of 10% from 2024 to 2027. Its price-to-earnings ratio is a bit high at 32 times, yet the infrastructure it relies upon is designed for longevity through market fluctuations. Berkshire holds a 14.2% stake in Verisign, worth approximately $3.7 billion, representing about 1.3% of its overall portfolio.
On another front, Berkshire’s substantial position in Occidental Oil (NYSE: OXY), valued at $11.6 billion, holds a 26.9% interest in the company, making up 4.1% of its stock holdings. This position has seen consistent growth over the past three years. Buffett favors Occidental as a domestic energy play aimed at reducing U.S. reliance on foreign oil, though its stock has depreciated nearly 30% due to falling crude prices over the last year.
As an upstream company, Occidental engages in oil and gas exploration, drilling, and extraction. Consequently, when energy prices rise, earnings should ideally grow, although declines in prices can impede revenue and profit margins.
Factors such as inflation, increasing interest rates, and trade disputes appear to be dampening global demand for oil, contributing to its price downturn. Meanwhile, OPEC+ has ramped up crude oil production, exerting additional pressure on oil prices, while U.S. firms have curbed domestic drilling in response to these macroeconomic challenges.
Over the past decade, Occidental has increased its shares by 28% to fund acquisitions and obligations. However, analysts do project a 14% annual growth in EPS from 2024 to 2027 as the fossil fuel market stabilizes. Current dividends yield around 2.2%, and the stock seems reasonably valued with an earnings multiple of 19 times. So, while Occidental may eventually rebound, cautious investors might prefer to wait until oil prices find equilibrium.
It’s crucial to consider these insights carefully before diving into stocks offered by Berkshire Hathaway.
