Are you aiming to give your investment portfolio a significant edge? One of the most effective strategies is to invest in stocks that Warren Buffett himself has backed. His investment portfolio has consistently outperformed the market over the years. By selecting stocks that Buffett has already chosen, you instantly position your portfolio ahead of the competition. Currently, there are two particular Buffett-backed stocks that are exceptionally affordable and worth considering.
For those bullish on oil, the first stock offers a compelling opportunity. Oil prices have experienced significant fluctuations in recent years, dropping below $25 per barrel in 2020 and then surging to over $125 two years later. Presently, prices stabilize around $70 per barrel. If you anticipate a resurgence in oil prices, whether due to rising demand from emerging markets or geopolitical disruptions, Occidental Petroleum could be a game-changer for your portfolio. Warren Buffett has held a stake in Occidental for an extended period, continuously increasing his holdings. Most recently, he purchased over 7 million shares through Berkshire Hathaway, elevating his investment to $16 billion.
Occidental's appeal to Buffett may be tied to its sensitivity to oil price shifts. The company is heavily invested in upstream operations, meaning its fortunes are closely linked to oil prices. Following its recent $12 billion acquisition of shale producer CrownRock, Occidental is well-positioned to appreciate significantly if oil prices climb. The company estimates an increase of $260 million in cash flow for every $1 increase in oil prices. Although oil prices are currently about $50 lower than their 2022 peak, the unpredictable nature of this market suggests a possible rebound, making Occidental a compelling investment choice for those confident in a future oil price resurgence. However, it's important to understand that with high potential rewards come measurable risks if oil prices decline further.
For investors who are not focused on oil, Nu Holdings represents an exciting growth opportunity that's still aligned with Buffett's strategy. This fintech company, largely unknown in many regions, is rapidly expanding in Brazil, Mexico, and Colombia. It offers an extensive range of digital financial services, from payment cards to crypto trading and personal insurance. Nu has swiftly grown its customer base from zero to over 100 million in a decade, reflecting the high demand for its services. Although the company’s most explosive growth phase might be behind it, sales continue to expand at a robust rate, exceeding 50% annually. With more than 600 million residents in Latin America, there's ample room for further expansion.
From a valuation perspective, Nu Holdings doesn't initially appear cheap, trading at 47 times earnings. However, the company's growth trajectory suggests these figures might soon seem economical. Earnings are projected to rise by over 70% this year, with analysts forecasting a continued 50% annual profit growth over the next five years. If these predictions hold true, Nu's stock could be valued at less than ten times its 2028 earnings. This indicates that while Nu Holdings may require patience, the potential payout could be significant for those willing to invest in its sustained growth. Ultimately, both Occidental Petroleum and Nu Holdings offer intriguing prospects for those looking to tap into Warren Buffett's historically successful stock picks.
