Tracking Warren Buffett’s investment moves can be rewarding. Through his company, Berkshire Hathaway, Buffett has made some extraordinary stock selections, including a highly successful investment in American Express. Although Buffett plans to retire at the end of this year, he and his team continue to add new stocks to Berkshire’s holdings.
Recently, they invested a total of $1.33 billion across three companies. Should you consider adding these same stocks to your own investment portfolio?
Lennar and the housing market
During the second quarter, Berkshire Hathaway acquired 5.1 million shares of Lennar ( LEN 0.31%). The home construction industry has experienced significant ups and downs as rising mortgage rates have disrupted the housing market. Lennar’s share price dropped from over $180 in late 2024 to around $100 in the second quarter, but as of Oct. 14, it has rebounded to about $120.
Although homebuilders are subject to economic cycles, Lennar has proven its resilience and has become a top company in the field, generating $35 billion in revenue over the last year. Its net income declined to $2.7 billion during this period, down from roughly $3.9 billion in 2023 and $4.6 billion in 2022, mainly due to higher costs and lower home prices caused by increased interest rates.
Buffett and Berkshire Hathaway probably view Lennar as an undervalued opportunity with potential for profit growth if the Federal Reserve continues to lower interest rates, which would reduce mortgage costs and potentially boost home prices. Lennar’s price-to-earnings ratio (P/E) stands at just 12.7, even with its current earnings dip, suggesting the stock could be attractively priced for future gains. Additionally, the ongoing housing shortage in the U.S. could keep demand for Lennar’s homes strong for years.
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Beer brands at a discount
Constellation Brands ( STZ 0.31%) is a beverage company specializing in Mexican beers, including Pacifico, Modelo, and Corona. Beer sales in the U.S. have been declining, which has led to the stock dropping 48% from its peak. In the most recent quarter, beer shipments fell 8.7% compared to the previous year.
Despite the drop in alcohol consumption, Berkshire Hathaway may see Constellation Brands as a bargain in a sector with long-term pricing strength. The stock currently trades at an enterprise value-to-EBIT (earnings before interest and taxes) ratio of just 11, making it appear inexpensive for today’s buyers.
Even if alcohol consumption continues to decrease for a few more years, it has remained a staple in societies for generations and could be a reliable asset for Berkshire Hathaway over time. With its strong Mexican beer brands gaining ground in the U.S. market, Buffett likely sees Constellation Brands as a low-priced stock that could reward shareholders over the coming decade.
CVX Net Income (TTM) data by YCharts; TTM = trailing 12 months.
Oil prices and inflation protection
The third stock Buffett has been adding to is Chevron ( CVX -0.32%), which is now Berkshire Hathaway’s fifth-largest position.
Chevron is a major player in the oil and gas industry and has been a leading energy producer for many years. While its results are closely linked to oil prices—which have dropped by half since the Russia-Ukraine conflict pushed them to $120 per barrel in 2022—the stock remains inexpensive and can serve as a hedge against inflation for Berkshire.
Chevron’s P/E ratio is around 20, which may not seem cheap at first. However, this is largely because its net income has dropped to $14 billion over the past year, compared to over $30 billion when oil prices were above $100. The company still offers a dividend yield of 4.5%, and profits could rise sharply if oil prices climb again.
While Buffett might not call Chevron an exceptional business like American Express, it is a valuable asset to hold during a bull market and can help diversify your investments. Consider adding this oil giant if you’re looking for a stock that can help protect your portfolio from inflation over the next ten years.
