Stocks may rise during bull markets, but that isn't where the best investors make the most money. Ask the most successful money managers around, and they'll tell you most of the gains they have notched in their decades-long careers came from stock purchases made during bear markets.
Which stocks are the best investors attracted to at the moment? Here are a few that Warren Buffett, Daniel Loeb, and Ray Dalio scooped up as markets were tanking during the first three months of the year.
Warren Buffett and Occidental Petroleum
The market value of Berkshire Hathaway (BRK.A 0.07%) (BRK.B -0.08%) has risen at a 19.7% compound annual growth rate since Warren Buffett acquired the now-defunct textile mill in 1965 and turned it into a holding company that invests in equities or buys businesses whole.
Warren Buffett's track record is perhaps the greatest of all time, and the way he made it happen is no secret. For decades he's been telling anyone who will listen that he'd rather pay a fair price for a great business than a great price for a mediocre business.
Earlier this year, Occidental Petroleum (OXY 0.40%) was obviously trading at a fair price because Berkshire Hathaway scooped up 5.9 million shares of the energy stock. This is one of the largest oil and gas producers in the U.S., and you'll be happy to know it doesn't do business in Russia or Ukraine.
It's easy to see why Buffett thinks Occidental Petroleum is a great business right now. In May, the company told us that its dividend would be sustainable even if oil fell to $40 per barrel. Prices have been hovering above $100 ever since Russia, one of the world's largest oil exporters, incited sanctions against itself by invading Ukraine. With no end to the war in sight, the company's bottom line and its quarterly payouts could rise sharply in the years ahead.
Daniel Loeb and CSX
Daniel Loeb is CEO and founder of Third Point Management, a high-profile hedge fund out of New York that's famous for getting up in the grills of businesses that he feels could perform better. Loeb is the last person most CEOs want to hear from, but everyday investors could do well to follow his lead.
Third Point's largest addition during the first quarter was CSX (CSX 0.20%), a major railroad operator on the East Coast. CSX's network connects every major metro area in the eastern U.S., which is where the vast majority of the population resides. This may be what gave Loeb confidence to buy more than 7 million shares during the first quarter.
Last summer, CSX made a smart acquisition of Quality Carriers, one of the largest bulk tank trucking fleets in North America. The acquisition greatly expands the reach of CSX's chemical shipping network, which helped revenue expand by 21% year over year in the first quarter. The gain was all the more impressive because the actual volume of shipments was 2% less than during the previous-year period.
Over the past year, CSX has delivered a whopping $4.2 billion to its shareholders in the form of dividends and share buybacks. With rising costs for the commodities CSX transports on the rise, shareholders can expect a lot more in the year ahead.
Ray Dalio and Medtronic
When he isn't busy writing best-selling self-help books, Ray Dalio runs one of the world's largest hedge funds, Bridgewater Associates. Dalio's funds are famous for performing well when the rest of the market is tanking, and diversification is an important part of his strategy.
The largest new addition to Bridgewater's portfolio in the first quarter was Medtronic (MDT -0.14%). This is the world's largest manufacturer of medical devices and a reliable generator of profits in good times and bad.
It's hard to open your eyes in any hospital room without seeing half a dozen Medtronic products. As the largest device maker, economies of scale allow the company to compete fiercely with smaller businesses.
Medtronic is committed to returning lots of cash to shareholders. The stock offers a dividend with a 3.1% yield at the moment, and investors can expect more. This year, the company raised its payout for the 45th consecutive year.
Over the past five years, Medtronic's dividend has increased by 48%. Soaring sales of replacement heart valves will help it rise much further in the years to come.