Buffett just bought eight stocks for Berkshire's portfolio in Q3. Here are my picks for the best of the bunch (listed in alphabetical order).
Berkshire scooped up nearly 5.8 million shares of Louisiana-Pacific (LPX -0.70%) in the third quarter. That's enough to give the conglomerate an 8.1% stake in the building products company.
This might seem like an ill-advised move, with housing sales sinking in large part due to higher interest rates. But Buffett always looks at the long term and the big picture. Both look pretty good for Louisiana-Pacific.
Many areas in the U.S. are still experiencing housing shortages. Experts think it could take years for enough new houses to be built to meet demand.
Meanwhile, Louisiana-Pacific stock is dirt cheap -- at least, using one popular valuation metric. Shares trade at 4.4 times trailing-12-month earnings. Even with the recent Buffett bounce, the stock remains down around 20% year to date.
2. Occidental Petroleum
Buffett has become a big fan of oil stocks over the last year or so. He appears to be especially enamored with Occidental Petroleum (OXY 1.53%). Berkshire's stake in the oil and gas producer now stands at 21.4% after recent purchases.
Occidental has already been a huge winner for Buffett. The stock has skyrocketed more than 130% year to date and was even higher just a few days ago.
Buffett will almost certainly keep buying Occidental. And that will likely provide a further boost to the share price. In addition, Berkshire received approval in August from the Federal Energy Regulatory Commission to acquire 50% of the oil and gas producer. There's a lot of buying to go before Berkshire's stake in Oxy reaches that level.
I also think that the industry dynamics will continue to work in Occidental's favor. As much as we'd all like for fuel prices to fall sharply, that scenario doesn't seem likely.
Finally, Occidental stock remains priced attractively even after its impressive run this year. Shares trade at 10.4 times expected earnings.
3. Taiwan Semiconductor Manufacturing
Perhaps the most surprising purchase for Buffett in Q3 was the big investment in Taiwan Semiconductor Manufacturing (TSM 0.01%). Berkshire bought more than 60 million shares of the semiconductor maker.
In several ways, though, the Taiwan Semi buy shouldn't be all that surprising. For one thing, Buffett really likes one of the company's biggest customers -- Apple. The iconic investor remains bullish about Apple's prospects, which should also bode well for Taiwan Semi's prospects.
Aside from the Apple connection, though, Taiwan Semi fits the mold of a typical Buffett stock in other ways. The company has a strong competitive advantage. It commanded a 53% global market share in the semiconductor market in the first quarter of 2022, according to Statista.
Taiwan Semi is also valued attractively. Its shares trade at 14 times expected earnings. The stock's price-to-earnings-to-growth (PEG) ratio is only 0.87. As mentioned, Buffett likes bargains. He appears to have gotten one with this leading semiconductor stock.