Editor's Update: This article focused on Warren Buffett's investment activities. Buffett's Berkshire Hathaway is beating the market by a significant margin this year. With that said, many of his investments are down significantly this year, so now could be an excellent time to capitalize on Buffett's favorite stocks that have significant potential upside.

If you've ever wondered why Wall Street professionals pay close attention to billionaire Warren Buffett's investment activity, just take a closer look at his track record.

Since becoming CEO of conglomerate Berkshire Hathaway (BRK.A 0.68%) (BRK.B 0.93%) in 1965, he's delivered an aggregate return of 3,641,613% for the company's Class A shares (BRK.A), through Dec. 31, 2021. Meanwhile, including dividends paid, the S&P 500 has gained 30,209% over the same period. Berkshire's stock could lose 99% tomorrow and Buffett would still be handily outperforming the broader market.

Warren Buffett at Berkshire Hathaway's annual shareholder meeting.

Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.

While it's easy to look in the rearview mirror and track what the Oracle of Omaha has been buying and selling thanks to 13F filings, it's a bit more of a guessing game trying to figure out what he might be purchasing in an upcoming quarter or year. Nevertheless, with a number of clues at my disposal, it won't stop me from trying.

What follows are four stocks Warren Buffett is almost certain to buy in 2023.

Apple

The first stock Warren Buffett is likely to buy in 2023 is tech stock Apple (AAPL 0.02%). Even though Apple already accounts for close to 40% of Berkshire Hathaway's invested assets, the Oracle of Omaha has been clear in the past that it represents one of his company's "four giants," and he's been more than willing to add on any significant share price weakness.

With interest rates rising rapidly and the interest rate yield curve facing its biggest inversion in decades, the winds of recessions are blowing hard. If the U.S. economy were to enter a recession in 2023, cyclical companies like Apple would undoubtedly feel the sting. On the bright side, it would give Buffett an opportunity to add.

One of the greatest things about Apple, and a key reason it's the top Buffett holding, is its capital-return program. Aside from doling out one of the largest nominal-dollar dividends on the planet, Apple has repurchased $554 billion worth of its common stock since the beginning of 2013. Without having to lift a finger, Berkshire Hathaway's stake in Apple has continued to grow.

Apple CEO Tim Cook is also overseeing a steady transition to subscription services that'll make the company operationally stronger. Subscriptions generate predictable cash flow and high margins, which will help Apple better navigate the revenue fluctuations it contends with during physical product replacement cycles.

Occidental Petroleum

After purchasing more than 194 million shares of oil and gas stock Occidental Petroleum (OXY 0.88%) in 2022, you might be under the impression that Warren Buffett has more than enough. However, in August, Berkshire received authorization from the Federal Energy Regulatory Commission to up its stake in Occidental to as much as 50%. Berkshire's ownership stake in Occidental currently stands at 21.4%, and it's a pretty clear indication that Buffett and his team aren't done buying.

Prior to 2022, energy stocks had never accounted for more than 8.9% of Buffett's invested assets. This year, they've bolted to Berkshire's third-largest sector (13% of invested assets). This likely has to do with the expectation crude oil and natural gas prices will remain above average for some time.

There are two key factors adversely impacting the global energy supply chain. First, Russia invaded Ukraine, which puts Europe's energy needs into question. The second issue is energy companies reduced their capital investments during the pandemic. Without any way to quickly ramp oil and gas supply, both energy commodities could remain elevated for years.

Buffett's fascination with Occidental Petroleum might also have to do with its rapid balance sheet improvement. Thanks to significantly higher oil and gas prices and much-improved operating cash flow, Occidental's net debt has fallen from $35.4 billion to $20.5 billion over the past five quarters (15 months). An improved balance sheet could lead to a higher valuation.

Two siblings lying on a rug watching television, with their parents seated on a couch in the background.

Image source: Getty Images.

Paramount Global

A third stock Warren Buffett seems almost certain to buy in 2023 is media company Paramount Global (PARA -4.91%). Despite an already sizable stake, Berkshire purchased close to 12.8 million additional shares of Paramount in the latest quarter.

Historically, the Oracle of Omaha has been a fan of owning media stocks and cyclical companies reliant on advertising. Even though a company like Paramount is susceptible to weakness during recessions as ad spending falls, periods of economic expansion last far longer than recessions. Over time, Buffett has found that buying media stocks during brief downturns is a smart move. That might be his thinking with Paramount Global.

Another reason Buffett and his team might dip their toes further into the pond with Paramount is its fast-growing streaming platform. Even after halting streaming services to Russia, Paramount's direct-to-consumer segment recognized 59% revenue growth in the third quarter. With roughly 67 million (and growing) global subscribers, Paramount should enjoy predictable sales growth and improving ad-pricing power.

Paramount's entertainment segment has shown signs of life, too. Despite domestic box office revenue disappointing as a whole in 2022, Top Gun: Maverick absolutely crushed it in theaters. Paramount's theatrical sales are up 457% through the first nine months of 2022 when compared to the same period last year. There's plenty of momentum in Paramount Global's sails from a streaming, movie, and advertising standpoint over the long run.

Berkshire Hathaway

The fourth and final stock I'm most confident that Warren Buffett will be buying in 2023 is shares of his own company: Berkshire Hathaway.

Prior to mid-July 2018, buying back Berkshire Hathaway stock could only be undertaken if shares of the company fell to or below 120% of book value (i.e., no more than 20% above book value). For more than a half-decade leading up to mid-July 2018, not a single share was repurchased, because Berkshire Hathaway stock never fell below this preset threshold.

However, things changed on July 17, 2018. Berkshire Hathaway's board passed new buyback measures that allowed the Oracle of Omaha and executive vice chairman Charlie Munger to repurchase stock in the company as long as:

  • The Berkshire Hathaway balance sheet held at least $30 billion in combined cash and U.S. Treasuries; and
  • Both Buffett and Munger agreed that shares were trading at an intrinsic discount.

Since the board passed this measure a little over four years ago, Buffett and Munger have overseen the repurchase of $63.1 billion worth of Berkshire Hathaway stock. With the S&P 500 in a bear market and the U.S. economy signaling a possible recession in 2023, it seems all but certain that buybacks will continue.

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