We now know what Warren Buffett was up to during the fourth quarter of 2024. Berkshire Hathaway (BRK.A +0.00%) (BRK.B 0.24%) submitted its 13F filing to the U.S. Securities and Exchange Commission (SEC) last week. This filing revealed all the stocks Buffett and his team bought and sold during Q4.
Two familiar names made the list of Buffett's recent purchases: Occidental Petroleum (OXY +4.62%) and SiriusXM Holdings (SIRI +2.62%). Why does Buffett keep piling into two beaten-down stocks that have plunged more than 30%?
Continued buying, continued declining
Buffett initiated a position in Occidental Petroleum in the first quarter of 2022. Since then, he has added to Berkshire's stake in the big oil and gas company nearly every quarter. Oxy now ranks as Berkshire's sixth-largest holding.
NYSE: OXY
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However, the oil stock hasn't been a winner for Buffett lately. Occidental's shares are roughly 35% below the peak in late 2022. The stock has fallen almost 20% over the past 12 months.
Buffett has owned SiriusXM off and on since 2016. The satellite radio operator appears to have become one of his favorites, though, beginning late last year. Berkshire's stake in SiriusXM has grown steadily, in part because of the merger of the company with Liberty Media Sirius XM Holdings.
NASDAQ: SIRI
Key Data Points
But SiriusXM's stock hasn't performed well. It's down more than 40% over the last 12 months. Shares remain over 60% below the high achieved in mid-2023. Even Buffett's interest in the company hasn't been enough to spark a sustained rally.
What does Buffett like about Oxy and SiriusXM?
I think there are several common denominators with Buffett's attraction to Occidental Petroleum and SiriusXM. Valuation ranks near the top of the list.
Oxy trades at a forward price-to-earnings ratio of around 13. That's lower than the S&P 500 energy sector average forward earnings multiple of 14.7. SiriusXM especially looks like a bargain with its shares trading at under nine times forward earnings.
Buffett also loves to invest in companies that generate significant free cash flow. Both Occidental and SiriusXM check off this box. Occidental's free cash flow over the last 12 months topped $3.7 billion. SiriusXM generated free cash flow of over $1 billion last year.
Business models are of paramount importance to Buffett. He has expressed admiration for Occidental's business, in particular. In Buffett's 2023 letter to Berkshire Hathaway shareholders, he wrote, "We particularly like its vast oil and gas holdings in the United States, as well as its leadership in carbon-capture initiatives, though the economic feasibility of this technique has yet to be proven."
I'd bet Buffett admires SiriusXM's business model as well. The company enjoys a monopoly like position in the satellite radio market. SiriusXM's subscription model generated recurring revenue -- something Buffett undoubtedly likes.
Should you buy these stocks too?
The reasons why Buffett likes Occidental Petroleum and SiriusXM appear to be pretty good ones for other investors to consider buying the stocks, too. In addition, investors could like these companies' dividends. I suspect that will especially be true for SiriusXM, which offers a forward dividend yield of roughly 4%.
I fully expect that Buffett will continue adding to Berkshire's position in Occidental. I wouldn't be surprised if he keeps buying more shares of SiriusXM. But which of these beaten-down Buffett stocks is the better pick? I give the nod to Occidental.
Granted, volatility in oil prices could weigh on the stock over the near term. However, Oxy's long-term prospects are very good and could be even better with advances in its carbon capture technology. I think it's telling that Buffett included Occidental as one of only a handful of stocks that he intends to "maintain indefinitely."
