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Some people’s exploits in their chosen profession transcend the industry in which they operate, making them household names. It’s pretty safe to say that even those not interested in the investment world are familiar with Warren Buffett.
Buffett probably epitomizes the term “legendary investor” more than any other and given his decades of almost unparalleled stock-picking success, it’s a well-deserved nickname.
For those looking to emulate a fraction of Buffett’s success, get an edge, it makes sense to see what stocks are currently in the Oracle or Omaha portfolio. And when some of those stocks also have the backing of one of Wall Street’s biggest banks, like Goldman Sachs, it sends an even stronger message that the time may be right to load.
Against this backdrop, we dug into the TipRanks database to find out more about three stocks currently receiving approval from both Buffett and the banking giant. Let’s see the details.
Western petroleum (OXY)
For our first Buffett/Goldman-backed name, we turn to the energy industry and multinational corporation Occidental Petroleum. The Houston, Texas-based company is engaged in the exploration, production and marketing of oil and gas. Occidental has been in business since 1920 and has grown to become one of the largest independent oil and gas producers in the United States. The company also operates globally, with significant operations not only in the US, but also in the Middle East and Latin America.
With its know-how and global reach, the company benefited hugely from rising energy prices last year, and like many names in one of the few industries that did well, OXY stock had a stellar 2022 – a 117% gain. But the performance is more muted this year.
Impacted by reduced volumes and prices for crude oil, natural gas liquids and domestic natural gas, first-quarter revenues fell 14.9% year-over-year to $7.26 billion, missing Street’s forecast by $110 million. Profits also fell, with adj. Earnings per share fell 48% to $1.09, eschewing the $1.37 consensus estimate.
Although free cash flow fell 33% to $1.69 billion in the first quarter, that hasn’t stopped the company’s share buyback activity. In the quarter, Oxy repurchased $752 million worth of stock, keeping it on track to meet its $3 billion 2023 buyback program.
Despite the underperformance, it’s a bit of an understatement to say that Buffett remains an OXY fan. OXY stocks are a bug in his portfolio, and during the first quarter, Buffett purchased an additional 17,355,469 stocks. Notably, he continued to show his faith in May by purchasing approximately 5.62 million additional shares. As it stands, Buffett’s holdings of approximately 217.3 million OXY shares translate to a whopping $12.73 billion, equating to an impressive 24.4% stake in the company.
Buffett’s unwavering faith in OXY is backed up by Goldman Sachs analyst Neil Mehta, who has a positive view of the company. Pointing out some key reasons why OXY looks promising, Mehta, a 5-star analyst, notes, “We remain positive on OXY due to its attractive FCF generation potential (13% FCF return versus 9% for diversified peers), which could be a drive strong share buybacks and enable the company to redeem its preferred stock and simplify corporate structure (a focus for the company this year) Our favorable FCF outlook is supported by cash flows above mid-cycle from chemicals , and we continue to expect favorable upstream results from OXY’s Permian business.”
These comments support Mehta’s Buy rating, while his $77 price target allows for 12-month returns of 31%. (To view Mehta’s track record, click here)
Elsewhere on Wall Street, the stock gets 7 additional Buys and Holds, each for a Moderate Buy consensus rating. The forecast calls for a 22% annual gain as the average target is $71.67. (To see OXY stock forecast)
Charter communication (CHTR)
Now let’s move from energy to a major player in the telecom industry. Charter Communications is one of the largest telecommunications and mass media companies in the US. According to subscribers, it is even the second largest cable operator in the country. Charter offers a wide range of offerings including cable television, high speed internet and telephone services to residential and commercial customers. The company operates under the Spectrum brand name and serves millions of customers in 41 states.
In addition to its core services, Charter has also ventured into the streaming market with its video-on-demand platform, Spectrum TV, which offers a wide selection of movies and TV shows to subscribers.
Despite missing earnings profile expectations in last month’s 1Q23 report, investors seemed to prefer to focus on the positives. Earnings per share of $6.65 beat consensus expectations of $7.50, but revenue grew 3.4% year over year to $13.65 billion, beating street projection by $40 million. In addition, adjusted EBITDA increased 2.6% from the same period a year ago to $5.4 billion. In the quarter, the company also reported a record 686,000 new wireless networks.
As for Buffett’s involvement, he owns a portion of CHTR stock. His total holdings of 3,828,941 shares are currently worth more than $1.27 billion.
The telecom giant also has the backing of Goldman Sachs analyst Brett Feldman, who sees some shareholder-friendly moves ahead.
“We remain confident that CHTR can deliver LSD EBITDA growth in 2023, with growth accelerating in 2H23 as opex compounds ease…We continue to expect that CHTR will be able to complete share buybacks in the coming Sustain for 5 years and ramp up gradually, even during periods of increased capex, based on our outlook for continued EBITDA growth, which should create additional borrowing capacity that we expect CHTR to use to fund buybacks. As such, we estimate CHTR will repurchase nearly $40 billion of shares over the next 5 years, representing nearly 60% of its market cap,” Feldman opined.
Accordingly, Feldman rates CHTR stock as a buy recommendation along with a $450 price target. The implication for investors? Possible increase of 35% from current levels. (Click here to view Feldman’s track record)
The Goldman Sachs view represents the bulls here; the street shows a clear split in the ratings for CHTR. Out of 16 recent analyst ratings, 7 are buy, 8 hold, and 1 sell, for an average buy consensus rating. Assuming the average target of $469.65, investors will pocket a 41% return from now on. (To see CHTR Inventory Forecast)
Marsh & Mclennan Companies (MMC)
Now let’s switch back to a globally recognized professional services company that has received backing from both Buffett and Goldman Sachs. Marsh & McLennan is a leading player in the field, specializing in risk management, insurance brokerage and advisory services. The company operates through its four main subsidiaries: Marsh, Guy Carpenter, Mercer and Oliver Wyman. With expertise in these diverse industries, Marsh & McLennan is well positioned to provide comprehensive solutions to its clients on a global scale.
Marsh provides insurance intermediation and risk management solutions to clients, helping them manage complex risks while protecting their assets. Guy Carpenter specializes in reinsurance brokerage and strategic advisory services, assisting insurers in managing their reinsurance needs. Mercer specializes in HR consulting and offers a broad range of services related to employee benefits, talent management and retirement planning. Finally, Oliver Wyman provides management consulting services and assists clients in various industries with strategic planning, risk assessment and operational improvement.
Operating for more than 150 years, MMC has established itself as a trusted global name, and this was evident in the company’s most recently reported quarter — for 1Q23. Boosted by a strong performance from its risk and insurance services, revenue increased 6.3% year-over-year to $5.9 billion, ahead of $40 million forecast. adjective Earnings per share of $2.53 improved from $2.30 generated in the same period a year ago, while also exceeding Street’s expectations by $0.06. During the quarter, the company bought back 1.8 million shares of its stock for $300 million.
Buffett comes into the picture here via the 404,911 shares of MMC he currently owns. At the current price, these are worth more than $70.58 million.
The global service provider also has a fan base in Goldman analyst Robert Cox. Scanning the Q1 print, Cox finds plenty of reassuring points to keep him on board.
“We view the MMC 1Q23 results as further evidence that the company is benefiting from strong P&C hiring conditions, talent investments are yielding results and that margins will continue to grow significantly with further cost savings identified,” the analyst explained. “Broad RIS organic growth in the quarter coupled with our expectations for a modest slowdown in P&C pricing and exposure growth leads us to raise our estimate of RIS organic growth for FY23 by 50 bps up to +9.7% (+7.1% excluding fiduciary investment income).”
Putting those thoughts into numbers and numbers, Cox rates MMC stock as a buy, backed by a $202 price target. Should the figure be met, investors are looking at a 16% increase from current levels. (Click here to view Cox’s track record)
Looking at the consensus breakdown, 3 analysts join Cox in the bull camp and with an additional 6 Holds and 1 Sell, the stock claims a Moderate Buy consensus rating. At $189.80, the average target implies equities have room for ~9% growth in the coming months. (To see MMC stock forecast)
To find great ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a recently launched tool that brings together all of TipRanks’ stock insights.
Disclaimer: The opinions expressed in this article are solely those of the recommended analysts. The content is for informational purposes only. It is very important to do your own analysis before making an investment.
