Each quarter, investors clamor to dissect the quarterly filings of institutional investment managers with at least $100 million in equity assets under management.
These filings are known as SEC Form 13F. The documents tell you exactly what the some of the most sophisticated investors are doing with their money and the money of their clients or shareholders.
One of the most popular 13Fs filed every quarter belongs to the Oracle of Omaha, Warren Buffett. Buffett is the CEO of Berkshire Hathaway Inc. (NYSE: BRK.A), whose stock sells for approximately $327,000 per share.
Buffett is considered the most legendary living investor, amassing an $86 billion fortune over the decades. His secret combines extreme patience and the purchasing of assets that he deems undervalued according to his proprietary intrinsic value calculations.
After examining his latest 13F, something extremely interesting stuck out to me...
In the third quarter, Buffett built a stake in an energy company that is poised to rally in the months ahead.
It's especially noteworthy when Buffett invests today because the market is at or near all-time highs, and Berkshire is sitting on $122 billion of cash.
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Buffett protects that cash and doesn't put it to work unless he's certain it will pay off. In fact, his two rules to investing are:
The stock Buffett just bought currently trades just under $40 per share.
But in the year ahead, our proprietary rating system - the Money Morning Stock VQScore™ - suggests that it could rally to $60.
Here's all you need to know about this Warren Buffett stock...
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According to Buffett's 13F, the legendary investor has stocked up on more shares of Occidental Petroleum Corp. (NYSE: OXY).
Occidental is an oil-and-gas explorer. In the third quarter, Berkshire Hathaway purchased $332 million in OXY stock, making Buffett's firm the 17th largest shareholder in the company.
Now, it's no secret that Buffett really likes this company...
His firm purchased $10 billion in Occidental preferred stock that paid an 8% dividend in order to help Occidental buy out Anadarko Petroleum back in April.
Buffett's firm also controls warrants that allow the firm to purchase up to 80 million more shares at a price of $62.50.
Since the deal, shares of Occidental have pulled back sharply - falling about 35% from that level. Investors pulled away after the company announced plans to slash its capital spending by 40% as it absorbs the $37 billion deal for Anadarko.
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Given that Buffett owned preferred shares with a solid 8% dividend, he likely wasn't concerned about the short-term move in the stock. While many investors are worried about the energy company's debt levels, Buffett stepped in and began buying up shares on the cheap.
The recent downturn in Occidental fits Buffett's popular saying: "Be fearful when others are greedy and greedy when others are fearful."
Based on the investment, it's clear that Berkshire Hathaway is committed to working with the company in the long term.
Following the announcement that Buffett had purchased this stock, it popped more than 3.3% overnight last Friday.
If you follow VQScore, it would have alerted you to buy this stock before the "Buffett gains" were priced in.
Our proprietary system rates every profitable company in the U.S. markets.
It tracks thousands of companies based on in-house metrics and assigns every stock with a score from 1 to 4.9. A score above 4 signals that the stock is in the "Buy Zone."
The higher the score, the more likely it is to break out in the months ahead. It's that simple.
Occidental Petroleum currently has a VQScore of 4.8, making it a "Strong Buy" now.
With Warren Buffett's backing, Occidental will improve its balance sheet over time and see shares rise accordingly.
Looking ahead, Occidental Petroleum has potential upside of $60 per share. That figure represents a potential 50% upside in the year ahead.
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