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Warren Buffett’s top 3 stock picks for the end of 2024

Warren Buffett’s top 3 stock picks for the end of 2024
Elmaz Sabovic

Stock picking might be challenging, with new investors often making mistakes in their selection. For those who want to play it safe and borrow some knowledge from the market legends, there is no better investor than Warren Buffett.

Also known as “Oracle of Omaha,” Buffett is the CEO of Berkshire Hathaway (NYSE: BRK.A), a successful investment firm that is led by his ideology of compound investing, with stock pickings that offer dividend payments and are an optimal pick for novice and veteran stock investors alike.

American Express (NYSE: AXP)

Despite being Berkshire Hathaway’s third-largest position, American Express (NYSE: AXP) is rarely highlighted as a top Buffett pick. The 151.6 million-share position has been maintained for decades for good reason.

American Express, often grouped with Visa (NYSE: V) and Mastercard (NYSE: MA) (also owned by Berkshire), stands out as a rewards program manager that incentivizes card usage. Even its cards with the lowest annual fees offer rewards for dining, ride-hailing services, and hotel discounts. Higher-tier cards add credits for streaming services and various retail purchases. While Visa and Mastercard offer similar perks, American Express’s offerings are unmatched.

Numbers back up this claim. Despite current economic challenges, American Express’s stock has grown 25.09% on a year-to-date scale, with even more impressive growth of 37.23% in the past 12 months.

AXP stock YTD price chart. Source: Finbold
AXP stock YTD price chart. Source: Finbold

Although the forward-looking dividend yield of 1.2% isn’t impressive, American Express compensates with solid dividend growth. Over the past 30 years, the company has increased its quarterly dividend from $0.07 to $0.70 per share, an annualized growth rate of 8% likely to continue.

VeriSign (NASDAQ: VRSN)

Most investors probably don’t realize that Berkshire Hathaway is a long-term stakeholder in VeriSign (NASDAQ: VRSN). Indeed, some may have never even heard of VeriSign.

In simple terms, VeriSign manages website name registrations.

Although it’s not a high-growth business—since the rapid expansion of new websites has slowed—the existing web’s growth comes from adding more content to current sites. Despite this, VeriSign remains a reliable, high-margin business that’s not going away. More than half last year’s $1.5 billion revenue was converted into net income, matching the previous year’s profit margins. Both its revenue and profit have continued to grow steadily.

While VeriSign’s consistency aligns with Buffett’s typical stock picks, it is unique in one way: it doesn’t pay dividends and likely never will. Instead, it provides shareholder value by aggressively buying back shares, having more than halved its outstanding share count over the past two decades. This strategy has led to a 2,671% stock gain, in line with its per-share earnings growth, making it one of Buffett’s best-performing picks over this period.

VRSN stock all-time price chart. Source: Google Finance
VRSN stock all-time price chart. Source: Google Finance

These trends are expected to continue into the foreseeable future. Although Berkshire’s stake in VeriSign is relatively small—about 12.8 million shares worth $2.2 billion, less than 1% of Berkshire Hathaway’s stock portfolio—it owns roughly 12% of VeriSign itself, highlighting its confidence in the company’s value.

Chevron (NYSE: CVX)

Berkshire Hathaway has owned energy stocks, so it’s not entirely surprising that it now holds a $19 billion stake in the oil and gas giant Chevron (NYSE: CVX), making it Berkshire’s fifth-largest stock position. Despite the rise of renewable energy, Buffett seems to recognize that the decline of the fossil fuel industry may be overstated.

Goldman Sachs supports this view, predicting that global crude oil consumption will continue to grow until 2034. The U.S. Energy Information Administration also projects that oil will remain the world’s largest energy source through 2050, with natural gas usage expected to increase.

CVX stock has added a healthy 2.81% since 2024 started, primarily due to the rising geopolitical tensions and lower OPEC output.

CVX stock YTD price chart. Source: Finbold
CVX stock YTD price chart. Source: Finbold

There is still significant profit potential in the fossil fuel sector. While Chevron is one of many ways to capitalize on this opportunity, Buffett likely chose it for its size, proven operations, and reliable dividend, which has been raised annually for the past 37 years. Currently, Chevron stock yields a healthy 4.2%.

These three stock pickings offer an excellent entry into Buffett’s portfolio while exemplifying diversification across various sectors, thus minimizing risk.

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