Buffett Is Stepping Down, But His Blessing Still Means a Great Deal for These 3 Stocks

Well, we finally got the news everyone was kind of half-expecting (and half-hoping wouldn’t be true for a long time to come). Berkshire Hathaway (NYSE:BRK-B) CEO Warren Buffett is 95 years old, and has determined that now is indeed the time to step away from the investing game – a game he’s played his entire life.

For more than 65 years, Buffett has stood atop Berkshire as the company’s CEO, revitalizing the once-textile maker into one of the most impressive global conglomerates there is. Berkshire invests in a wide range of companies spanning various industries and sectors, with most of the company’s holdings benefiting from the “American exceptionalism” trade, which as Buffett has noted in many of his shareholder letters, is a trade that he sees as ongoing. 

Given Mr. Buffett’s absolutely incredible track record of performance within his own portfolio and ability to pick stocks (and stick with them for very long periods of time when other money managers would most likely have sold), his blessing in the form of buying a given stock is often viewed as a green light for all investors to jump aboard.

Here’s why I think this blessing still matters for the following three companies, and what to make of their long-term prospects for investors considering putting fresh capital to work. 

Occidental Petroleum (OXY)

One company Warren Buffett has continued to tout in his annual meetings (and back up his bullish rhetoric with smashing the bid) is energy giant Occidental Petroleum (NYSE:OXY). Buffett increased his holdings in the oil & gas player this past quarter, continuing to add to a company he and his team appear to remain very bullish on as a long-term holding worth accumulating in this environment. 

Occidental’s outlook remains strong, with very robust earnings supporting a shareholder-friendly capital allocation plan. And with the company’s domestic production levels surging to nearly 1.4 million barrels per day, Occidental’s underlying fundamentals remain rock-solid, regardless of recent fluctuations in the price of energy. 

The company’s recent earnings report, in which Occidental reported a significant earnings beat of 26% (bringing in $0.87 of EPS) was notable, and indicates that Buffett has picked a company that’s among the best operators in this sector. That’s what he does – we shouldn’t be surprised.

But looking forward, I see more strength ahead, as the company’s 52-year dividend growth streak remains on the line and Buffett and his team expect to be paid. 

Dominos Pizza (DPZ)

An intriguing recent pick of Buffett’s, which was actually a new add this past quarter according to the company’s 13-F filing, is pizza giant Dominos (NYSE:DPZ). This isn’t the first quick service play Buffett has invested in over the years. In fact, he’s been quite a bull on the rise of fast dining trends in the U.S. and globally, and he’s been right on predicting these trends in the past.

The company’s recent financial performance has been sluggish, with the company only seeing top-line growth of 2.5% year-over-year. That said, earnings did rise faster than revenue amid a nice uptick in Dominos’ gross margin (up to 39.8% from 38.9% in the same quarter the year prior). These sorts of operating metrics indicate Dominos is moving in the right direction, toward creating tremendous long-term shareholder value.

As an established name with a well-known brand and some key overhangs now off of the stock, this is an intriguing pick and one I’ll have to dive into more. that said, I do think Buffett may be onto something here, so if we do see continued progress on improving U.S. same-store sales in the coming quarters, this is a stock I’d be open to adding at the right price. 

VeriSign (VRSN)

Verisign (NYSE:VRSN) is one company I don’t follow too closely, to be honest, but which interests me a great deal is another Buffett pick I thought would be worth highlighting for this piece. Berkshire very slightly added to its position in Verisign this past quarter, seemingly looking to bet on companies with very robust moats in their respective industries.

As the key player int he domain name registry services space, VeriSign offers investors unique exposure to a company dominating this subscription-based segment of the market. The company’s cash flow growth profile remains extremely predictable, something Buffett and other similar investors will like to see. And given VeriSign’s near-monopoly status over this industry, the company’s pricing power is really unparalleled outside of other similar names in the financial services industry such as Moody’s (another key long-term Buffett holding). 

To me, VeriSign looks like a stock pick that was made on the basis of the company’s underlying business model. And with little likely to change on this front in the years to come, this does look like a relatively safe bet to me right now. 

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