Buffett's Stock Picking Slump and Future Investments Outlook

Warren Buffett's recent selling spree raises concerns. The master stock picker has been net selling stocks for eight quarters, prompting investors to ponder the upcoming fourth quarter transactions of 2024 and which stocks could pass his stringent selection criteria.

Date: 05-01-2025

AI Rating: 5

Warren Buffett's current strategy reveals a cautious approach to investments, as he has been a net seller of stocks for eight consecutive quarters. This trend may signal a bearish market outlook or indicate that Buffett's criteria for stock selection are hard to meet in today's economic climate.

**Earnings Estimation and Selection Criteria**
Buffett prioritizes companies that allow him to sensibly estimate earnings over a significant duration, typically five years. This criterion is bold as it implies a level of understanding of both the company and its industry. The difficulty level arises when market conditions are volatile, making it hard to forecast earnings accurately.

**Valuation Considerations**
In addition, Buffett doesn’t just look for growth; he insists on purchasing stocks at a reasonable price relative to the lower end of his estimated earnings range. This means that even if a company has potential, if it's not priced correctly according to Buffett's metrics, he will bypass investing.

**Potential Candidates for Investment**
A couple of companies, including Energy Transfer (NYSE: ET) and Occidental Petroleum (NYSE: OXY), are mentioned as possibly passing Buffett’s investment criteria for 2025. Energy Transfer is noted for its reliable distribution yield around 6.5% and moderate expected growth of 3%-5%. On the other hand, Occidental Petroleum is a favorite of Buffett's, having regularly acquired shares, implying a favorable long-term net income outlook for the company.

**Overall Market Sentiment**
The narrative around Buffett’s reluctance to buy stocks may instill caution among investors. If Buffett, a widely respected investor, is hoarding cash—over $325 billion—it may suggest he foresees market instability which could translate to a more negative sentiment in the stock market overall.

Stocks: BRK.B ET OXY