When the biggest names on Wall Street make an investment decision, the world listens. As the first quarter of 2024 comes to a close, SEC 13-F filings are coming in hot, showing investors where some of the biggest fund managers are finding investing opportunities despite market indexes hovering near all-time highs.
With a focus on the next leg in the business cycle, mega investors like Warren Buffett, Ray Dalio, and Michael Burry (yes, the guy who called the 2008 financial crisis) all rebalanced their portfolios to reflect their current views on the market.
In this comprehensive guide, investors will gain insight into the potential trends pushing them to buy stocks like Occidental Petroleum Co. (NYSE: OXY), Johnson & Johnson (NYSE: JNJ), and even Oracle Co. (NYSE: ORCL). Far from blindly following their decisions, here’s why these stocks came into these investors’ watchlists.
Buffett’s Oil Bet Through Occidental
[content-module:CompanyOverview|NYSE:OXY]After betting on the U.S. residential construction boom through names like D.R. Horton Inc. (NYSE: DHI), Warren Buffett followed up with an 8.7% boost in his Occidental Petroleum position, bringing his total investment to $14.5 billion as of the past quarter.
Oil prices finally broke above their $80 a barrel ceiling during the quarter Buffett decided to buy Occidental. Analysts at The Goldman Sachs Group Inc. (NYSE: GS) think that oil could go as high as $100 a barrel this year. As higher oil prices translate into bigger profits for Occidental, it seems like a no-brainer bet.
Broader markets are on board with this thesis, as the stock has been bid up to 96% of its 52-week high prices. If there’s any more upside to this stock, investors can check on Wall Street’s sentiment and projections for the rest of the year.
Analysts at Susquehanna Bancshares Inc. (NASDAQ: SUSQ) expect earnings per share (EPS) growth of up to 31% in the next 12 months. They boosted their price targets for Occidental stock up to $81 a share. Scotiabank analysts followed up with their $90 valuation for the stock.
To prove these targets right, Occidental stock would need to rally by up to 32% from today’s prices, crystalizing the current fundamental trend in energy stocks with one of the highest proposed EPS growth rates.
Johnson & Johnson: Dalio’s Discount Haven
[content-module:CompanyOverview|NYSE:JNJ]Compared to the medical sector, valued at a 150.6x P/E multiple today, Johnson & Johnson stock offers investors a discount of up to 94% through its 9.2x valuation.
There’s usually a good reason for a stock to be this cheap, particularly compared to the rest of its peers. As analysts see only 2.6% EPS growth this year, Johnson & Johnson may be setting up to beat expectations for 2024.
According to the company’s first quarter 2024 earnings report, management provided full-year guidance for EPS. With a low point of 6.6% growth and a high point of 7.4%, management is bluntly saying that current Wall Street projections may not only be conservative but out of date.
Analysts realize that this gap must be filled, which is why they slapped a consensus price target of $175.9 a share for Johnson & Johnson. The stock would need to jump by 20% compared to today's trading price to prove these analysts right.
More than that, even if it takes the stock longer than expected, investors can lean on Johnson & Johnson’s 3.2% annual dividend yield today.
Keeping up with inflation while being exposed to double-digit upside could have been part of Dalio’s strategy when he boosted his position in the stock by 1.8% in the past quarter, bringing his total position to $434.9 million.
Burry Likes Value, Oracle Has Plenty
[content-module:CompanyOverview|NYSE:ORCL]Despite trading at 88% of its 52-week high, Oracle stock still presents a massive discount to its peers in the computer sector. Michael Burry saw fit to initiate a $5.3 million position in the stock, probably after finding out how cheap it is today.
Oracle's valuation of 31x P/E places It well below the computer sector's average 238.8x P/E valuation today—a discount of up to 87%!
For this and other reasons, analysts at KeyCorp (NYSE: KEY) boosted their price targets for Oracle up to $150 a share, calling for a net upside of 29.2% from today’s prices. Those at HSBC Holdings (NYSE: HSBC) justified a valuation of $155, giving Oracle a higher 33.5% upside.
Burry isn’t the only one on Wall Street looking to load up on Oracle stock as a potential artificial intelligence play. Over the past 12 months, the stock reported up to $147.9 billion in institutional inflows, giving the $319 billion behemoth another reason to seek a potential bull run.
