To The Moon

Key Points

• It's never a bad idea to check out what Warren Buffett's Berkshire Hathaway is holding in its portfolio.

• Buffett and Berkshire buy stocks in multiple different sectors and have been through many market cycles.

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Warren Buffett and his company, Berkshire Hathaway, have been successfully picking great stocks for decades. Their track record and superior market-beating returns speak for themselves. Berkshire owns 46 stocks and exchange-traded funds (ETFs) in its $300 billion-plus equities portfolio.

Berkshire's portfolio owns stocks in a variety of industries, including tech and artificial intelligence (AI), oil and gas, and financials, among others. Investors can use Berkshire's stock purchases and sales to get a glimpse inside the mind of the Oracle of Omaha and see how arguably the greatest investor of all time thinks.

However, investors should always do their own due diligence, because institutional investors often have different mindsets and investing time horizons than retail investors. With that said, here are two Buffett stocks to buy hand over fist in February.

1. Chevron: Exposure to domestic oil and a 4%+ dividend yield

The U.S.-headquartered oil and gas company Chevron (CVX 2.60%) now makes up a whopping 6.6% of Berkshire's portfolio. The company offers two things that Buffett and his team have a high propensity for: exposure to U.S. oil, and a hearty dividend over 4%.

Chevron largely focuses on upstream and downstream oil production. Upstream refers to the exploration, drilling, and extraction of oil and natural gas, while downstream production refers to refining and transforming that oil into the fuel and gas products used in everyday life. The company is also working to complete a previously announced $53 billion purchase of the oil company Hess Corp. The transaction recently cleared an antitrust review from the Federal Trade Commission (FTC), a critical step in eventually closing the deal. Chevron expects the acquisition to be accretive to free cash flow and increase the company's five-year production targets.

Chevron also has a strong balance sheet, highlighted by a net debt ratio of 11.9%, a decade low. Plus, management thinks the company will continue to grow free cash flow and return capital to shareholders, another feature that Buffett has always liked.

On its third-quarter investor presentation, management guided for average annual free cash flow growth in excess of 10% and to target a return on common equity (ROCE) of 12% by 2027, based on a $60 Brent crude oil per barrel price (ROCE is currently around 10%).

In Q3, Chevron returned $7.7 billion of capital to shareholders through a combination of dividends and share repurchases, and management thinks they can buy back anywhere from $10 billion to $20 billion of stock per year. The company has also increased its dividend for 35 consecutive years. Chevron is a company that will return lots of capital to shareholders, and holding oil stocks is also a good hedge against geopolitical uncertainty, which can lead to higher oil prices.

2. Domino's Pizza: A new position with better days ahead

Domino's Pizza (DPZ 2.21%), the largest pizza franchise in the world, is one of the few stocks Berkshire purchased in 2024, and also a new position for Berkshire. The large conglomerate seems to have only dipped its toe in the water, with Domino's making up just 0.2% of its portfolio.

Domino's hasn't enjoyed the spoils of the bull market, with its stock roughly flat over the last year. Like many quick-service restaurants, Domino's has struggled with labor retention, intense competition, less ability to pass on higher costs to customers, and issues with its franchise abroad. In fact, some of these issues are even more prevalent abroad in markets it operates in Asia and Europe, whose economies have struggled more than the U.S. In Q3, international stores made up roughly half of global retail sales.

Still, analysts argue that these economic issues are masking strong parts of the business. For instance, the Domino's app, which provides customers with the ability to track delivery times, has pulled in millions of monthly active users, well ahead of competitors. Management is also investing in new stores and repurchasing stock, setting up the potential for sales and earnings growth this year, especially if some of its international markets start to recover.

Buffett believes in buying "a wonderful company at a fair price." With Domino's trading at 26 times trailing earnings and 24 times forward earnings, this presents an opportunity for the valuation to move higher if Domino's can grow earnings.

Another great thing about the pizza business is that it tends to be more resilient in recessions than other stocks, because people usually keep pizza in their budgets even when they get stretched. So while Domino's may not rise as much as an AI stock during a bull market, it will likely hold up better if and when a bear market arrives.