Imagine having one of the greatest investors of all time send you a list of the stocks he likes the most. The good news is that you don't have to use your imagination. In a real sense, it happens every three months.
Warren Buffett unquestionably qualifies as a legendary investor. Although Buffett doesn't personally email a list of his favorite stocks to you, he does the next best thing. Every quarter, the company he runs, Berkshire Hathaway, reveals its stock holdings to the U.S. Securities and Exchange Commission (SEC). Any investor seeking ideas from the so-called Oracle of Omaha only needs to scan Berkshire's latest 13-F filing.
Granted, some of the stocks on this list were better picks when Buffett first bought them than they are now. However, others remain great candidates for investors. Which Buffett stock would I buy in October if I could choose only one?
Several good options
Before I get to my top pick among the stocks Buffett owns, I'll readily admit that it's not an easy decision. Considering Buffett's acumen in selecting stocks, that shouldn't be surprising.
For example, I'm pretty much on the same page with Buffett about Apple. He thinks it has a great business, and so do I.
Sure, Buffett slashed his stake in the stock in recent quarters. However, Apple remains Berkshire's top holding by far. It's my top stock holding, too (although I have more invested in ETFs). I expect Apple's generative AI initiatives will lead to increased iPhone sales over the next few years and propel the stock higher.
Even though Buffett didn't personally make the call to buy shares of Amazon, it's one of his best stocks in my view. Amazon's investments in technology should boost profitability. Its Amazon Web Services unit has a huge growth opportunity as organizations migrate to the cloud.
I also agree with Buffett's bullish take on Occidental Petroleum. He likes the company's leadership, oil and gas reserves, and focus on carbon capture technology. Tensions in the Middle East could serve as a tailwind for the stock over the near term.
Buffett's best bet
But if I could buy only one Buffett stock in October, I'd go with Lennar (LEN 1.76%). The company is one of the largest homebuilders in the U.S. (Berkshire also owns another top homebuilder -- NVR.)
NYSE: LEN
Key Data Points
I think now is the perfect time to buy Lennar stock, in part because of the Federal Reserve's interest rate cut. Lennar executive chairman and co-CEO Stuart Miller said in his company's third-quarter earnings press release that the Fed's moves "should start to enhance affordability and accelerate the already strong demand for both new and existing homes."
Miller's optimism is fully warranted, in my view. I picture a row of dominoes, where one falling leads to a ripple of others falling. Lower interest rates should lead to lower mortgage rates, which lead to increasing home buying, which lead to greater revenue and profits for Lennar.
Lennar isn't just poised for a short-term boost, though. The U.S. has an ongoing, chronic housing shortage. Miller spoke about this shortage several times in his comments during Lennar's Q3 earnings call. He noted that it is "well-documented" and is "a result of years of underproduction." Of course, the solution to a problem caused by underproduction is more production -- great news for Lennar's long-term prospects.
Those prospects aren't fully reflected in Lennar's valuation. The stock's price-to-earnings ratio is only 12.4, well below the 18.3 earnings multiple of the SPDR S&P Homebuilders ETF.
One wild card
Lennar could also benefit from a wild card. Miller alluded to it in the Q3 earnings call, saying, "[E]ven the national narrative has begun to acknowledge the need for programs that activate supply."
The presidential nominees of both major political parties have spoken about the need for more homes. Vice President Kamala Harris wants to offer financial assistance to first-time homebuyers and tax credits to homebuilders. Meanwhile, former President Donald Trump wants to make more federal land available for housing development.
It's possible that new federal policies could be enacted in the next presidential term that directly help Lennar. This isn't a sure thing, but it's a wild card that makes this Buffett stock even more attractive.
