2 Warren Buffett Stocks to Buy Hand Over Fist and 1 To Avoid

Group 1: Berkshire Hathaway's Portfolio Insights - Berkshire Hathaway has a diverse stock portfolio, with many positions selected by Warren Buffett, focusing on companies with durable competitive advantages and attractive valuations [1] - Two stocks from Berkshire's portfolio are highlighted as particularly appealing: Capital One Financial and Ally Financial, while Occidental Petroleum is noted as a stock to avoid [1] Group 2: Capital One Financial - Capital One is a profitable bank trading below its book value, known for its credit card business and a net interest margin of 6.7%, which is significantly higher than most large banks [2] - The bank has seen a 7% year-over-year growth in customer deposits, supported by its high-yield savings accounts and CDs [2] - Capital One plans to acquire Discover Financial Services in an all-stock deal, expecting $2.7 billion in synergies by 2027, which will enhance its credit card business and reduce reliance on Visa and Mastercard [3] Group 3: Ally Financial - Ally Financial is a leading auto lender with a growing online banking operation, in which Berkshire owns 9.5% [4] - The company benefits from relationships with over 22,000 vehicle dealerships, a high level of automation, and a superior cost structure due to its online banking model [4] - Ally's average retail auto loan has a 10.6% interest rate, with a deposit cost of about 4% and a net charge-off rate of less than 2%, making it a highly profitable business [4] Group 4: Occidental Petroleum - Occidental Petroleum is a significant investment for Berkshire, with over 27% ownership, but it is considered a risky investment due to its sensitivity to oil prices, which have dropped more than 15% since midyear [5] - The company is facing debt issues, which could impact cash flow despite management's efforts in debt reduction [5] Group 5: Investment Strategy - For investors uncertain about which Buffett stocks to choose, investing in Berkshire Hathaway itself provides exposure to all its holdings, including Occidental Petroleum [6]