Why Does Warren Buffett Keep Piling Into 2 Beaten-Down Stocks That Have Plunged More Than 30%?

Core Insights - Warren Buffett's investment activities during Q4 2024 were disclosed in Berkshire Hathaway's 13F filing, revealing purchases and sales of stocks [1] - Buffett has continued to invest in Occidental Petroleum and SiriusXM Holdings, both of which have seen significant declines in their stock prices [2][4] Group 1: Investment Details - Occidental Petroleum is now Berkshire's sixth-largest holding, with Buffett increasing his stake nearly every quarter since initiating a position in Q1 2022 [2] - SiriusXM has been a part of Buffett's portfolio since 2016, with a steady increase in stake due to its merger with Liberty Media [3][6] Group 2: Stock Performance - Occidental's shares are approximately 35% below their peak in late 2022 and have fallen nearly 20% over the past year [3] - SiriusXM's stock has decreased over 40% in the last 12 months and remains over 60% below its mid-2023 high [4] Group 3: Investment Rationale - Valuation is a key factor, with Occidental trading at a forward price-to-earnings ratio of around 13, lower than the S&P 500 energy sector average of 14.7, while SiriusXM trades at under nine times forward earnings [5] - Both companies generate significant free cash flow, with Occidental exceeding $3.7 billion and SiriusXM over$1 billion in the last year [6] Group 4: Business Model Appeal - Buffett appreciates Occidental's vast oil and gas holdings and its leadership in carbon-capture initiatives, despite the economic feasibility being unproven [7] - SiriusXM's monopoly-like position in the satellite radio market and its subscription model, which generates recurring revenue, are also attractive to Buffett [7] Group 5: Future Outlook - There is an expectation that Buffett will continue to add to Berkshire's positions in both Occidental and SiriusXM, with a preference for Occidental as the better pick [9] - While volatility in oil prices may impact Occidental's stock in the short term, its long-term prospects are considered strong, especially with advancements in carbon capture technology [10]