Anyone who follows Warren Buffett knows that Apple (NASDAQ: AAPL) is the greatest position in him Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) portfolio. The tech giant currently represents a whopping 41.2% of Berkshire's total equity investments.
Which stock is in second place? That is the case for the time being bank of America (NYSE: BAC). However, the big bank might not stay in place for much longer. I predict another stock will be Buffett's second-largest holding by 2027, after Apple.
The current top candidates
First off, I fully expect Apple to remain at the top of the list for Berkshire for years to come. Although the conglomerate slightly reduced its position in Apple in the fourth quarter of 2023Buffett still has a high opinion of the company and its management.
I also don't expect Apple's shares to fall so much that the company disappears from the number 1 position. Certainly, the stock is arguably overvalued given its lackluster growth. However, artificial intelligence (AI) could be a much-needed catalyst for Apple in the coming years.
Which stock could knock Bank of America out of its second-place spot? Only three other stocks currently represent more than 5% of Berkshire's portfolio.
It wouldn't take too much effort American Express to go beyond Bank of America. Berkshire's stake in AmEx is worth nearly $36 billion, compared to $39.1 billion for BofA. I don't think Buffett will put much more money into American Express. However, AmEx stock could grow faster than Bank of America over the next three years — perhaps enough to slide into second place in Berkshire's portfolio.
The Coca-Cola Company And Chevron have steeper hills to climb. Berkshire owns $24.7 billion in Coca-Cola shares and $20.8 billion in Chevron. I doubt Buffett will buy more Coca-Cola shares, but he could increase his stake in Chevron (as he did in the fourth quarter). Still, in my opinion, it's unlikely that either stock will replace Bank of America behind Apple.
Why another stock could make a jump to No. 2
However, another stock could leap past Bank of America, American Express, Coca-Cola and Chevron to become Buffett's second-largest holding. I think the ingredients for that are there Western petroleum (NYSE:OXY) to skip these stocks.
Buffett likes Oxy. He wrote to Berkshire shareholders earlier this year that he expects to own shares of the oil and gas producer “indefinitely.” He also praised Occidental CEO Vicki Hollub, saying she knows “how to separate oil from rock, and that is an unusual talent, valuable to her shareholders and to her country.”
More importantly, Buffett continues to show his affection for Occidental by aggressively buying shares. He started a position in the stock in the first quarter of 2022. Berkshire now owns 28% of the company. The conglomerate received regulatory approval in August 2022 to acquire up to 50% of Oxy.
At the current rate, Berkshire could easily own half of Occidental by the end of 2027. Based on the company's current market capitalization, its stake would be worth about $30 billion. That's still well below the level needed to replace Bank of America as Berkshire's second-largest holding company, but I don't expect Oxy's market cap to remain at current levels.
Hollub predicts an oil shortage by the end of 2025. If she's right, Western and other oil stocks should move significantly higher. I also wouldn't rule out the possibility of a boost from advances in the company's direct air capture technology.
Should you buy Oxy hand over fist?
Investors shouldn't buy Occidental stock just because I predicted it could be Buffett's second-largest holding by 2027. I've been wrong before; I could be wrong in this case.
Overall, however, the outlook for oil stocks in the coming years is positive. Occidental could become one of the top performers in the industry, especially if Buffett continues to acquire shares (which I think is likely).
Should You Invest $1,000 in Occidental Petroleum Now?
Before you buy shares in Occidental Petroleum, consider the following:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Occidental Petroleum wasn't one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $537,557!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
*Stock Advisor returns April 22, 2024
Bank of America is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. Keith Speights has positions in Apple, Bank of America, Berkshire Hathaway and Chevron. The Motley Fool holds positions in and recommends Apple, Bank of America, Berkshire Hathaway and Chevron. The Motley Fool recommends Occidental Petroleum. The Motley Fool has one disclosure policy.
Prediction: This will be Warren Buffett's second-largest company by 2027, after Apple was originally published by The Motley Fool
