Stocks can rise during bull markets, but that’s not where the best investors make the most money. Ask the most successful money managers and they’ll tell you that most of the gains they’ve made over their decades of careers have come from stock purchases made during bear markets.
What stocks are the best investors attracted to right now? Here are a few that Warren Buffett, Daniel Loeb and Ray Dalio picked up as markets crashed in the first three months of the year.
Warren Buffett and Occidental Petroleum
The market value of Berkshire Hathaway (BRK.A -0.15%) (BRK.B -0.23%) has grown at a compound annual growth rate of 19.7% since Warren Buffett acquired the now-defunct textile factory in 1965 and turned it into a holding company that invests in stocks or buys entire companies .
Warren Buffett’s track record may be the greatest of all time, and it’s no secret how he did it. For decades, he’s been telling anyone who will listen that he’d rather pay a fair price for a great company than a good price for a mediocre one.
Earlier this year, western oil (OXY -3.14%) was obviously trading at a fair price because Berkshire Hathaway scooped up 5.9 million shares of the energy stock. It’s one of the largest oil and gas producers in the United States, and you’ll be happy to know that it doesn’t do business in Russia or Ukraine.
It’s easy to see why Buffett thinks Occidental Petroleum is a great company right now. In May, the company told us that its dividend would be sustainable even if oil fell to $40 a barrel. Prices have been hovering above $100 since Russia, one of the world’s largest oil exporters, provoked sanctions against itself by invading Ukraine. With the end of the war not in sight, the company’s bottom line and its quarterly payouts could rise sharply in coming years.
Daniel Loeb and CSX
Daniel Loeb is CEO and founder of Third Point Management, a high-profile New York-based hedge fund famous for getting noticed by companies it thinks could perform better. Loeb is the last person most CEOs want to hear from, but everyday investors might just follow his lead.
Third Point’s most significant addition in the first quarter was CSX (CSX -2.11%), a major rail operator on the East Coast. CSX’s network connects all major metropolitan areas in the eastern United States, where the vast majority of the population resides. Perhaps that’s what gave Loeb the confidence to buy more than 7 million shares in the first quarter.
Last summer, CSX made a smart acquisition of Quality Carriers, one of the largest fleets of bulk tankers in North America. The acquisition significantly expands the reach of CSX’s chemical shipping network, which contributed to the 21% year-over-year revenue increase in the first quarter. The gain is all the more impressive given that the actual volume of shipments is 2% lower than the period of the previous year.
Over the past year, CSX has paid out $4.2 billion to its shareholders in the form of dividends and share buybacks. With the rising costs of goods transported by CSX, shareholders can expect much more in the coming year.
Ray Dalio and Medtronic
When he’s not busy writing best-selling self-help books, Ray Dalio runs one of the world’s largest hedge funds, Bridgewater Associates. Dalio’s funds are renowned for performing well when the rest of the market crashes, and diversification is an important part of his strategy.
The biggest new addition to Bridgewater’s portfolio in the first quarter was Medtronic (MDT 0.57%). It is the world’s largest manufacturer of medical devices and a reliable generator of profits in good and bad times.
It’s hard to open your eyes in a hospital room without seeing half a dozen Medtronic products. As the largest device maker, economies of scale allow the company to compete fiercely with smaller companies.
Medtronic is committed to returning a lot of money to shareholders. The stock is offering a dividend with a yield of 3.1% at the moment, and investors can expect more. This year, the company increased its payout for the 45th consecutive year.
Over the past five years, Medtronic’s dividend has increased by 48%. The boom in sales of replacement heart valves will help it increase even more in the years to come.
Cory Renauer has no position in the stocks mentioned. The Motley Fool holds positions and recommends Berkshire Hathaway (B shares). The Motley Fool recommends the following options: $200 long calls in January 2023 on Berkshire Hathaway (B shares), $200 short puts in January 2023 on Berkshire Hathaway (B shares) and short calls of $265 in January 2023 on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.