Anyone who follows Warren Buffett knows this Apple (NASDAQ:AAPL) is the largest position in it Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) Portfolio. The tech giant currently accounts for a whopping 41.2% of Berkshire’s total stock investments.
Which stock comes second? At the moment it is like this Bank of America (NYSE:BAC). However, the major bank could not keep its place for too long. By 2027, I expect another stock to be Buffett’s second-largest holding after Apple.
The current top contenders
First, I expect Apple to remain at the top of Berkshire’s list for years to come. Even though the group slightly reduced its stake in Apple in the fourth quarter of 2023, Buffett still values the company and its management very much.
I also don’t expect Apple’s shares to fall so much that the company slips from the No. 1 position. Certainly the stock is probably overvalued given its low growth. However, artificial intelligence (AI) could be a much-needed catalyst for Apple in the next few years.
Which stock could knock Bank of America out of its No. 2 spot? Only three other stocks currently make up more than 5% of Berkshire’s portfolio.
It wouldn’t be too much of a hassle American Express to pass the 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 to climb steeper hills. Berkshire owns $24.7 billion worth of Coca-Cola shares and $20.8 billion worth of Chevron shares. I doubt Buffett will buy more Coca-Cola shares, but he could increase his stake in Chevron (like he did in the fourth quarter). Still, I think it’s unlikely that either stock will replace Bank of America behind Apple.
Why another stock could make it to second place
However, another stock could overtake Bank of America, American Express, Coca-Cola and Chevron to become Buffett’s second-largest holding. I think the ingredients are there Occidental Petroleum (NYSE:OXY) to skip these stocks.
Buffett loves Oxy. He wrote to Berkshire shareholders earlier this year that he expected 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 that is valuable to her shareholders and her country.”
More importantly, Buffett continues to show his affection for Occidental by aggressively buying shares. He initiated a position in the stock in the first quarter of 2022. Berkshire now owns 28% of the company. The conglomerate received regulatory approval to acquire up to 50% of Oxy in August 2022.
At this rate, Berkshire could easily own half of Occidental by the end of 2027. Based on the company’s current market cap, 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, but I don’t expect Oxy’s market cap to remain at current levels.
Hollub predicts a shortage of oil supplies by the end of 2025. If she’s right, Occidental and other oil stocks should rise significantly. 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 with your 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.
However, I like the outlook for oil stocks in general over the next few years. Occidental could be one of the industry’s top performers, especially if Buffett continues buying up stocks (which I think is likely).
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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 at 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 a disclosure policy.
Prediction: This will be Warren Buffett’s second-largest holding after Apple by 2027, originally published by The Motley Fool