3 Warren Buffett Stocks Down 20% or More to Buy and Hold

Warren Buffett has had quite a few winners over the last year or so. That’s to be expected when the overall stock market soared. But not every stock in the legendary investor’s Berkshire Hathaway portfolio has performed well.

Those declines usually don’t bother Buffett much, if at all. He knows that pullbacks present great opportunities to buy even more shares of wonderful businesses. There are three such opportunities within the legendary investor’s holdings right now. Here are three Buffett stocks down 20% or more to buy and hold.

1. Bank of America

Shares of Bank of America (BAC 0.12%) have plunged more than 30% from the previous high set in early 2022. The overall stock market sell-off in 2022 pulled BofA down. Last year, the banking crisis negatively impacted the stock.

Bank of America remains the second-largest holding in Berkshire Hathaway’s portfolio, though. Buffett took advantage of the lower prices and added to the conglomerate’s position in BofA in early 2023. Berkshire’s stake in the big bank is now worth close to $34.4 billion.

There are two positive side effects directly stemming from Bank of America’s declines that benefit investors considering the stock today. First, BofA’s valuation is more attractive with shares trading at a forward earnings multiple of only 10.3x. Second, its dividend yield of nearly 2.9% is near the upper end of its historical range.

Meanwhile, Bank of America remains one of the best-run banks in the world. That’s not just my opinion. Global Finance named it the best bank in North America, the best consumer digital bank in the U.S., and the most innovative bank in North America last year. Family Wealth Report also recognized BofA as the best national private bank of 2023.

2. Chevron

Chevron (CVX 0.38%) stock is a little over 20% below its peak level from the beginning of 2023. Although the overall stock market took off last year, Chevron felt the sting of lower oil prices. Investors also weren’t happy with the oil and gas giant’s plan to acquire Hess for $53 billion.

Buffett initiated a position in Chevron during the fourth quarter of 2020 — an especially opportune time with oil stocks taking a beating due to the effects of the COVID-19 lockdowns. He sold shares throughout much of last year. However, Berkshire still owns $16.3 billion of Chevron stock, enough to make it the conglomerate’s fifth-largest holding.

As was the case with Bank of America, Chevron’s valuation and dividend are now more attractive as a result of the decline. The stock now trades at under 11.4 times expected earnings. Chevron’s dividend yield stands at nearly 4.1%.

Chevron should continue to have good growth prospects in the coming years. Even with the rising adoption of renewable energy sources, experts predict that the demand for oil and gas will increase. The company is also investing in renewable fuels, carbon capture, and hydrogen.

3. Occidental Petroleum

Occidental Petroleum (OXY 0.67%) is another oil stock that has fallen more than 20% below its previous high mark. Like Chevron, lower oil prices hurt Oxy last year.

I suspect that Buffett smiled as he saw the stock tumble. Berkshire aggressively added to its position in Occidental in 2023. It now owns 27.8% of the oil and gas producer. Occidental ranks as Berkshire’s sixth-largest position just behind Chevron.

Unsurprisingly, Occidental’s valuation is more appealing after the sell-off. The stock’s forward earnings multiple is a low 10.7x. It seems likely that Berkshire will build its position in Oxy further, especially considering that it secured regulatory approval to acquire up to 50% of the company.

I view Occidental as one of the best-positioned oil stocks for the future because of its big bet on direct air capture, technology that removes carbon dioxide from the air. If this bet pays off, Occidental should become a leader in a market that could potentially be measured in the trillions of dollars.