The Oracle of Omaha has its sights set on Chevron and Verizon.
Berkshire Hathaway, led by famed investor Warren Buffett, announced significant stakes in those two legacy players earlier this week.
CNBC’s “Trading Nation” asked two traders if they would follow his lead and put money to work in those two stocks.
“It speaks to the challenge Buffett has right now in deploying capital. It’s such a huge amount of money that he has to put in, so he really needs to find those big names. … It’s not the typical American franchise purchases that go on. you would see him make it, ”said Quint Tatro, president of Joule Financial, Wednesday.
Tatro said that while Verizon looks somewhat attractive as a dividend game, he prefers oil giant Chevron.
“This is a major integrated oil name, one of the best of the balance sheet type names, 25% debt to equity, which is really, really good in that area,” he said. “Not his typical kind of names, but we’d probably prefer the Chevron to the Verizon.”
Berkshire Hathaway has announced an $ 8.6 billion stake in Verizon and $ 4.1 billion in Chevron. Both outperformed the market this week.
Todd Gordon, founder of TradingAnalysis.com, holds Chevron and Verizon and points out that both are high-yielders. Verizon has a 4.4% dividend yield and Chevron nearly 5.5%.
Chevron in particular is getting a boost from higher oil prices, driven by increased demand and energy scarcity in Texas during a winter storm. The stock is up more than 12% this month, while crude oil is up 17%. Gordon trades in the shares.
“If you want to do an option spread, here’s a little idea … maybe do a 95-105 call spread if you want to do it that way until June as the markets are discounting the summer driving season and reopening,” ” he said.
A target of $ 105 represents a 10% increase for Chevron from its current level.
Disclosure: Gordon keeps CVX and VZ in his value portfolio.
Disclaimer