Anticipation: These Two Warren Buffet Stocks are Likely to Surge if Trump and the GOP Secure Victory in November Elections
Only two more days left before millions of Americans cast their votes. Countless others have already done so. The elections' results are set to influence some stocks to climb and others to plummet.
Warren Buffett might not be overly concerned about how the stocks in Berkshire Hathaway's portfolio might fare, regardless of who wins. However, a few of his stocks could skyrocket if former President Donald Trump secures another term and the Republicans gain control of Congress. I foresee two Buffett stocks, in particular, surging if Trump and the GOP triumph this week.
Largest Buffett holdings with potential gains
Two of the six biggest positions in Berkshire's portfolio include oil stocks that are poised for a significant rise should the Republicans be in power. Chevron (CVX 0.01%) ranks as the conglomerate's fifth-largest holding, with a stake worth approximately $17.7 billion. Occidental Petroleum (OXY 0.75%) is in the sixth spot, with Berkshire owning around $13.2 billion worth of the oil and gas producer as per fair value.
Buffett purchased a position in Chevron during the fourth quarter of 2020. The stock had dropped earlier in the year due to the pandemic-related shutdowns, which significantly reduced the demand for oil.
Despite Berkshire's substantial stake in Chevron, it owns fewer shares than it did a year earlier. Buffett sold around 3.11 million shares in the first quarter of 2024 and another 4.37 million shares in the second quarter.
On the contrary, Buffett has continued to purchase shares of Occidental Petroleum aggressively. He initiated a new position in Oxy in the first quarter of 2022 and has increased his stake almost every quarter since then. Berkshire now owns 27.3% of Occidental and acquired permission to purchase up to 50% of the company in 2022.
Republican policies that could impact these Buffett stocks
What makes Chevron and Occidental Petroleum stocks likely to thrive if Trump and the GOP win? Two Republican policies could particularly affect them.
First, Trump has vowed to increase domestic drilling for oil and gas. Exactly how much this will contribute to Chevron and Occidental remains to be seen. The U.S. is already producing a record number of barrels of oil per day.
However, oil executives would undoubtedly appreciate the deregulation that a GOP sweep would likely bring. Investors, too, are likely to react positively, with shares of Chevron and Occidental likely to rise due to the increased optimism about the oil and gas industry.
Second, Trump wants to lower corporate tax rates from 21% to 15%. If he succeeds in implementing this change (which would be more feasible with the Republicans controlling the Senate and House of Representatives), it could improve Chevron's and Occidental's profitability.
What happens if there isn't a GOP sweep?
According to Decision Desk HQ, a website that reports on U.S. election results, Trump had a 54% chance of winning the presidential race as of Friday night. It estimated that the Republicans have a 74% chance of winning the Senate and a 53% chance of capturing the House. Although these percentages might suggest a strong chance of a GOP sweep, the site considers the presidential and House margins "essentially a toss-up." Probability math suggests that the odds of the party winning the presidency and both legislative chambers is only about 1 in 5, based on Decision Desk HQ's projections.
Remember that Decision Desk's predictions are reliant on polls, which might be inaccurate. The almost identical polling margins in several states could indicate that some pollsters are fine-tuning their results to avoid being outliers. This process, known as "herding," can create the impression that the election is closer than it actually is. In reality, there should be more variation in polls.
Therefore, Vice President Kamala Harris could defeat Trump, and the Democrats could control at least one legislative chamber. How would Chevron and Occidental stocks fare in this situation? I wouldn't anticipate a substantial increase. However, a major sell-off seems unlikely, either.
Regardless of which party holds power in Washington, D.C., there will still be a robust demand for oil and gas. Moreover, both Chevron and Occidental are investing in carbon capture and storage technology. If successful, these Buffett stocks are likely to be significant long-term winners.
In such a scenario where Vice President Kamala Harris wins the presidency and the Democrats control at least one legislative chamber, Warren Buffet might adjust his investing strategies, but the demand for oil and gas is expected to remain robust due to the global market needs. Therefore, a major sell-off of Chevron and Occidental stocks seems unlikely.
Even with Democratic control, Berkshire Hathaway's investments in clean energy initiatives, such as Carbon capture and storage technology, could still yield significant long-term returns for these Buffett stocks.
