Warren Buffett, the legendary investor and CEO of Berkshire Hathaway, has recently shifted his investment strategy. Despite having spent an astounding $78 billion on share buybacks of his own company since mid-2018, Buffett has now directed his attention to three other value stocks. This move comes as no surprise given the historically high valuations in the broader market. While Berkshire Hathaway's stock remains a significant part of the portfolio, Buffett has opted to explore new opportunities that offer attractive valuations and solid fundamentals.

Buffett’s decision not to continue with share repurchases for two consecutive quarters marks a notable change in strategy. Since July 2018, he had consistently bought back shares of Berkshire Hathaway, leveraging the company's robust financial health to enhance shareholder value. However, with Berkshire's stock trading at its highest premium to book value in over 16 years, and the broader market being historically pricey, Buffett has chosen to diversify into other areas. The Oracle of Omaha has identified three companies that fit his value investing criteria: Sirius XM Holdings, Occidental Petroleum, and VeriSign.

Sirius XM Holdings, a satellite radio operator, has caught Buffett's eye due to its unique market position. As the sole provider of satellite radio services, it enjoys strong pricing power and a stable revenue stream from subscriptions, which account for 76% of its net sales. Unlike traditional radio companies that rely heavily on advertising, Sirius XM’s business model is less vulnerable to economic downturns, ensuring more consistent cash flow. Moreover, its current valuation, trading at just 7.4 times Wall Street’s consensus earnings forecast for 2026, makes it an appealing bargain.

Occidental Petroleum, an integrated oil and gas giant, has also piqued Buffett’s interest. With geopolitical risks and underinvestment in energy infrastructure during the pandemic tightening global oil supply, Occidental stands to benefit significantly if crude oil prices remain elevated or rise further. The company’s upstream drilling operations contribute substantially to its revenue, and its downstream assets provide a hedge against potential oil price volatility. Additionally, Occidental’s forward P/E ratio of 11 offers a 14% discount compared to its five-year average, making it an attractive investment opportunity.

VeriSign, an internet domain-name registry service, rounds out Buffett’s recent acquisitions. As the exclusive registrar for .com and .net domains, VeriSign benefits from significant pricing power and predictable cash flows. The company’s low-cost operating model and impressive margins, ranging from 64% to 69%, underscore its financial strength. Although not as cheaply valued as Sirius XM or Occidental, VeriSign’s forward P/E ratio of 26 represents an 8% discount to its five-year average, presenting a compelling value proposition.

Buffett’s shift in focus reflects his adaptability as an investor, identifying undervalued opportunities in a challenging market environment. By diversifying into these three companies, he aims to capitalize on their unique strengths and favorable valuations. This strategic move highlights Buffett’s commitment to long-term value creation, even as he steps back from aggressive share repurchases of Berkshire Hathaway. Investors will undoubtedly be watching closely to see how these new additions perform within the Berkshire Hathaway portfolio.