The Oracle of Omaha drew its attention to Chevron and Verizon.
Berkshire Hathaway, led by famed investor Warren Buffett, announced a significant stake in the two legacy players earlier this week.
CNBC’s “Trading Nation” asked two traders if they would follow its lead and make money in the two stocks.
“That speaks to the challenge Buffett is currently facing in deploying capital. It’s such a large amount he has to use, so he really needs to find these big stable names … They’re not the typical American franchise purchases you would make. “Do not see him make it,” Quint Tatro, president of Joule Financial, said on Wednesday.
Tatro said although Verizon looks somewhat attractive as a dividend gamer, it prefers the oil giant Chevron.
“It’s a major integrated oil name, one of the best balance sheets, 25% debt to equity, which is really very good in space,” he said. “Not his typical name, but we’ll probably prefer the Chevron over the Verizon.”
Berkshire Hathaway has announced a $ 8.6 billion stake in Verizon and $ 4.1 billion in Chevron. Both outperformed the market this week.
Todd Gordon, founder of TradingAnalysis.com, cites Chevron and Verizon, pointing out that both are high returns. Verizon has a dividend yield of 4.4% and Chevron close to 5.5%.
Chevron in particular is getting a boost from higher oil prices, driven by rising demand and energy pressures in Texas during a winter storm. The share rose more than 12% this month, while crude rose 17%. Gordon trades on the stock.
“If you want to do an option spread, it’s a bit of an idea … maybe do a 95-105 call spread if you want to do that in June, as markets are discounting the summer season and the reopening,” he said.
A target of $ 105 means that Chevron is 10% higher than the current level.
Disclosure: Gordon holds CVX and VZ in its value portfolio.
Disclaimer