1 Warren Buffett Stock to Buy Hand Over Fist and 1 to Avoid

Key Points

• Warren Buffett loves Occidental Petroleum with its vast U.S. oil and gas holdings.

• But most investors would do well to stick to another of his stock picks: Amazon.

• 10 stocks we like better than Amazon ›

Warren Buffett is stepping down as CEO of Berkshire Hathaway by the end of 2025. For decades, investors have followed Buffett's portfolio to try and mimic his best investing ideas.

For now, it's still possible to follow Buffett's stock picks given he remains in his leadership position. One of his stock picks looks particularly exciting. Another pick, however, should be avoided by most investors.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Buffett loves this oil and gas stock

Buffett is a huge fan of oil and gas producer Occidental Petroleum (NYSE: OXY). He currently owns more than 25% of the entire business. In 2022, Berkshire received regulatory permission to buy up to half of the company's shares, so more buying may be on the way.

When asked why he first bought shares, Buffett explained that he read the company's annual report and came away impressed. Buffett noted that the company's CEO was "running the company the right way," adding that he particularly likes "its vast oil and gas holdings in the United States, as well as its leadership in carbon-capture initiatives."

Here's the issue: No matter how well run Occidental Petroleum is, the business is still reliant on commodity prices to generate profits for shareholders. If oil prices plunge, nearly all of Occidental's revenue sources are directly affected. Over the past year, for example, oil prices have fallen by around 22%. Occidental's stock price, predictably, has fallen in tandem by around 25%.

While Buffett remains enamored with Occidental stock, most investors are better off sticking with businesses that can better control their own future -- like the exciting tech stock below.

Image source: Getty Images.

This is my favorite Warren Buffett stock

In my view, the most exciting stock in Berkshire's portfolio right now is Amazon (NASDAQ: AMZN). While most people think of Amazon as an e-commerce business, investors should be paying closer attention to Amazon Web Services, a cloud computing division more commonly referred to as AWS.

Right now, the artificial intelligence (AI) revolution is in full swing. According to United Nations estimates, the AI market will grow from $189 billion in 2023 to nearly $5 trillion by 2033. That's an annual growth rate of more than 30%. Companies that are exposed to this growth are in great position. And it's hard to argue that AWS isn't one of the most highly exposed businesses that should benefit from the AI revolution.

AI developers don't typically build out their own infrastructure to train and run their models. Instead, they use cloud computing infrastructure such as those provided by AWS. AWS is the largest cloud computing infrastructure provider in the world with an estimated 30% global market share. This gives it a great network size and capabilities versus the competition. It also gives it more negotiating power to secure next-gen GPUs. These advantages should help AWS maintain its market leading position for years to come, and thus keep Amazon at the center of the AI spending spree.

For now, Amazon's e-commerce division contributes most of its revenue. But AWS actually contributes most of its operating profit. As the AWS business grows, expect it to receive more and more of the spotlight. With a 10 million share stake worth more than $2 billion, Buffett and Berkshire appear invested for the long haul.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Berkshire Hathaway. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.