Key Points

Investors tend to watch Warren Buffett's portfolio closely, looking for investment ideas. Chevron is a high-yield option in the oil space that is attractive in just about any energy environment. Pool Corp. is a supplier to a consumer niche that has unique demand characteristics. 10 stocks we like better than Chevron ›

The list of publicly traded stocks within Berkshire Hathaway isn't particularly long. But the portfolio that Warren Buffett (who plans to retire at the end of 2025) and his team have built gets scrutinized carefully by Wall Street for investment ideas.

There are two stocks on the list that look interesting today, even given the uncertainty in the broader market and economy. Here's why you might want to buy Chevron(NYSE: CVX) and Pool Corp.(NASDAQ: POOL) in May.

Buffett's approach is important to understand

Nobody knows exactly what Buffett's investment approach is because he's never laid it out step by step. However, a broad outline goes something like: Buy good companies when they are attractively priced and then hold them for the long term to benefit from that company's growth over time.

But before you simply buy the publicly traded stocks that Berkshire Hathaway owns, you need to remember that some of them have been in the portfolio for decades.Image source: Getty Images.

In other words, you may not want to buy every company because Buffett probably wouldn't be a buyer himself at today's prices. A good example of that is probably Coca-Cola. Although the stock isn't wildly expensive right now, its price-to-sales, price-to-earnings, and price-to-book value ratios are all above their five-year averages.

That, however, doesn't mean that you can't take any guidance from the portfolio that Buffett and his team have created. Two more attractive choices are Chevron and Pool Corp.

Chevron is always a good oil option

From a big-picture perspective, Chevron's integrated business model and dividend history suggest that it is a solid choice in the energy patch just about all the time. Being integrated -- owning a broad spectrum of oil production, pipeline, and processing assets -- helps to soften the peaks and valleys of the commodity driven energy sector. And the company's 38 consecutive annual dividend increases proves that it knows how to weather the energy cycle while still rewarding investors with dividend growth.

Notable here is Chevron's rock-solid balance sheet, which allows it to take on leverage to support its business and dividend through industry downturns. With a low debt-to-equity ratio of around 0.2, it is ready for adversity. That said, oil prices have been on the weak side of late with Chevron facing some company-specific headwinds, too (notably a difficult acquisition and its business operations in Venezuela, which have become a political football).

Story Continues

Chevron's 5% dividend yield is reasonably attractive. Sure, the yield has been higher in the past, but that was during periods of truly deep industry dislocation. If you are willing to pay a fair to attractive price for a well-run energy company, Chevron should be on your short list in May.

Pool Corp. has interesting dynamics

Pool Corp. is a more recent addition to Berkshire Hathaway's portfolio, having been bought by Buffett and his team in the back half of 2024. The stock is down about 50% from its peak in late 2021. It is currently offering a yield of around 1.6%, which is at the high end of the yield range over the past decade.

What's interesting about Pool Corp. is that it sells products that are used to maintain, well, pools. There are really two big drivers here: new pools/remodels of old pools and the supplies needed to maintain existing pools. When people were forced to socially distance during the pandemic there was a boom in pool construction. That boom has now cooled off thanks to higher interest rates and rising inflation.

Investors extrapolated Pool Corp.'s pandemic-driven business surge way too far into the future. They dumped the stock as soon as the surge in new pool construction cooled off. But every one of those new pools still needs to be maintained. And while new pool construction and remodels are slower than they were, every new pool that's added still needs to be maintained.

So, this is an inherently growing business from a fundamental perspective even if there are ups and downs along the general upward path. If you invest for the long term like Buffett and his top lieutenants do, Pool Corp. could be a good choice for your portfolio in May.

Buffett keeps it simple. So should you.

The stories behind Chevron and Pool aren't really that complicated. That fits the mold because Buffett tends to buy businesses that are fairly easy to understand. If you buy into the stories, and fancy the idea of investing like Warren Buffett, you might want to buy Chevron and/or Pool as May gets underway.

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Chevron. The Motley Fool has a disclosure policy.

2 Warren Buffett Stocks to Buy Hand Over Fist in May was originally published by The Motley Fool

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