Warren Buffett’s latest $2.1 billion purchase brings his total investment in the stock to more than $74 billion in less than six years

By | March 4, 2024

For almost six decades Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett has organized a clinic for Wall Street. While the benchmark S&P500 has delivered a total return, including dividends, of just over 33,000% since the ‘Oracle of Omaha’ took over as CEO in the mid-1960s, Berkshire’s (BRK.A) Class A shares have totaled more than 33,000 % increased. than 5,000,000% from the closing bell on February 28, 2024! Outperformance of this magnitude will get you noticed by professional and private investors.

Warren Buffett’s phenomenal track record is a big reason why there is a lot of buzz surrounding Berkshire Hathaway every time the company files Form 13F with the Securities and Exchange Commission (SEC). A 13F gives investors an over-the-shoulder look at what Wall Street’s biggest money managers have been buying and selling, and is a required quarterly filing for institutions and investors with at least $100 million in assets under management.

A cheering Warren Buffett at Berkshire Hathaway's annual shareholder meeting.

Warren Buffett, CEO of Berkshire Hathaway. Image source: The Motley Fool.

Warren Buffett has increased his core position and built up his interest in value stocks

Throughout 2023, the Oracle of Omaha and his investment assistants, Todd Combs and Ted Weschler, were very selective in their purchases. One core holding that continues to see somewhat regular additions is energy stocks Western petroleum (NYSE:OXY).

Taking into account Berkshire’s latest stock purchases in the first week of February, Buffett’s company has gobbled up more than 248 million shares of Occidental Petroleum since the start of 2022. That’s a position of about $15 billion, of which a total of $34 billion was spent on energy stocks. , including Berkshire’s position in Chevron.

The fact that 9% of Berkshire’s invested assets are tied up in two integrated oil and gas stocks sends a pretty clear message that the company’s brightest minds expect crude oil prices to remain high for an extended period of time. With global oil supplies remaining tight after years of underinvestment in capital due to the COVID-19 pandemic, there is a real possibility that spot crude oil prices will rise even further.

What makes Occidental Petroleum an intriguing energy investment is its revenue distribution. Despite being an integrated operator that gets a portion of its revenue from downstream chemical plants, Occidental gets the lion’s share of its revenue from drilling. If the spot price of crude oil rises, it will benefit more than almost any other integrated oil and gas company.

In addition to Occidental, we’ve also seen Warren Buffett and his team re-emerge as a satellite radio operator Sirius XM Holdings (NASDAQ: SIRI). While radio operators often rely heavily on advertising revenue to keep the lights on, Sirius .

To start with the obvious: Sirius XM is the only licensed satellite radio operator. While this doesn’t mean there’s no competition for listeners, it does give the company some fairly strong power in terms of subscription pricing.

What may be even more important about Sirius XM is how the company generates revenue. While terrestrial and online radio providers rely on advertising revenue, only 20% of Sirius XM’s revenue came from advertising in 2023. Meanwhile, as much as 77% of Sirius XM’s revenue can be traced to subscriptions. Subscribers are less likely to cancel their service during an economic downturn than companies are to meaningfully scale back their advertising budgets.

Sirius XM is also historically cheap. Shares currently trade at a multiple of thirteen times full-year earnings, which is a 32% discount to the average earnings multiple over the past five years.

A stopwatch with the second hand stopped above the phrase: Time to buy.A stopwatch with the second hand stopped above the phrase: Time to buy.

Image source: Getty Images.

The Oracle of Omaha has purchased more than $74 billion worth of stock

While Berkshire’s 13Fs have been telling an interesting story for more than a year β€” Buffett and his team have been net sellers of stocks for the past five quarters β€” here’s what’s happening not in Berkshire’s 13Fs, that’s an even bigger deal.

Warren Buffett’s favorite stocks to buy are not Apple, Occidental Petroleum, or any of the nearly four dozen securities currently listed in Berkshire’s quarterly 13F. The only way to find these mysterious stocks that the Oracle of Omaha can’t stop buying is to dig into his company’s bottom line. There you will find the quarterly stock buyback activity, because Warren Buffett’s favorite stocks are none other than shares of his own company! Don’t like a good plot twist?

Before July 2018, the rules for Berkshire’s stock buyback program didn’t allow then-dynamic duo Warren Buffett and Charlie Munger to get off the proverbial couch. Buybacks could only be undertaken if Berkshire’s share price fell to or below 120% of book value (i.e., no more than 20% above quoted book value, at the end of the last quarter). Because Berkshire’s stock price never fell to or below this preset threshold, no buybacks were undertaken for many years.

On July 17, 2018, everything changed for Buffett, Berkshire and the company’s shareholders. The company’s board changed the buyback rules to allow their star players to “get into the game.” As long as Berkshire has at least $30 billion in cash, cash equivalents and U.S. Treasuries on its balance sheet, and Buffett and Munger agree that their company’s stock is intrinsically cheap, the buybacks can begin without a cap.

During the quarter ended December, Berkshire retired 3,623 Class A shares and 660,585 Class B shares (BRK.B), for a total of $2,147,823,075! This was the 22nd consecutive quarter that Buffett’s company has repurchased its own shares, and it brought the total of buybacks since July 2018 to more than $74 billion. To put this in context, Buffett and the late Charlie Munger spent roughly twice as much buying Berkshire stock compared to the amount they spent buying Apple stock.

Because Berkshire Hathaway doesn’t pay dividends, stock buybacks are the direct way Warren Buffett and his investment team can reward investors who align with their long-term vision. Steady share buybacks should increase the ownership stake of the company’s shareholders.

Additionally, companies like Berkshire Hathaway, which tend to grow their bottom line over time, should see a big boost to their earnings per share as the number of shares outstanding declines. This will only make the stock more attractive to fundamentally minded investors.

Buying back tens of billions in shares of his own company is also a pretty clear indication that Buffett is betting that he and the company he, Munger, Combs and Weschler have built will succeed in the long term.

With a record $167.6 billion in cash and few, if any, values ​​to pique the interest of the Oracle of Omaha and his team, we’re waiting for buybacks of Warren Buffett’s favorite stocks that have been happening throughout the first quarter (and likely beyond). long after) will continue.

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Sean Williams has positions in Sirius XM. The Motley Fool holds positions in and recommends Apple, Berkshire Hathaway, and Chevron. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.

Warren Buffett’s latest $2.1 billion purchase brings his total investment in the stock to more than $74 billion in less than six years. Originally published by The Motley Fool

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