There’s little question that Berkshire Hathaway(BRK.A -0.79%) (BRK.B -0.69%) CEO Warren Buffett will go down as one of the greatest investors of our time. In the roughly 58 years since taking the reins at Berkshire Hathaway, he’s overseen a greater-than 4,300,000% aggregate return in his company’s Class A shares (BRK.A) as well as doubled-up the annualized total return, including dividends paid, of the benchmark S&P 500 (19.8% vs. 9.9%) as of the end of 2022.
This sustained long-term outperformance, coupled with the Oracle of Omaha’s willingness to share what factors he looks for in an investment, is why investors are eager to see what Warren Buffett is buying and selling. After all, riding Buffett’s coattails has made investors a boatload of money for nearly 60 years.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Following Warren Buffett’s investment activity has been a moneymaking strategy for decades
For the most part, tracking Warren Buffett’s trading activity is easy. Institutional investors and money managers with over $100 million in assets under management (AUM) are required to file Form 13F with the Securities and Exchange Commission (SEC) no later than 45 days following the end of a quarter. A 13F provides a snapshot of what Wall Street’s brightest minds bought and sold in the most recent quarter.
Though we’ll be getting a closer look at Berkshire’s second-quarter 13F on Monday, Aug. 14, previous filings from the Oracle of Omaha show that he and his investment team have been piling into a handful of stocks.
For instance, oil stock Occidental Petroleum(OXY 0.91%) has been a consistent buy for Buffett and his investing lieutenants, Ted Weschler and Todd Combs, since the start of 2022. Berkshire has purchased more than 224 million shares of Occidental common stock.
Having more than $14 billion invested in the common stock of an energy company suggests that Buffett and his team expect the spot price of oil to remain elevated. The ongoing war in Ukraine, along with more than three years of capital underinvestment by energy majors tied to COVID-19 uncertainties, has created a tight supply market for oil that may keep the West Texas Intermediate Crude price above historic norms.
This is noteworthy given that Occidental Petroleum generates the bulk of its revenue from drilling. Although it’s an integrated operator with downstream chemical plants, it’s far more reliant on its upstream operations for success. If the price of crude oil rallies, Occidental Petroleum should disproportionately benefit.
During Berkshire Hathaway’s annual shareholder meeting, Buffett referred to Apple as “a better business than any we own.” He certainly didn’t make this comment lightly. He values Apple for its phenomenally strong brand, its years of innovation, and the company’s steadfastly loyal customer base.
To add, Warren Buffett is also a huge fan of Apple’s capital-return program. In addition to doling out one of the world’s largest nominal-dollar dividends ($15.1 billion per year), Apple has bought back around $600 billion worth of its common stock since the start of 2013. Not only do buybacks improve earnings per share for companies (like Apple) with steady or growing net income, but they can also increase the ownership stakes of existing investors.
Image source: Getty Images.
The Oracle of Omaha has spent north of $71 billion buying shares of this stock
But here’s a news flash that may come as a surprise to a lot of investors: Neither Apple nor Occidental Petroleum is Warren Buffett’s most-purchased stock over the past five years. In fact, the company Buffett has piled more than $71 billion into since the start of July 2018 won’t be found in Berkshire Hathaway’s quarterly 13F filings.
To locate the stock that truly has the Oracle of Omaha’s attention, you’ll want to pull up page 53 (slide 54 in PDF format) of Berkshire Hathaway’s Q2 operating results. That’s the page where you’ll find the company’s share-repurchase activity. That’s right…Warren Buffett’s favorite stock to buy is none other than his own company, Berkshire Hathaway. Don’t you love a good plot twist?
Prior to July 17, 2018, Warren Buffett and Executive Vice Chairman Charlie Munger were hamstrung by one specific component of Berkshire Hathaway’s share-repurchase criteria. Specifically, they were only allowed to pull the trigger on buybacks if Berkshire Hathaway’s stock traded at or below 120% of book value — i.e., no more than 20% above its book value, as reported in the most recent quarter. For more than a half-decade leading up to July 2018, the company’s stock never fell below this book value threshold, which meant that Berkshire’s dynamic duo couldn’t conduct any buybacks.
Thankfully, Berkshire Hathaway’s Board of Directors made some adjustments. The new criteria to conduct buybacks that was passed on July 17, 2018 allowed Buffett and Munger to repurchase Berkshire Hathaway stock if:
The company has at least $30 billion in cash, cash equivalents, and U.S. Treasuries on its balance sheet.
Buffett and Munger agree that the company’s stock is intrinsically cheap.
If these criteria are met, buybacks can be undertaken with no set cap or timeline.
During the recently completed second quarter, Berkshire Hathaway repurchased 1,042 Class A shares (BRK.A) and 2,354,444 Class B shares (BRK.B). Based on the average purchase price of these buybacks as reported by the company, Buffett and his team oversaw $1,302,648,276.48 in repurchases in Q2.
More impressively, this marks the 20th consecutive quarter that Warren Buffett and Charlie Munger have OK’d the repurchase of Berkshire Hathaway stock. Collectively, more than $71 billion worth of stock has been repurchased in 17 days shy of five years.
The way I see it, Berkshire Hathaway’s mammoth buyback program serves three key purposes. First, it’s a way to reward the company’s long-term investors. Just as Berkshire has seen its stake in Apple grow larger over time due to buybacks, reducing Berkshire’s outstanding share count through buybacks is increasing the ownership stakes of its faithful shareholders.
Second, reducing Berkshire’s outstanding share count via buybacks should increase the company’s earnings per share over time. In other words, it’s making an already fundamentally attractive stock that much more appealing.
The third reason for such an aggressive share-repurchase program is to emphasize the faith Warren Buffett and Charlie Munger have in the company they’ve built over many decades. As I’ve stated previously, Berkshire’s investment portfolio is loaded with cyclical businesses. Since the U.S. and global economy spend far more time growing than contracting, it means Berkshire Hathaway is well positioned to take advantage of domestic and global growth over the long run.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
