For nearly six decades, Berkshire Hathaway(BRK.A -0.95%) (BRK.B -0.91%) CEO Warren Buffett has been putting on a clinic for Wall Street. Whereas the benchmark S&P 500 has delivered a total return, including dividends, of a little north of 33,000% since the “Oracle of Omaha” took over as CEO in the mid-1960s, Berkshire’s Class A shares (BRK.A) have galloped higher by an aggregate of more than 5,000,000% as of the closing bell on Feb. 28, 2024! An outperformance of this magnitude is going to get you noticed by professional and retail investors.
Warren Buffett’s phenomenal track record is a big reason why there’s a 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 greatest 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.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Warren Buffett has been adding to a core position and building up his stake in a value stock
Throughout 2023, the Oracle of Omaha and his investment aides, Todd Combs and Ted Weschler, were very selective about their purchases. One core holding that’s continued to see somewhat regular additions is energy stockOccidental Petroleum(OXY -1.11%).
Accounting for Berkshire’s latest share purchases during 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 roughly $15 billion position, with $34 billion, in total, devoted to energy stocks, including Berkshire’s position in Chevron.
Having 9% of Berkshire’s invested assets tied up in two integrated oil and gas stocks is a pretty clear message that the company’s brightest minds anticipate crude oil prices will remain elevated for an extended period. With the global supply of oil remaining tight following years of capital underinvestment tied to the COVID-19 pandemic, there’s a real possibility the spot price of crude oil heads even higher.
What makes Occidental Petroleum an intriguing investment in the energy arena is its revenue breakdown. Despite being an integrated operator that generates some of its revenue from downstream chemical plants, Occidental derives the lion’s share of its sales from drilling. If the spot price of crude oil climbs, it’ll benefit more than virtually any other integrated oil and gas company.
Beyond Occidental, we’ve also seen Warren Buffett and his team piling back into satellite-radio operator Sirius XM Holdings(SIRI -2.34%). Though radio operators are often highly dependent on advertising revenue to keep the lights on, Sirius XM has an assortment of competitive advantages working in its favor that should help it navigate any economic climate better than terrestrial and online radio companies.
To start with the obvious, Sirius XM is the only licensed satellite-radio operator. While this doesn’t mean it’s free of competition for listeners, it does give the company reasonably strong subscription-pricing power.
What’s arguably even more important with Sirius XM is how the company generates revenue. Whereas terrestrial and online radio providers are reliant on advertising revenue, only 20% of Sirius XM’s sales came from advertising in 2023. Meanwhile, a whopping 77% of Sirius XM’s revenue can be traced to subscriptions. Subscribers are less likely to cancel their service during an economic downturn than businesses are to meaningfully pare back their advertising budgets.
Sirius XM is also historically cheap. Shares are currently trading for a multiple of 13 times forward-year earnings, which is a 32% discount to its average forward-year earnings multiple over the trailing five-year period.
Image source: Getty Images.
The Oracle of Omaha has purchased in excess of $74 billion worth of this stock
Although Berkshire’s 13Fs have told an interesting story for more than a year — Buffett and his team have been net sellers of equities for the past five quarters — it’s what’s not in Berkshire’s 13Fs that’s an even bigger deal.
Warren Buffett’s favorite stock to buy isn’t Apple, Occidental Petroleum, or any of the nearly four dozen securities currently listed in Berkshire’s quarterly filed 13F. The only way to find this mystery stock that the Oracle of Omaha can’t stop buying is to dig into his company’s operating results. That’s where you’ll find the quarterly share-repurchase activity, because Warren Buffett’s favorite stock to buy is none other than shares of his own company! Don’t you love a good plot twist?
Prior to July 2018, the rules governing Berkshire’s share-buyback program didn’t allow its then-dynamic duo of Warren Buffett and Charlie Munger to get off the proverbial bench. Repurchases could only be undertaken if Berkshire’s share price fell to or below 120% of book value (i.e., no more than 20% above its listed book value, as of the end of the latest quarter). Because Berkshire’s share price never fell to or below this preset threshold, no buybacks were undertaken for years.
On July 17, 2018, everything changed for Buffett, Berkshire, and the company’s shareholders. The company’s board amended the buyback rules to allow their star players to “get in the game.” As long as Berkshire holds at least $30 billion in cash, cash equivalents, and U.S. Treasuries on its balance sheet, and Buffett and Munger agreed that their company’s stock was intrinsically cheap, buybacks could commence without a ceiling.
During the December-ended quarter, Berkshire retired 3,623 shares of Class A stock and 660,585 shares of Class B stock (BRK.B) at a total cost of $2,147,823,075! This marked the 22nd consecutive quarter that Buffett’s company has repurchased its own stock, and it brought the grand total of buybacks since July 2018 to more than $74 billion. To put this into context, Buffett and the late Charlie Munger spent roughly twice as much buying Berkshire stock compared to how much they spent purchasing shares of Apple.
Since Berkshire Hathaway doesn’t pay a dividend, share repurchases are the direct way Warren Buffett and his investment team can reward investors who align with their long-term vision. Steadily buying back stock should increase the ownership stakes of the company’s shareholders.
Furthermore, businesses like Berkshire Hathaway that tend to grow their operating income over time should enjoy a hearty boost to their earnings per share as their outstanding share count declines. This is only going to make the stock more attractive to fundamentally focused investors.
Buying back tens of billions in his own company’s stock is also a pretty clear indication that Buffett is betting on himself and the business he, Munger, Combs, and Weschler have built to succeed over the long run.
With a record $167.6 billion in cash on hand and few, if any, values piquing the interest of the Oracle of Omaha and his team, look for repurchases of Warren Buffett’s favorite stock to continue throughout the first quarter (and likely well beyond).
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.
