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For nearly six decades, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett has been dazzling Wall Street with his investing prowess. Since becoming CEO in the mid-1960s, the Oracle of Omaha, as he's best known, has overseen a greater than 4,450,000% aggregate return in his company's Class A Shares (BRK.A), as of the closing bell on January 12.
Warren Buffett has a knack for picking long-term winners, and investors of all walks usually wait on the edge of their respective seats to see what he and his investment team have been buying and selling. The funny thing is, Buffett's most commonly purchased stock isn't the one you might initially think it is.
Buffett and his team have been adding to a handful of brand-name stocks with frequency
The good news for curious investors is that Berkshire Hathaway is required to file Form 13F with the Securities and Exchange Commission no later than 45 days following the end of each quarter. A 13F provides an under-the-hood look at what Wall Street's brightest minds purchased and sold in the previous quarter and is a required filing for persons and entities with at least $100 million in assets under management.
As of the closing bell on Jan. 12, Berkshire Hathaway's investment portfolio had $361 billion of invested assets spread across roughly 50 stocks. Some of these stocks have been added to with frequency in recent years.
Energy stock Occidental Petroleum (NYSE: OXY) is the perfect example of a now-core holding that's had the undivided attention of the Oracle of Omaha and his “investing lieutenants,” Todd Combs and Ted Weschler, over the past two years.
When 2022 began, Berkshire Hathaway held $10 billion in Occidental preferred stock yielding 8% annually. However, it held no common shares. As of this past week, Buffett's company owned a little over 243.7 million shares of Occidental Petroleum common stock, representing a greater than $14.1 billion stake.
The reason Buffett and his investing aides have purchased shares of Occidental with frequency over the past two years likely has to do with the expectation that the spot price for crude oil will remain elevated or head even higher. Multiple years of capital underinvestment by global energy majors during the pandemic, coupled with uncertainty tied to Russia's ongoing war with Ukraine, has led to a tight global supply of crude oil. Generally speaking, when the supply of a key commodity is constrained, it's not unusual for the spot price of that commodity to increase.
Occidental Petroleum is unique among integrated oil and gas operators in that it generates a disproportionate percentage of its revenue from its upstream (i.e., drilling) operations. If the price of crude oil rises, Occidental will enjoy an outsized benefit. Of course, the opposite of this scenario (a decline in the spot price of crude oil) is true, as well.
Warren Buffett has also not been shy about increasing his company's position in tech stock Apple (NASDAQ: AAPL). Since Berkshire's initial stake in Apple was opened during the first quarter of 2016, it's grown to almost 915.6 million shares and accounts for 47.1% ($170.2 billion) of invested assets.
Considering that Buffett referred to Apple as “a better business than any we own” during Berkshire's 2023 annual shareholder meeting, it shouldn't surprise anyone that he and his team have been building this position for years. Apple brings brand power and innovative consistency to the table that few other businesses can match.
For instance, Apple has been absolutely dominant in the U.S. smartphone market for well over a decade. Since introducing a 5G-capable iPhone in the fourth quarter of 2020, the company has consistently accounted for a little over half of U.S. smartphone market share.
Apple is also evolving into a platforms company. Placing added emphasis on subscription services is a way to boost long-term margins, minimize sales fluctuations during major iPhone upgrade cycles, and keep customers loyal to its ecosystem of products and services.
There's also nothing quite like Apple's capital-return program. Apple is returning $15 billion in dividends to its shareholders each year and has repurchased more than $600 billion of its common stock since kicking off its buyback program in 2013.
Warren Buffett has bought shares of this stock on a nearly monthly basis for over five years
Berkshire Hathaway's 13F is an invaluable tool that helps investors get a read on what stocks, industries, and trends are piquing the interest of Warren Buffett and his lieutenants. However, it doesn't tell the full story — at least with regard to Warren Buffett's favorite stock to buy.
Though there are a couple of core holdings in Berkshire's portfolio that have been purchased with frequency in recent years, there's another stock you'll find listed toward the end of Berkshire's quarterly reports that's been purchased by Warren Buffett on an almost monthly basis, dating back to July 2018. The reason you're not going to find this stock listed on the company's 13F is because Buffett's favorite stock to buy is his own company, Berkshire Hathaway.
As of the midpoint of 2018, Berkshire Hathaway's share repurchase program required the company's stock to trade at or below 120% of book value (i.e., no more than 20% above book value) for buybacks to take place. For many years leading up to July 2018, Berkshire's stock never fell to this line-in-the-sand threshold — which meant not a cent was spent on repurchases.
Everything changed on July 17, 2018. The company's board passed new measures that allowed Warren Buffett and his late right-hand man Charlie Munger more freedom to pull the trigger on buybacks when they saw fit. As long as Berkshire Hathaway had at least $30 billion in cash, cash equivalents, and Treasuries on its balance sheet, and Buffett and Munger agreed that their own company's stock was intrinsically cheap, repurchases could be conducted without any cap.
Since Berkshire Hathaway's board made this change — Berkshire hasn't reported its fourth-quarter results yet, which is why I'm stating this figure through Sept. 30, 2023 — Buffett and Munger OK'd share buybacks in all 21 quarters. In fact, there have only been a handful of months over the past five-plus years where share repurchases didn't take place. In aggregate, Buffett and the late, great Charlie Munger oversaw the repurchase of more than $72 billion worth of Berkshire Hathaway stock since mid-2018.
Share buybacks are the direct way Warren Buffett and his team reward long-term shareholders. Since Berkshire doesn't pay a dividend, regularly buying back stock can steadily increase the ownership stakes of longtime shareholders.
Furthermore, companies with steady or growing net income, like Berkshire Hathaway (sans the recognition of unrealized investment gains and losses), should see their earnings per share climb as the number of outstanding shares decline. This helps to make Berkshire's stock even more attractive to fundamentally focused investors.
In 2024, there's no stock I'm more confident we'll see Warren Buffett buy than his own company.
Elon Musk: THIS will be bigger than Tesla
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Hello. I'm James Altucher. I've been called a “genius investor” by my fans… And an “eccentric millionaire” by some others. I think it's because I make big predictions… That tend to come true. Today, I'm revealing a brand-new prediction:
American manufacturing will leave China…
And make a triumphant return to America…
Thanks to AI-powered robots.
The technology is being developed right now. I'm talking about, among others… Elon Musk's Optimus robots. These robots are autonomous workers… Embedded with a smart “AI brain”. Musk is going to use thousands of them in Tesla factories… AI robots will make it cheaper to manufacture goods here in America than China. And they'll create new American jobs in construction, maintenance, transportation, management, and more. Musk believes the potential of these robots is almost limitless… And could soon exceed Tesla's revenues… He's even said his robots have the potential to be used in homes… To make dinner and do housework… Care for the elderly… Or even hinted at them… Being a buddy or “romantic companion” for lonely people. Now that may sound strange… (And perhaps it is.) But I've learned not to bet against Musk's vision. And this is just one of the ways AI will transform our economy and society. In fact, I now predict… Between now and January 9, 2024… Next generation AI technology will open a “wealth window”… That could be the biggest wealth-building opportunity of your lifetime. I now expect AI to be the first $100 TRILLION industry. There could be trillions available to those who get in early… Today, for the first time… I'm showing good Americans exactly what to do… Go here now to see my plan… For investing in AI during this brief “wealth window”.
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