When Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) CEO Warren Buffett speaks, professional and ordinary investors pay close attention to it. That’s because the “Oracle of Omaha,” as it’s now known, far exceeded the benchmark. S&P500 in the returns column for almost six decades.
While the S&P 500 has produced an impressive total return, including dividends, of around 34,200% since the mid-1960s, Buffett has overseen an overall return on his company’s Class A shares (BRK.A) that approaches the 5,000,000%! With such strong outperformance, it’s no wonder that tens of thousands of investors gather in Omaha, Nebraska, every year to hear Buffett talk about stocks and the U.S. economy.
This also explains why investors are eagerly awaiting Berkshire Hathaway’s quarterly Form 13F filing. A 13F provides insight into what Wall Street’s brightest and most successful money managers bought and sold in the most recent quarter.
Although Berkshire’s 13Fs have always been a gold mine for investors, they don’t tell the whole story of Warren Buffett’s favorite stocks.
The Oracle of Omaha Spent a Small Fortune on Berkshire’s Top Stocks
With the preface I write this Before Berkshire Hathaway files its 13F on Wednesday, May 15. The combination of Berkshire’s previous operating reports, 13Fs and annual letters to shareholders shows that Warren Buffett and his investment team have spent a small fortune to strengthen many of their core positions.
According to Buffett’s confession at his company’s most recent annual shareholder meeting, he and his top investment advisors (Todd Combs and Ted Weschler) sold about 13% of their company’s leading position in the technology sector. . Apple (NASDAQ:AAPL) for tax purposes during the quarter ended March. This reduced the market value of Berkshire’s stake in Apple to approximately $144.5 billion, as of the market’s close on May 10.
However, Buffett and his team have a huge unrealized gain. According to the 13F aggregator website WhaleWisdom.com, Berkshire Hathaway would have a cost base of less than $40 at Apple. This suggests that Buffett & Co. spent approximately $31.3 billion to purchase the Apple shares they currently own.
The Oracle of Omaha and his team also spent a lot of money to bolster Berkshire’s stakes in two integrated companies. energy companies, Chevron (NYSE: CVX) And Western oil (NYSE: OXY). Somewhere between $16 billion and $13 billion, respectively, was invested in Chevron and Occidental stock — and that doesn’t take into account the $8.5 billion in Occidental Petroleum preferred stock that Berkshire also owns .
Spending a total of $29 billion on energy stocks is a pretty clear indication that Berkshire’s smartest investors expect the spot price of crude oil to remain high. After years of capital underinvestment during the pandemic by energy majors (including Chevron and Occidental), the global supply of crude oil is limited. With no easy way out in sight, higher spot prices should benefit both companies’ high-margin drilling segments.
Warren Buffett put much of his company’s capital to good use when the beverage maker Coca-Cola (NYSE:KO) and credit service provider American Express (NYSE:AXP) were added to Berkshire’s portfolio in 1988 and 1991, respectively. Building on a previous annual letter to shareholders, Buffett points out that his company’s cost base for Coca-Cola and AmEx is about $1.3 billion for each company.
In his latest annual letter to shareholders, Buffett called Coca-Cola and American Express “undefined” holdings. These are companies with particularly strong branding and marketing that enjoy long periods of economic growth.
Warren Buffett has bought more than $77 billion worth of his favorite stocks since 2018
Collectively, Warren Buffett has invested approximately $63 billion in these top five holdings. While that may seem like a lot of money, it’s actually dwarfed by the amount of money he’s spent buying shares of his favorite stocks over the past six years.
What makes this purchasing activity somewhat mysterious is that it does not appear in Berkshire Hathaway’s quarterly F13s. In order to track the buying activity of Buffett’s favorite stock, you’ll need to look at the company’s quarterly operating results.
Toward the end of each quarterly report, just before the executive certifications, you will find complete details of stock repurchases made during the previous three months. That’s right…the Warren Buffett Company spent more money buying stocks than Apple, Chevron, Coca-Cola, American Express and Occidental, combinedIt’s Berkshire Hathaway!
Before mid-July 2018, Warren Buffett and the late Charlie Munger had their hands tied when it came to stock buybacks. Buybacks were only allowed if Berkshire’s shares fell to 120% or less of their book value (i.e., no more than 20% above the reported book value during the most recent quarter). At no time did Berkshire’s stock reach this threshold during the 2010s.
On July 17, 2018, Berkshire Hathaway’s board of directors adopted new measures that allowed Buffett and Munger to step off the proverbial bench and work their magic. Berkshire’s board has given the green light to share buybacks with no cap or end date as long as:
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Berkshire Hathaway has at least $30 billion in cash, cash equivalents and U.S. Treasuries on its balance sheet; And
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Warren Buffett believes that stocks are inherently cheap.
Since this change in July 2018, Warren Buffett has repurchased shares of his own company for 23 consecutive quarters. Including the $2.6 billion spent on buybacks in the first quarter, the Oracle of Omaha has repurchased more than $77 billion of Berkshire stock in less than six years, or $14 billion more than that. which was collectively spent on Apple, Chevron, Coca-Cola, AmEx, and Pétrole Occidental.
Since Buffett’s company does not pay dividends, a regular share buyback program is an easy way for the Oracle of Omaha to reward its shareholders in the long term. The constant repurchase of shares and reduction in the number of shares outstanding gradually increases the participation of long-term investors.
Additionally, companies with stable or growing net income typically see their earnings per share (EPS) increase as the number of shares outstanding decreases. With Berkshire’s cash on hand potentially approaching $200 billion this quarter, Buffett has every incentive to continue buying his favorite stocks.
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American Express is an advertising partner of The Ascent, a Motley Fool company. Sean Williams has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Apple, Berkshire Hathaway and Chevron. The Motley Fool recommends Occidental Petroleum. The Mad Motley has a disclosure policy.
Warren Buffett spent more to buy these stocks than Apple, Chevron, Coca-Cola, American Express and Occidental Petroleum combined! was originally published by The Motley Fool
