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

For about 60 years, berkshire hathaway (BRK.A -0.42%) (BRK.B -0.56%) CEO Warren Buffett is giving Wall Street a clinic.On the other hand, the benchmark S&P500 Since the “Oracle of Omaha” took over as CEO in the mid-1960s, total returns, including dividends, have reached just over 33,000%, and Berkshire’s Class A shares (BRK.A) have even more The total is soaring. As of the closing bell on February 28, 2024, it is over 5,000,000%. With this much outperformance, it will attract the attention of professional and individual investors.

Warren Buffett’s incredible track record is a big reason why Berkshire Hathaway gets talked about every time it files a Form 13F with the Securities and Exchange Commission. 13F gives investors an at-a-glance view of what Wall Street’s great money managers are buying and selling, and is available quarterly to institutions and investors with at least $100 million in assets under management. Submission is mandatory.

Berkshire Hathaway CEO Warren Buffett. Image source: Motley Fool.

Warren Buffett is expanding his core positions and increasing his stake in value stocks

Throughout 2023, Oracle of Omaha and its investment aides Todd Combs and Ted Weschler were very cautious about their purchases. One of the main holdings that continues to be added to with some regularity is energy stocks. western oil (Oxy 1.24%).

Considering Berkshire’s latest stock purchase in the first week of February, Buffett’s company has bought more than 248 million shares of Occidental Petroleum since the beginning of 2022. This is a roughly $15 billion position, with a total of $34 billion in energy stocks.including Berkshire’s position in chevron.

With 9% of Berkshire’s invested assets invested in two oil and gas stocks, it sends a very clear message that Berkshire’s brightest minds expect oil prices to remain high for a long time. . Global oil supplies remain tight due to years of capital shortages due to the COVID-19 pandemic, and there is a real possibility that spot crude oil head prices will rise further.

What makes Occidental Petroleum an interesting investment in the energy space is the breakdown of its revenue. Occidental derives the majority of its revenue from drilling, even though it is an integrated operator that derives some of its revenue from downstream chemical plants. It stands to benefit more than virtually any other integrated oil and gas company if the spot price of crude oil rises.

Beyond Occidental, we’ve also seen Warren Buffett and his team return to work as a satellite radio operator. SiriusXM Holdings (SIRI -3.39%). Although radio operators often rely heavily on advertising revenue to keep the lights on, Sirius XM has a number of competitive advantages that favor it over terrestrial and online radio companies. It should help you survive any economic situation.

Not surprisingly, Sirius XM is the only licensed satellite radio operator. This doesn’t mean there’s no competition for listeners, but it does give the company fairly strong subscription pricing power.

Perhaps even more important about Sirius XM is how the company generates revenue. Terrestrial and online radio providers rely on advertising revenue, but only 20% of SiriusXM’s revenue in 2023 will come from advertising. Meanwhile, a whopping 77% of SiriusXM’s revenue comes from subscription fees. Subscribers are less likely to cancel service during an economic downturn than companies are to drastically cut their advertising budgets.

SiriusXM is also historically cheap. The company’s stock currently trades at 13 times forward annual earnings, which is a 32% discount to the average forward annual earnings multiple over the past five years.

Image source: Getty Images.

Oracle of Omaha bought this stock worth $74 billion

Berkshire’s 13F has been telling an interesting story for over a year, but that’s just the way Buffett and his team have been net shorting the stock for the past five quarters. do not have On Berkshire’s 13th floor, it’s an even bigger problem.

These aren’t the stocks Warren Buffett wants to buy the most. apple, Occidental Petroleum, or any of the approximately 40 securities currently listed on the 13th floor of Berkshire’s Quarterly Files. The only way to find this mysterious stock that the Oracle of Omaha can’t stop buying is to dig into his company’s performance. Warren Buffett’s favorite stocks are those of none other than his own company, so this is where his quarterly stock buyback activity takes place. Don’t you just love a great plot twist?

Before July 2018, the rules governing Berkshire’s stock buyback program did not allow the then-powerful duo of Warren Buffett and Charlie Munger to come off the bench. Repurchases can only occur if Berkshire’s stock price falls below 120% of its book value (i.e., no more than 20% above its listed book value as of the end of its most recent quarter). Berkshire’s stock price never fell below this predetermined threshold, so there were no buybacks for many years.

On July 17, 2018, everything changed for Buffett, Berkshire, and the company’s shareholders. The company’s board modified the buyback rules to allow star players to “play the game.” No cap 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 stock is inherently undervalued. You can start stock buybacks.

During the quarter ending 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 marks the 22nd consecutive quarter that Buffett’s company has repurchased its own stock, bringing its total buybacks since July 2018 to more than $74 billion. To put this into context, Buffett and the late Charlie Munger spent about twice as much money buying Berkshire stock compared to the amount they spent buying Apple stock.

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

Additionally, companies like Berkshire Hathaway, whose operating profits tend to increase over time, should see their earnings per share increase significantly as the number of shares outstanding decreases. This only makes the stock more attractive to fundamentals-focused investors.

Buying back tens of billions of dollars in company stock makes it very clear that Buffett is betting on himself and the business he, Munger, Combs and Weschler have built for long-term success. .

With a record $167.6 billion in cash on hand and little value to pique the Oracle of Omaha and his team’s interest, buybacks of Warren Buffett’s favorite stocks will continue throughout the first quarter (and likely beyond). I hope that it will continue.