As group CEO for nearly six decades Berkshire Hathaway (BRK.A -0.50%) (BRK.B -0.65%), Warren Buffett is dazzling Wall Street with his investing prowess. Although Buffett is just as wrong as the rest of us, he has seen a total return of more than 4,200,000% in his company’s Class A shares (BRK.A) since acquiring Berkshire Hathaway in the mid-1960s. Meanwhile, the benchmark S&P 500 The cumulative total return including dividends over the same period has not even reached 30,000%.Thank you for reading this post, don't forget to subscribe!
Given the Oracle of Omaha’s penchant for generating long-term profits, professional and everyday investors often keep an eye on its buying and selling activity like hawks. Thankfully, Form 13 filing makes it relatively simple to reflect Buffett’s trades.
13F is a required quarterly filing by wealth managers with at least $100 million of assets under management. It’s effectively a snapshot that allows investors to see what Wall Street’s smartest investors have been buying and selling in the most recent quarter.
Warren Buffett and his team have built Berkshire’s $344 billion portfolio over time
Although Warren Buffett and his investment lieutenants, Ted Weschler and Todd Combs, have been net sellers of equities since the beginning of October 2022, they have also been big buyers of stocks over the long term. Indeed, Buffett has said on several occasions that he “wouldn’t bet against America.”
A quick look at Berkshire Hathaway’s $344 billion investment portfolio shows that the Oracle of Omaha and his team have put big bucks to work on many top ideas.
Berkshire Hathaway’s top holding, for example, has an estimated $36.3 billion invested in tech stocks Apple (AAPL -0.22%), from the first quarter of 2016. The amount of capital pumped into Apple should be no surprise, given that Buffett has referred to the tech company as “a better business than any business we’ve owned.” That’s a strong statement, considering that Berkshire owns a leading railroad (BNSF) and a major insurance company (GEICO).
Apart from being seen as the world’s most valuable brand, Apple’s biggest advantage is its innovation. The iPhone has been at the forefront of innovation since its introduction in 2007. Since upgrading to 5G-capable iPhones in late 2020, Apple has controlled nearly half, if not more, of the US smartphone market.
To boot, Apple’s capital-return program is unmatched. It is set to return $15 billion in dividends to its shareholders over the next 12 months. The company has also repurchased approximately $600 billion of its common stock since the beginning of 2013.
But Apple isn’t the only big-name company getting a lot of attention from Warren Buffett and his investment colleagues. Bank of America (BAC -1.28%) and beam The 13F Aggregate (CVX 0.11% ) has an estimated cost base of $26.5 billion and $15.6 billion, respectively, according to data from WhaleWisdom.com.
The Oracle of Omaha absolutely loves the cyclical nature of bank stocks, which helps explain why there is more than $26 billion invested in Bank of America shares. Additionally, BofA is the most interest rate sensitive among US money-center banks. With the Federal Reserve raising interest rates at the fastest pace in more than four decades, no major bank has benefited more (in terms of higher net-interest income) than Bank of America.
Meanwhile, Buffett’s big bet on Chevron reflects his expectation that crude oil prices are likely to remain high. Although Chevron generates most of its margins from its drilling segment, it is an integrated energy company that can thrive in most economic environments. If the spot price of crude oil declines, Chevron can rely on predictable cash flows from its transmission pipelines, as well as its downstream segments (chemical plants and refineries), which generally benefit from lower input costs. .
Warren Buffett has invested more than $71 billion in one stock in just five years
As of the closing bell a week ago (October 13, 2023), Apple, Bank of America and Chevron collectively account for about 62% of Berkshire Hathaway’s $344 billion of invested assets. But you might be surprised to learn that none of these three stocks represent Warren Buffett’s biggest investment.
Over the past five years, the Oracle of Omaha has bought more than $71 billion worth of single stock — and what’s more, you won’t find it listed in Berkshire Hathaway’s quarterly 13F filings.
To put into context how big this overall purchase is, consider what Buffett could do with $71 billion in relation to high-flying, innovation-driven nasdaq 100, The Nasdaq 100 consists of the 100 largest non-financial companies listed. nasdaq exchange.
At the closing bell on October 13, 60 of these 100 companies had a market capitalization of less than $71 billion. Warren Buffett and his team could have bought any of these 60 potential outperformers, but instead, they decided to pool more than $71 billion of Berkshire Hathaway’s capital into a single stock.
The stock bought by the Oracle of Omaha for 20 consecutive quarters is (drumroll)… Berkshire Hathaway. That’s right – Buffett has paid out more than $71 billion in share repurchases over a five-year period.
Before July 17, 2018, share buybacks were allowed only if Berkshire Hathaway’s shares fell to or below 120% of book value (i.e., no more than 20% above book value). For more than half a decade before mid-2018, no share repurchases were completed as Berkshire’s stock never fell to or below this predetermined mark.
On July 17, 2018, Berkshire Hathaway’s board of directors created new share-repurchase rules designed to sideline Warren Buffett and his dynamic duo of Charlie Munger. 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 feel the company’s shares are intrinsically cheap, buybacks can continue without limit.
Since Berkshire Hathaway doesn’t pay a dividend, buybacks serve as the primary means of rewarding long-term shareholders — if the 19.8% annual return over nearly six decades wasn’t good enough for the company’s Class A shares (BRK.A). . Sufficient. Reducing the outstanding share count through buybacks increases the ownership stake of existing shareholders and could lead to healthy growth in Berkshire Hathaway’s earnings per share.
To start, buying back over $71 billion worth of his own company’s stock in just five years is a fantastic endorsement by Warren Buffett of the company he and his team have built. Although Berkshire Hathaway suffers from periodic downturns, its portfolio and owned assets are heavily weighted toward cyclical businesses. Because recessions are much less frequent than periods of economic expansion, Berkshire Hathaway is ideally positioned for long-term success.