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Warren Buffett Acquires $549 Million Stake in Kroger

By Rich Duprey - Feb 18, 2020 at 1:53PM

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The purchase makes the Berkshire Hathaway one of the supermarket chain's 10 biggest shareholders.

Warren Buffett went grocery shopping the other day and ended up spending half a billion dollars. Berkshire Hathaway (BRK.A 1.69%) (BRK.B 1.64%) revealed after the stock market closed on Friday that it had spent $549 million to acquire nearly 19 million shares of grocery store chain Kroger (KR 1.71%), the largest supermarket operator in the country.

The tranche of stock amounts to about a 2.3% ownership stake in the company, and makes Berkshire one of the top 10 shareholders in the grocer.

Warren Buffett.

Image source: The Motley Fool.

A simple business in a complicated world

The purchase was very much in keeping with the Oracle of Omaha's traditional investing strategy. Although in recent years, he has begun acquiring shares of tech companies, which he once avoided because he said he didn't understand them, and airlines, which he long derided as money-losing operations, supermarkets are right in his classic wheelhouse.

Despite its thin margins, Kroger is the sort of consumer-oriented business that customers return to again and again. Buffett famously owns a sizable stake in Coca-Cola, and also has positions in Kraft Heinz and Mondelez International.

Indicating Buffett's knowledge has been updated, Berkshire Hathaway acquired a $900 million stake in Amazon.com, which has been responsible for creating an upheaval in the businesses of many companies he owns. It's also growing its presence in groceries.

While Kroger has struggled for several years to respond to the twin threats of Amazon and Walmart, its investments in curbside grocery pickup and home delivery have improved its prospects. Kroger's stock was trading more than 5% higher around 1:45 p.m. Tuesday after the long holiday weekend.

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Stocks Mentioned

Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$415,850.00 (1.69%) $6,900.00
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$277.50 (1.64%) $4.48
The Kroger Co. Stock Quote
The Kroger Co.
KR
$48.14 (1.71%) $0.81

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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