When Berkshire Hathaway (BRK.A -0.59%) (BRK.B -0.74%) CEO Warren Buffett buys a stock, Wall Street and investors wisely pay close attention. That's because riding the Oracle of Omaha's coattails has been a very profitable strategy for decades.
Since taking the reins as CEO in 1965, Buffett has overseen the creation of more than $645 billion in value for shareholders, as well as delivered an aggregate return on the company's Class A shares (BRK.A) of 3,641,613%. This works out to a 20.1% average annual return over 57 years, and is effectively double the annualized total return of the benchmark S&P 500, including dividends, over the same stretch.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Here's the full rundown of what Buffett has been buying
Aside from Berkshire Hathaway's annual shareholder meeting and the letter Buffett writes to shareholders each year, the most-anticipated event is the company's quarterly 13F filing with the Securities and Exchange Commission (SEC). A 13F gives investors an under-the-hood look at what the most successful money managers bought, sold, and held in the most-recent quarter. It's a required filing by money managers with at least $100 million in assets under management.
With all three of the major U.S. stock indexes entering correction territory or a bear market in the first quarter, Buffett and his investment team were quite busy. More than $50 billion in Berkshire's available capital has been put to work since the year began. Based on the company's mid-May 13F filing, as well as other SEC filings, Buffett has overseen the purchase of the following 16 stocks since 2022 began:
- HP (HPQ -2.00%): 120,952,818 shares
- Chevron (CVX -0.86%): 120,933,081
- Paramount Global (PARA -0.55%): 68,947,760
- Citigroup (C -1.88%): 55,155,797
- Activision Blizzard (ATVI): 49,657,101
- Ally Financial (ALLY -1.72%): 8,969,420
- Celanese (CE -0.17%): 7,880,998
- Occidental Petroleum (OXY -0.97%): 5,887,618
- Formula One Group (FWON.K 1.00%): 5,603,705
- Floor & Décor (FND -1.89%): 3,936,291
- Apple (AAPL -2.19%): 3,787,856
- McKesson (MCK -0.06%): 2,921,975
- General Motors (GM -0.91%): 2,045,847
- Markel (MKL -0.38%): 420,293
- RH (RH -1.43%): 353,453
- Berkshire Hathaway: 2,005 BRK.A shares and 6,824,671 BRK.B shares
Value stocks are a Buffett specialty
If there's one prevailing theme with the vast majority of Buffett's buying activity through the first five months and change of 2022, it's that value is paramount (no pun intended given the purchase of shares of Paramount). Buying highly profitable, time-tested businesses at a discount has been the Oracle of Omaha's priority.
For instance, Berkshire Hathaway took a greater-than-11% stake in personal computing and printing solutions company HP. The growth heyday for HP has long since passed. But it remains exceptionally profitable and is valued at roughly eight times forecast earnings for this year and 2023. Consumer and enterprise demand for PCs doesn't vacillate much, which makes HP a relatively safe bet in a volatile market.
The same can be said for auto giant General Motors, which is trading at just five times Wall Street's forecast earnings for this year. Despite numerous headwinds, such as supply chain disruptions caused by the COVID-19 pandemic, General Motors looks to have a sizable growth runway thanks to the industry's ongoing shift to electric vehicles (EVs). GM plans to invest $35 billion in EVs, autonomous vehicles, and batteries through the midpoint of the decade.
Image source: Getty Images.
Banks and energy stocks are back in focus
It's no secret that the Buffett aligns Berkshire Hathaway's portfolio to take advantage of cyclical upswings in the U.S. and global economy. After all, economic expansions last disproportionately longer than recessions. This is why banks and energy stocks have been popular buys for Buffett in 2022.
Although it's possibly the least-loved money-center bank, Buffett and his team piled into Citigroup during the first quarter. While Citi does have international headwinds and has faced its fair share of litigation, the company also happens to be one of the cheapest relative to book value among big-bank stocks. With higher interest rates on the horizon, banks are set to enjoy a windfall of added net interest income from outstanding variable-rate loans.
As for energy stocks, Buffett's enormous bets on Chevron and Occidental Petroleum likely signify his expectation that oil and natural gas prices will remain elevated for some time. A lack of upstream investment during the pandemic, coupled with supply disruption tied to Russia's invasion of Ukraine, should allow integrated oil and gas companies like Chevron and Occidental to reap the rewards of multidecade highs for oil and natural gas.
There can never be enough Apple
Buffett's buying activity to begin 2022 also included adding more Apple shares. As of the end of last week, Apple made up a whopping 38.2% of Berkshire's invested assets.
Buffett views Apple as one of Berkshire's pillars and value determinants. It's also a company that checks all the appropriate boxes in his eyes. It has an extremely well-known brand, as well as highly loyal customer base, and its innovation has driven the company to successively higher sales and profits. As of the first quarter, Counterpoint Research notes that the iPhone accounted for half of all smartphone share in the United States.
But Apple is also a company in transition. CEO Tim Cook is overseeing an operating shift that places added emphasis on subscription services. As subscription revenue grows into a larger percentage of total sales, Apple should benefit from higher margins, an even more loyal customer base, and less revenue lumpiness associated with product replacement cycles.
I'd also be remiss if I didn't point out that Apple has repurchased nearly $500 billion worth of its common stock since the beginning of 2013. Having a sizable capital return program is an easy way to get on Buffett's good side.
Buffett's favorite company is, arguably, his own
But perhaps the least surprising Buffett buy of all -- and one you won't find in the 13F filing -- is that of his own company. Berkshire Hathaway's first-quarter results show that Buffett and his right-hand man, Charlie Munger, oversaw the repurchase of 2,005 Class A shares and more than 6.8 million Class B shares.
Following more than a half-decade without any stock buybacks, Buffett and Munger have had a field day since Berkshire's board of directors changed the necessary parameters for share repurchases. Since mid-July 2018, over $61 billion worth of Berkshire Hathaway stock has been bought back.
As a reminder, repurchasing stock often has a positive impact on the value of a company's remaining shares. If a company's net income is steady or growing over time, having fewer shares outstanding should result in higher earnings per share. Thus, share buybacks can make a company appear more attractive on a valuation basis.
