Most institutional investors try not to purchase more than a 10% stake in a company because it comes with additional regulatory reporting requirements that can be burdensome. But that hasn't stopped Warren Buffett's company Berkshire Hathaway (BRK.A -0.72%) (BRK.B -0.75%) from crossing the 10% threshold on about a dozen stocks in Berkshire's massive roughly $338 billion equities portfolio.
Buffett and Berkshire's motto has always been to go all in when you see a good opportunity, so it's no surprise to see Berkshire do this, not that executives at the company aren't also cognizant of the 10% rule. Here are three stocks in which Berkshire owns more than a 23% stake.
1. Davita
Berkshire began purchasing stock in the integrated healthcare delivery company Davita (DVA) in 2011 and currently owns about $3 billion worth of shares, which equates to nearly 40% of all outstanding shares in the company. Still, the $3 billion position is relatively small overall and only constitutes about 0.90% of Berkshire's portfolio.
Davita provides dialysis to people dealing with kidney failure. While most of them would like to get a kidney transplant, this isn't always an option because there are only so many organ donors and a long list of people that need new kidneys, so dialysis becomes a critical and necessary option for many patients. This makes the company essential in many people's lives, which is why it has a business model that Buffett seems to like. Public and private insurance covers the cost of these treatments.
Like a lot of other businesses, Davita has been dealing with an abnormally strong labor market, which has driven up labor costs. While there has been some improvement, management still expects labor costs to continue to be higher than pre-pandemic levels. However, the company also recently rolled out its cloud-based next-generation IT system, which provides fluid access to patient records as well as better data and analytics that can make a big difference in patient care. Given how critical the company's services are, Davita can also be a good stock to own during a recession, in which the economy could very find itself in the near future.
2. Kraft Heinz
Buffett and Berkshire's history with Kraft Heinz (KHC -1.05%) is pretty well-known at this point. In 2013, Buffett teamed up with 3G Capital to purchase the iconic food company Heinz for $23 billion. Two years later, they merged Heinz with Kraft Foods to create Kraft Heinz, which debuted at $71 per share.
Since then, things haven't gone exactly how Buffett planned, with Kraft Heinz currently trading at around $39 per share. Still, Buffett hasn't given up on the company, and Berkshire still owns roughly 26.5% of all outstanding shares. The position makes up 3.8% of Berkshire's portfolio.
Kraft Heinz performed well last year, with shares gaining 13.4% against the broader market's nearly 20% loss. Furthermore, Kraft Heinz has done a good job of reducing debt from more than $32 billion in 2016 to just about $20 billion now.
Being a consumer staples company with a strong brand, Kraft Heinz is another good one to own during a recession because some of its major products, like baked beans and ketchup, are still likely to continue to be a part of a consumer's grocery shopping list during a more challenging economy. Furthermore, consumers may also eat out less during a recession and could also be more likely to buy some of the cheaper pre-made food that Kraft Heinz is famous for. The company also currently pays more than a 3.9% annual dividend yield.
3. Occidental Petroleum
Another company Berkshire has been aggressively buying is the large domestic oil producer Occidental Petroleum (OXY -0.30%), in which Berkshire now owns a 23.6% stake, equating to 4% of its total portfolio.
Berkshire began ratcheting up its purchases in Occidental in 2022, right around the time that Russia was contemplating its invasion of Ukraine. When Russia officially invaded, Berkshire continued to purchase stock in the company when embargoes on Russian oil really put a dent in the global oil supply and made U.S. oil companies very valuable. Since the beginning of 2022, Occidental's stock is up about 120%.
The company says it can break even and sustain its dividend with the price of oil at $40 per barrel. Currently, oil prices hover around $81 per barrel. Occidental also recently increased its dividend by 38% and launched a new $3 billion share repurchase program. Many investors believe that the global oil supply is only going to get tighter and drive oil prices higher. Buffett apparently wants to be prepared for this situation.
