If billionaire Warren Buffett's nearly six decades in the CEO chair of Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%) have proved anything, it's that he has a knack for building wealth. Berkshire Hathaway's Class A shares (BRK.A) have doubled up the annualized total return, including dividends, of the benchmark S&P 500 since the mid-1960s (19.8% vs. 9.9%).
But just because billionaires find success on Wall Street, it doesn't mean they'll all see eye to eye.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Since the start of 2023, Buffett and his investing lieutenants (Todd Combs and Ted Weschler) have bought more than a half-dozen stocks for Berkshire's nearly $354 billion investment portfolio. But while Buffett has been buying, other billionaire money managers have been selling. Here are three stocks Buffett is quite enamored with that have other billionaires heading for the exit.
Apple
One stock Warren Buffett absolutely can't get enough of is Apple (AAPL -0.35%), which he dubbed as a "better business than any we own" during Berkshire Hathaway's annual shareholder meeting. During the first quarter, 13F filings show that Buffett's company added more than 20.4 million shares of the tech giant, which increased Berkshire's position to almost 915.6 million shares.
However, most billionaire investors were lightening their load on Apple to begin 2023. All told, five billionaire investors were busy selling as Buffett and his team were buying, including:
- Ken Fisher at Fisher Asset Management
- Jim Simons at Renaissance Technologies
- Ken Griffin at Citadel Advisors
- Israel Englander at Millennium Management
- Jeff Yass at Susquehanna International
In the same orders as they've been listed above, these billionaires dumped approximately 7.52 million shares, 7.09 million shares, 5.12 million shares, 2.22 million shares, and 1.1 million shares of Apple in the March-ended quarter.
The likeliest reason we've seen a number of prominent billionaire fund managers head for the exit is Apple's valuation. Even with historically high inflation as a tailwind, modest sales of the iPhone 14 and weaker personal computer sales of Apple's Mac are expected to result in Apple's fiscal 2023 sales and profits declining by a low-single-digit percentage.
Whereas Apple had pretty consistently been valued in the low-to-mid-teens, with regard to its price-to-earnings ratio, between 2013 and 2018, investors are now paying 31 times Wall Street's consensus earnings in fiscal 2023 for a company that isn't growing.
On the flipside, Apple has, historically, led with its innovation. Apple's steadily growing services segment could eventually overtake iPhone as the company's biggest breadwinner.
Furthermore, Apple's capital-return program is unmatched. While it's dividend yield is nothing to look at, its nominal-dollar annual payout is one of the biggest in the world. Additionally, the company has repurchased $586 billion worth of its common stock over the last 10 years.
Occidental Petroleum
A second stock the Oracle of Omaha has been buying hand over fist for Berkshire Hathaway's investment portfolio that other billionaire investors aren't too keen on is oil stock Occidental Petroleum (OXY -0.15%). Since the start of 2022, Buffett and his lieutenants have built up Berkshire's common stock position in Occidental to just shy of 222 million shares.
But based on Form 13Fs filed with the Securities and Exchange Commission in the first quarter, three billionaires were active sellers of Occidental stock, including:
- Ken Griffin of Citadel Advisors
- Jim Simons of Renaissance Technologies
- Steven Cohen of Point72 Asset Management
Griffin's fund dumped roughly 2.63 million shares; Simons' fund sold its entire 2.43-million-share stake; and Cohen's Point72 jettisoned close to 1.3 million shares of Occidental Petroleum.
There look to be two reasons why we're seeing this divergence in outlooks between Warren Buffett and other billionaire investors. First, there's Occidental's revenue stream. Even though it's an integrated operator -- i.e., it owns downstream assets, such as chemical plants, in addition to being a driller -- the company generates the bulk of its revenue from drilling. If the spot price of West Texas Intermediate (WTI) oil declines, Occidental's operating cash flow will be more vulnerable than most other drillers.
The other concern looks to be Occidental's balance sheet. Even with WTI surging in 2022, which allowed the company to pay down some of its debt, Occidental still closed out March 2023 with $19.6 billion in net debt.
The upside that Warren Buffett and his team likely see in Occidental Petroleum has to do with the globally challenged energy supply chain. Russia's invasion of Ukraine, combined with three years of capital underinvestment due to pandemic-related uncertainties, should make it difficult to increase global oil supply anytime soon. A market where the supply for oil is constrained is usually positive for the spot price of crude oil -- and, as noted, Occidental's operating cash flow is heavily weighted to its higher-margin drilling segment.
Image source: Getty Images.
Paramount Global
The third stock Warren Buffett has been buying hand over fist while other billionaire investors are selling is legacy media company Paramount Global (PARA -2.22%). Berkshire Hathaway added a modest 93,786 shares of Paramount in the March-ended quarter, which brought its stake up to roughly 93.73 million shares.
As Buffett and his team have been mashing the buy button, three of the brightest billionaire money managers on Wall Street have been reducing their positions in Paramount, including:
- Jim Simons of Renaissance Technologies
- Ken Griffin of Citadel Advisors
- Israel Englander of Millennium Management
In order, Simons, Griffin, and Englander oversaw the sale of approximately 2.87 million shares, 2.31 million shares, and 2.17 million shares of Paramount Global stock in the March-ended quarter.
If you're looking for a reason to be pessimistic about Paramount, ad spending is the elephant in the room. The traditional TV segments of legacy media companies are still notably reliant on advertising revenue. However, ad spending has been paring back for more than a year in anticipation of a weaker economic outlook caused by rapidly rising interest rates.
The other potential cause of concern could be Paramount's sizable direct-to-consumer losses. Despite rapidly growing the subscriber base of Paramount+ and even seeing ad revenue surge by a double-digit percentage in its streaming segment, mounting losses have fundamentally focused investors worried.
There is, however, a potential light at the end of the tunnel for Paramount. In addition to Paramount+ steadily adding subscribers, Pluto TV reached 80 million monthly active users in the March-ended quarter. Pluto TV is the nation's No. 1 free, ad-supported streaming service. If U.S. economic growth were to derail, Pluto TV is where viewers may turn.
Among Buffett's top buys of late, Paramount Global is, to me, the most attractive of the bunch.
