For nearly six decades as CEO of conglomerate Berkshire Hathaway (BRK.A) (BRK.B 5.36%), Warren Buffett has been dazzling Wall Street with his investing prowess. Although Buffett is fallible just like the rest of us, he's overseen a greater than 4,200,000% aggregate return in his company's Class A shares (BRK.A) since taking over Berkshire Hathaway in the mid-1960s. Meanwhile, the benchmark S&P 500 hasn't even reached a cumulative 30,000% total return, including dividends, over the same stretch.
Given the Oracle of Omaha's affinity for generating long-term profits, professional and everyday investors often track his buying and selling activity like hawks. Thankfully, Form 13 filings make mirroring Buffett's trades relatively simple.
A 13F is a required quarterly filing by money managers with at least $100 million in 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 up 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've nevertheless been big-time buyers of stocks over longer periods. In fact, Buffett has stated on multiple 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 in a number of top ideas.
For example, an estimated $36.3 billion has been invested in Berkshire Hathaway's top holding, tech stock Apple (AAPL -0.33%), since the first quarter of 2016. The amount of capital deployed into Apple shouldn't be a surprise, given that Buffett has referred to the tech company as "a better business than any we own." It's a strong statement, considering that Berkshire owns a leading railroad (BNSF) and a mainstay insurance company (GEICO).
Aside from being viewed as the world's most valuable brand, Apple's biggest advantage is its innovation. The iPhone has been on the cutting edge of innovation since its debut in 2007. Since upgrading to 5G-capable iPhones in late 2020, Apple has controlled around half, if not more, of the U.S. smartphone market.
To boot, Apple's capital-return program is unmatched. It's set to return $15 billion to its shareholders as a dividend over the next 12 months. The company also has repurchased approximately $600 billion worth of its common stock since the start of 2013.
But Apple isn't the only big-name company that's generating a lot of attention from Warren Buffett and his investment lieutenants. Bank of America (BAC 8.43%) and Chevron (CVX 2.81%) have estimated cost bases of $26.5 billion and $15.6 billion, respectively, according to data from 13F aggregate WhaleWisdom.com.
The Oracle of Omaha absolutely loves the cyclical nature of bank stocks, which helps explain why more than $26 billion has been put to work in shares of Bank of America. Further, BofA is the most interest-rate sensitive of the U.S. money-center banks. With the Federal Reserve raising interest rates at the fastest clip in more than four decades, no large bank has benefited more (in the form of higher net-interest income) than Bank of America.
Meanwhile, Buffett's sizable bet on Chevron indicates his expectation that crude oil prices are likely to remain elevated. Although Chevron generates its highest margins from its drilling segment, it's an integrated energy company that can thrive in most economic climates. If the spot price for crude were to decline, Chevron could rely on the predictability of cash flow from its transmission pipelines, as well as its downstream segments (chemical plants and refineries), which typically benefit from lower input costs.
Warren Buffett has piled more than $71 billion into one stock in just five years
Apple, Bank of America, and Chevron collectively accounted for almost 62% of Berkshire Hathaway's $344 billion in invested assets, as of the closing bell one week ago (Oct. 13, 2023). But you might be surprised to learn that none of these three stocks represents Warren Buffett's biggest investment.
Over the past five years, the Oracle of Omaha has bought more than $71 billion worth of a single stock -- and the kicker is, you won't find it listed on Berkshire Hathaway's quarterly 13F filings.
To put into context just how large this aggregate purchase is, consider what Buffett could have done with $71 billion in relation to the high-flying, innovation-driven Nasdaq 100. The Nasdaq 100 is comprised of the 100 largest non-financial companies that are listed on the Nasdaq exchange.
As of the closing bell on Oct. 13, 60 of these 100 companies had market caps of less than $71 billion. Warren Buffett and his team could have purchased any of these 60 potential outperformers but chose, instead, to pile more than $71 billion of Berkshire Hathaway's capital into a single stock.
This stock that has been purchased for 20 consecutive quarters by the Oracle of Omaha is (drumroll)... Berkshire Hathaway. That's right -- Buffett has OK'd more than $71 billion in share repurchases over a five-year stretch.
Prior to July 17, 2018, share buybacks were only allowed if Berkshire Hathaway's shares dipped to or below 120% of book value (i.e., no more than 20% above book value). For more than a half-decade prior to mid-2018, no share repurchases were completed because Berkshire's stock never fell to or below this predetermined mark.
On July 17, 2018, Berkshire Hathaway's board of directors enacted new share-repurchase rules designed to get their dynamic duo of Warren Buffett and Charlie Munger off the sidelines. 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 shares of the company are intrinsically cheap, buybacks can continue with no ceiling.
Since Berkshire Hathaway doesn't pay a dividend, repurchases serve as the primary means to reward long-term shareholders -- in case a 19.8% annualized return for the company's Class A shares (BRK.A) over nearly six decades wasn't good enough. Reducing the outstanding share count through buybacks increases the ownership stakes of existing shareholders and can provide a healthy boost to Berkshire Hathaway's earnings per share.
To boot, buying back more than $71 billion worth of his own company's stock in just five years is a resounding endorsement by Warren Buffett of the company he and his team have built. Although Berkshire Hathaway does have down years from time to time, its portfolio and owned assets are heavily weighted toward cyclical businesses. Since recessions are considerably shorter than periods of economic expansion, Berkshire Hathaway is ideally positioned for long-term success.