For more than a half century, Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%) CEO Warren Buffett has put on an investing clinic for Wall Street. Even though the Oracle of Omaha, as he's affably known, is just as fallible as any other investor, he's overseen a greater than 4,250,000% aggregate return in his company's Class A shares (BRK.A) since the mid-1960s. That compares to a total return, including dividends paid, of less than 30,000% for the benchmark S&P 500 over the same stretch.
In addition to his success as an investor, what makes Warren Buffett so special is his willingness to share his "recipe" for wealth creation. Buffett typically gravitates to brand-name, cyclical, dividend-paying companies with trusted management teams.
Mirroring the Oracle of Omaha's trading activity has been a path to riches for many investors. Thanks to required quarterly 13F filings, along with Form 4 filings in situations where Berkshire Hathaway holds at least a 10% stake in a public company, tracking Buffett's buying and selling activity is a relative breeze.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Warren Buffett has been adding to select core holdings in recent years
Although Buffett has frequently opined that investors should never "bet against America," he and his investing lieutenants, Ted Weschler and Todd Combs, have been net-sellers of equities over a nine-month stretch (Oct. 1, 2022 to June 30, 2023). Berkshire's three quarterly reports during this span show an aggregate of $33 billion in net-selling activity.
While the Oracle of Omaha may be pickier than normal about what he's currently buying, the past few 13Fs do point to pockets of optimism.
For instance, Buffett and his team have been steadfastly building up their company's stake in energy stock Occidental Petroleum (OXY -0.15%). Since the start of 2022, Buffett's company has purchased over 224 million shares of Occidental, which were worth about $14.7 billion, as of the closing bell on Oct. 17, 2023.
Though Berkshire Hathaway does outright own a handful of energy companies, Buffett has often shied away from investing in energy stocks. This sizable investment in Occidental appears to be a clear signal that Buffett and his lieutenants expect the spot price of crude oil to remain elevated, or perhaps increase further.
Despite Occidental Petroleum being an integrated energy company that also operates chemical plants, its revenue generation heavily skews toward drilling. If supply chain challenges for crude oil persist in the wake of the COVID-19 pandemic, Occidental could see a more sizable operating cash flow benefit than most oil and gas drillers.
Likewise, the Oracle of Omaha has continued to modestly add to Berkshire Hathaway's mammoth stake in tech stock Apple (AAPL -0.35%). The more than $162 billion stake Buffett's company holds in Apple accounts for nearly 47% of Berkshire Hathaway's invested assets.
Even though Warren Buffett couldn't tell his investors how an iPhone works, he's astute when it comes to observing and understanding consumer buying habits. Apple's ongoing innovation has allowed it to retain more than half of the smartphone market share in the U.S.
Meanwhile, CEO Tim Cook is overseeing the evolution of Apple into a platforms company. Becoming more reliant on a variety of subscription services should help smooth out the revenue fluctuations often observed during major iPhone replacement cycles. Further, subscription services should steadily lift Apple's operating margin and keep its customer base loyal to the brand.
Image source: Getty Images.
This is the stock Warren Buffett is likely buying right now
Although Form 13Fs provide a detailed snapshot of what Wall Street's most successful money managers have been buying and selling, these under-the-hood looks come with a drawback: They're usually more than six-weeks old, once released. In other words, investors may not be seeing what Warren Buffett is up to until weeks or months after the fact.
The next round of 13Fs will be filed with the Securities and Exchange Commission in mid-November and cover trading activity during the third quarter (July 1-Sept. 30). But given the basis of evidence we have as investors, there's one stock Warren Buffett almost assuredly bought in the third quarter, and is virtually guaranteed to be buying in the fourth quarter -- and you won't find it listed on the company's 13Fs. This mystery stock is none other than Buffett's own company, Berkshire Hathaway.
Prior to July 17, 2018, the only way buybacks could be given a green light at Berkshire Hathaway was if shares of the company traded at or below 120% of book value (i.e., no more than 20% above their book value). For well over five years leading up to this mid-July date in 2018, shares of Berkshire Hathaway never fell below this line in the sand. Ergo, no share repurchases were undertaken.
On July 17, 2018, Berkshire Hathaway's board amended its share repurchase program to allow Warren Buffett and executive vice chairman Charlie Munger to "get in the game." The new criteria simply stated that if Berkshire has at least $30 billion in cash, cash equivalents, and Treasury securities on its balance sheet, and Buffett and Munger agree that shares of their company are intrinsically cheap, repurchases can continue with no cap.
In the 20 quarters since Berkshire's board amended its share repurchase policy, the Oracle of Omaha and Charlie Munger have OK'd more than $71 billion worth of buybacks. More importantly, they've repurchased shares of Berkshire Hathaway 20 out of 20 quarters. With Berkshire Hathaway's cash pile soaring above $147 billion, as of June 30, it's only logical to expect Buffett and Munger to deploy at least some additional capital into buybacks.
As a reminder, buybacks can reduce the number of shares outstanding, which for companies with steady or growing net income should lead to higher earnings per share (EPS). A steady increase in EPS is an easy way to add luster to an already attractive stock.
Share repurchases are also Warren Buffett's way of rewarding his investors. Since Berkshire Hathaway doesn't pay a dividend, reducing the company's outstanding share count over time via buybacks is incrementally increasing the ownership stakes of the company's longtime shareholders.
If there's one stock Warren Buffett is buying right now, the evidence virtually guarantees it's Berkshire Hathaway.
