For the better part of the past six decades, Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%) CEO Warren Buffett has been running circles around Wall Street. The Oracle of Omaha, as he's affably known, has overseen a nearly 20% annualized return in his company's Class A shares (BRK.A) since taking the CEO role in the mid-1960s. On an aggregate basis, we're talking about a gain of 4,355,584%, as of the closing bell on Dec. 8.
When you double up the annualized total return of the benchmark S&P 500 over nearly 60 years, you're going to get noticed. It's why professional and everyday investors closely monitor Berkshire Hathaway's quarterly 13F filings to uncover which stocks the Oracle of Omaha and his team of investors have been buying and selling.
As we prepare to close the curtain on 2023 in roughly two weeks, it's readily apparent that one highly regarded stock is a virtual lock to be purchased by Warren Buffett throughout 2024.
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Buffett and his team are piling into some familiar names
A quick look at Berkshire Hathaway's 13Fs over the past couple of years reveal some popular names that Buffett and his investing lieutenants, Todd Combs and Ted Weschler, have piled into.
Tech stock Apple (AAPL -0.35%) is an ideal example of a great business that Buffett and his aides have the utmost faith in. Apple accounts for nearly half of Berkshire's $365.5 billion investment portfolio.
Since opening a position in Apple during the first quarter of 2016, Buffett and his team have added to their stake on numerous occasions. In fact, Buffett stated during Berkshire's annual shareholder meeting in May that Apple is "a better business than any we own." It's an incredibly strong statement, given that Berkshire owns well-regarded insurer GEICO and highly successful railroad BNSF, among roughly five dozen other businesses.
Buffett's belief that Apple is Berkshire's best business likely has to do with the company's innovation-driven operating model. It's consistently No. 1 in U.S. smartphone market share, and it has a loyal base of consumers that were drawn in by its physical products (iPhone, Mac, and iPad). To boot, CEO Tim Cook is overseeing a natural evolution of the company's operating model that will have Apple focused on higher-margin subscription services.
The Oracle of Omaha is also, undoubtedly, a huge fan of Apple's capital-return program. The largest publicly traded company by market cap in the U.S. is returning $15 billion a year to shareholders via its dividend, and it's repurchased more than $600 billion worth of its common stock since the start of 2013. These buybacks are increasing Berkshire's stake in Apple without Buffett or his "lieutenants" having to lift a finger.
Another familiar name Warren Buffett and his team have been piling into is energy stock Occidental Petroleum (OXY -0.15%). Since the start of 2022, Berkshire Hathaway has added more than 228 million common shares of Occidental. This is on top of the $10 billion in preferred stock in Occidental (yielding 8%) Buffett's company received in 2019.
Having close to $13 billion invested in Occidental common stock is a pretty clear indication that Buffett and his closest investing confidants believe the spot price of oil will remain elevated or head even higher. Russia's ongoing war with Ukraine, along with multiple years of reduced capital investment by energy majors because of the COVID-19 pandemic, has led to tight oil supply worldwide. Anytime the supply of a major commodity is constrained, there's a good likelihood the price of said commodity will increase.
What's noteworthy about Occidental Petroleum compared to other integrated oil and gas operators is that it generates most of its revenue from its drilling operations. This is to say that its operating performance is considerably more sensitive to changes in the spot price of crude oil than other integrated energy companies. If the spot price of crude oil remains high, Occidental will disproportionately benefit from it.
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Meet the one stock Warren Buffett is virtually guaranteed to buy in 2024
Over the past two years, Apple and Occidental Petroleum have been regularly purchased stocks for Buffett and his team. But if I had to wager on which stock is likeliest to be bought by Warren Buffett in 2024, neither of these two companies would top the list.
Interestingly enough, the stock Warren Buffett is virtually guaranteed to buy in 2024 isn't going to be found on Berkshire Hathaway's quarterly 13Fs. Instead, you'll find evidence of these purchases toward the tail end of the company's quarterly operating results. That's right -- the company that's a practical lock to be bought by Buffett in 2024 is... Berkshire Hathaway.
Prior to July 17, 2018, Berkshire Hathaway had a share repurchase policy in place that only allowed for buybacks if Berkshire's stock fell to or below 120% of book value (i.e., no more than 20% above stated book value). At no point for well over a half-decade prior to this date did Berkshire Hathaway's stock reach this threshold. As a result, Buffett was never able to pull the trigger on any buybacks.
On July 17, 2018, Berkshire's board passed new measures that allowed its dynamic duo -- Warren Buffett and the late, great Charlie Munger -- to get off the proverbial bench and repurchase their company's stock more frequently. In order for buybacks to take place:
- Berkshire Hathaway needed to have at least $30 billion in combined cash, cash equivalents, and U.S. Treasuries on its balance sheet; and
- Warren Buffett and Charlie Munger needed to agree that Berkshire's stock was intrinsically cheap.
Admittedly, I'm not entirely certain who, if anyone, will step in and play the sidekick role to Warren Buffett when it comes to share repurchases moving forward. What I do know is that the Oracle of Omaha has overseen the repurchase of more than $72 billion worth of Berkshire Hathaway stock since July 2018. Further, Buffett has bought back his own company's stock for 21 consecutive quarters, through September 2023.
As of the end of the most recent quarter, Berkshire's cash position ballooned to an all-time record $157.2 billion. With little in the way of value tickling the fancy of Buffett, Weschler, or Combs, it's a virtual guarantee that at least some of this cash will be deployed to repurchase Berkshire's common stock in 2024.
To add, Berkshire Hathaway doesn't pay a dividend. The way Buffett regularly rewards his long-term shareholders is through buybacks. Reducing the number of outstanding shares over time should increase the ownership stakes of Berkshire's shareholders, much in the same way that Apple's buyback program has grown Berkshire's stake in the company.
Furthermore, reducing the outstanding share count of a company with steady or growing net income can increase earnings per share (EPS) over time. This helps Berkshire Hathaway become even more fundamentally attractive to value-seeking investors.
