You might not realize it, but this could arguably be described as the most important week of data on Wall Street for the first quarter -- and this has nothing to do with the steady stream of operating results being announced by the stock market's most-influential businesses.
Friday, Feb. 14, marks the deadline for institutional investors with at least $100 million in assets under management to file Form 13F with the Securities and Exchange Commission (SEC). A 13F allows investors to see which stocks Wall Street's leading money managers have been buying and selling during the previous quarter (in this instance, trading activity from Oct. 1, 2024 through Dec. 31, 2024).
Berkshire Hathaway CEO Warren Buffett: Image source: The Motley Fool.
Though there are dozens of prominent asset managers that garner attention on Wall Street, few are more closely followed than the Oracle of Omaha, Warren Buffett. Berkshire Hathaway's (BRK.A 0.70%)(BRK.B 0.73%) billionaire CEO is overseeing a 44-stock, $301 billion portfolio, and he's effectively doubled up the average annual total return, including dividends, of the benchmark S&P 500 over the last 60 years.
But you don't have to wait until after the closing bell on Friday to get an idea of which stocks Buffett has been purchasing and selling. Thanks to other required filings with the SEC, we're aware of three stocks he's purchased, as well as one he's been aggressively selling.
Sirius XM Holdings: $296,801,878 purchased during the fourth quarter
In instances where Berkshire Hathaway owns at least 10% of the outstanding shares of a public company, it's required to file Form 4 with the SEC within two business days of a transaction. Form 4 allows investors to see every purchase and sale, along with the average acquisition and disposition price.
During the December-ended quarter, Buffett and his team purchased nearly $297 million worth of satellite-radio operator Sirius XM Holdings' (SIRI +0.39%) stock.
NASDAQ: SIRI
Key Data Points
The Oracle of Omaha is a big believer in businesses with sustainable competitive advantages and/or moats. As the lone satellite-radio operator, Sirius XM's legal monopoly status should afford it strong subscription pricing power more often than not.
Sirius XM Is also bucking the trend of terrestrial and online radio providers by not generating the bulk of its revenue from advertising. In 2024, approximately 76% of the company's net sales came from subscriptions, with around 20% tracing back to ads via Pandora, which it acquired in February 2019. The advantage of a subscription-driven operating model is that users are less likely to cancel during periods of economic weakness. In comparison, businesses aren't shy about slashing their market budget at the first hint of trouble.
There's also a value proposition that speaks to Buffett amid a historically pricey stock market. Sirius XM stock is valued at roughly 8 times forecast earnings per share (EPS) in 2025, and its dividend yield is north of 4%.
Image source: Getty Images.
Occidental Petroleum: $409,153,148 purchased during the fourth quarter
With the exception of Warren Buffett repurchasing close to $78 billion of his own company's shares since mid-2018, there's not a stock that's been on his buy list more consistently in recent years than integrated energy company Occidental Petroleum (OXY 3.00%).
Between Dec. 17 and Dec. 19, the Oracle of Omaha gobbled up closed 8.9 million shares at a cost of more than $409 million. Since 2022 began, Berkshire has acquired over 264 million shares of Occidental common stock.
Investing so aggressively in Occidental is a pretty clear indication that Berkshire's chief believes the spot price of crude oil will remain elevated or perhaps head even higher. Though all oil drillers benefit when the spot price of oil moves up, Occidental generates a disproportionate amount of its net sales from its upstream drilling operations. If the price of oil notably climbs, it benefits more than its peers. Just keep in mind that the reciprocal is also true if the spot price of crude oil declines.
Buffett likely appreciates the integrated aspect of Occidental's operating model, as well. Even with its reliance on drilling, Occidental still oversees midstream and downstream assets, such as chemical plants. If the spot price of crude oil falls, these ancillary operations can partially hedge upstream weakness.
Don't overlook that Berkshire Hathaway holds warrants to purchase up to 83,858,849 shares of Occidental Petroleum common stock at an exercise price of $59.624 per share. It's in Buffett's best interest if Occidental's share price remains well above this exercise price.
NASDAQ: VRSN
Key Data Points
VeriSign: $89,857,928 purchased during the fourth quarter
The third stock Warren Buffett was a decisive buyer of during the fourth quarter is internet domain-name registry services giant VeriSign (VRSN 1.57%), which has been a continuous holding for Berkshire Hathaway since the fourth quarter of 2012.
According to Form 4 filings, Buffett and his team oversaw the purchase of nearly $90 million worth of VeriSign stock from Dec. 17 through Dec. 31, with this buying continuing into the first few days of the new year.
Similar to Sirius XM, the Oracle of Omaha's fascination with VeriSign may have to with its legal monopoly ties. VeriSign holds the rights to register top .com and .net domains granted by the Internet Corporation for Assigned Names and Numbers (better known as ICANN). While domain name registration isn't the growth story it was when the century began, being the premier domain name registrar affords VeriSign substantial pricing power.
Another reason Buffett may be attracted to VeriSign is its juicy operating margin. Although the company pays fees to ICANN and requires a certain level of infrastructure to maintain its operations, VeriSign's costs tend to be relatively low and highly predictable. On a trailing-12-month basis, the company's operating margin is approximately 69%!
VeriSign's valuation is the other factor that might have enticed Buffett's buying. While it's not nearly as inexpensive as Sirius XM or Occidental Petroleum, its forward price-to-earnings (P/E) ratio of 25 does represent an 11% discount to its average forward multiple over the last five years.
NYSE: BAC
Key Data Points
Bank of America: $1,275,733,654 sold during the fourth quarter
However, Warren Buffett has been doing considerably more selling than buying of late. For eight consecutive quarters (Oct. 1, 2022 through Sept. 30, 2024), he's sold more stock than he's purchased, to the tune of $166.2 billion.
One of the stocks the Oracle of Omaha has been selling the most aggressively is money center giant Bank of America (BAC +1.28%). Since July 17, more than 266 million shares, totaling north of $10 billion in market value, have been sold. This includes $1.275 billion worth of stock sales from Oct. 1 through Oct. 15.
During Berkshire Hathaway's annual shareholder meeting in May, Buffett intimated (in reference to selling shares of Apple) that the corporate income tax rate was likely to climb in the future, which meant locking in sizable unrealized gains at a historically low rate would, in hindsight, be viewed favorably by investors. Dumping 26% of what's now Berkshire's No. 3 holding might represent nothing more than benign tax-advantaged selling.
Then again, Bank of America is the most interest-sensitive of America's largest banks by total assets, and the Federal Reserve is in the midst of a rate-easing cycle that will, in all likelihood, reduce BofA's net interest income. If there's a silver lining for Bank of America, it's that the central bank is being slow and methodical with its monetary policy decisions, which should allow it to continue originating higher-yield loans.
This persistent selling might also represent Buffett's dissatisfaction with stock valuations. When Buffett first purchased BofA preferred stock in the summer of 2011, BofA's common stock was valued at a 62% discount to book value. As of the closing bell on Feb. 5, Bank of America stock traded at a nearly 32% premium to book. Buffett is a value investor, first and foremost, and value is getting difficult to find on Wall Street.
