There's not a money manager on the planet that can captivate an audience of investors quite like Berkshire Hathaway's (BRK.A -0.46%) (BRK.B -0.45%) Warren Buffett. In the span of a half-century, Berkshire went from hosting its annual meeting in a subsidiary's employee cafeteria for roughly two dozen people to filling a venue that can now hold roughly 40,000 people.
The month of May has been particularly eventful, as it's featured the release of Berkshire first-quarter operating results, as well as the Oracle of Omaha's announcement that he plans to step down as CEO by the end of 2025 and hand the reins to Greg Abel.
And May is the month for the release of quarterly Form 13Fs, which are filings that detail which stocks and exchange-traded funds institutional investors overseeing at least $100 million have been buying and selling in the latest quarter.
In other words, it's an easy way to see which stocks, industries, sectors, and trends are piquing the interest of Wall Street's premier money managers; and no 13F filing is more anticipated than that of Berkshire Hathaway.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Buffett purchased 13 stocks in the first quarter
Even though Buffett has been a net seller of stocks for 10 consecutive quarters -- $174.4 billion in net stock sales since Oct. 1, 2022 -- he was also a fairly active buyer during the March-ended quarter. Based on Berkshire's 13F, as well as other regulatory filings, he bought 13 stocks in the first quarter, six of which he says he has no plans of ever selling.
- Constellation Brands (STZ -0.39%): 6,384,676 shares purchased
- Sirius XM Holdings (SIRI -1.04%): 2,308,119 shares
- Pool Corp. (POOL -0.90%): 865,311 shares
- Occidental Petroleum (OXY -0.22%): 763,017 shares
- Domino's Pizza (DPZ -0.47%): 238,613 shares
- HEICO Class A (HEI.A): 112,401 shares
- VeriSign (VRSN -0.60%): 18,423 shares
- Mitsubishi (MSBHF -0.10%) (MTSU.Y -0.43%): Now holds 9.67% of outstanding shares (OS), up from 8.31%
- Itochu (ITOCF -0.21%) (ITOCY -0.05%): Now holds 8.53% of OS, up from 7.47%
- Mitsui (MITSF 3.66%) (MITSY 0.04%): Now holds 9.82% of OS, up from 8.09%
- Marubeni (MARUF -1.56%) (MARUY 0.39%): Now holds 9.3% of OS, up from 8.3%
- Sumitomo (SSUM.F -0.46%) (SSUM.Y -0.23%): Now holds 9.29% of OS, up from 8.23%
- The as-of-now unknown confidential-treatment stock.
Six of Buffett's 13 buys are companies he considers "indefinite" holdings
In Berkshire Hathaway's 2023 annual letter to shareholders, Buffett outlined eight stocks that he viewed as "indefinite" holdings. Two of these companies are easy to decipher: Coca-Cola (KO -0.14%) and American Express (AXP -0.76%), which have been continuous holdings since 1988 and 1991, respectively.
Integrated oil and gas company Occidental Petroleum was listed as the third forever holding. Though energy stocks have rarely comprised a sizable percentage of Berkshire Hathaway's investment portfolio, the nearly 265 million shares of Occidental common stock that Buffett has bought since the start of 2022, coupled with the $8.49 billion in Occidental preferred stock yielding 8% annually that Berkshire is holding, signal a clear expectation that the spot price of crude oil will head higher.
Despite also overseeing pipelines and chemical plants, Occidental Petroleum's revenue stream is heavily overweight to the drilling side of its operations. If the spot price of crude oil climbs, it's arguable that no integrated energy company benefits more than Occidental. Just keep in mind that the reciprocal is true if the price of crude oil declines.
The five other stocks Buffett is buying that he never wants to sell are the Japanese trading companies, commonly known as the "sogo shosha" -- Mitsubishi, Itochu, Mitsui, Marubeni, and Sumitomo. Berkshire Hathaway was recently given permission to increase its holdings in the sogo shosha beyond 10% of their outstanding shares, should he and Greg Abel choose to do so.
Mitsubishi, Itochu, Mitsui, Marubeni, and Sumitomo play an integral role in Japan's economy. They're involved in the oil and gas industry, mining, chemicals, food production, healthcare, and so on. If Japan's economy is growing, there's a good chance these five companies are playing a key role.
More importantly, these five companies are reasonably cheap amid a historically pricey U.S. stock market. What's more, they all have low levels of executive compensation and relatively generous capital-return programs.
Image source: Getty Images.
Buffett is buying legal monopolies, too!
Investors might also notice that Berkshire's head honcho was a buyer of two legal monopolies during the March-ended quarter.
Satellite-radio operator Sirius XM, which is arguably the top bargain in Berkshire Hathaway's $287 billion investment portfolio, is the only company licensed to operate satellite radio. Though this doesn't mean it's devoid of competition for listeners, its monopoly status does afford it a healthy level of subscription pricing power.
What really tends to differentiate Sirius XM from traditional radio operators is its revenue diversity. Whereas terrestrial and online radio companies generate the bulk of their revenue from advertising, more than three-quarters of Sirius XM's net sales comes from subscriptions. Subscribers are less likely to cancel their service during a period of economic tumult than advertisers are to meaningfully cut back on their spending.
Internet domain-name registry service VeriSign is the other legal monopoly Buffett has been buying. VeriSign is the registrar for dot-com and dot-net domains, which are granted by the Internet Corporation for Assigned Names and Numbers (ICANN). Even though growth in internet domain-name registration has slowed dramatically in a quarter of a century, it's still a highly predictable source of operating cash flow.
Furthermore, VeriSign generates an operating margin that resides in the mid to high 60% range. Aside from the fees it pays to ICANN and some relatively minimal infrastructure investments, it enjoys strong pricing power for its services.
Buffett's lieutenants are exerting more influence
Lastly, it's fair to say that Buffett's investing lieutenants, Todd Combs and Ted Weschler, have continued to exert more influence on Berkshire's portfolio.
Based on Buffett's history of making decisive moves when buying and selling stocks, the additions to Pool, Domino's Pizza, and HEICO's Class A shares look to be the work of Combs and/or Weschler. While it's certainly possible for Berkshire's CEO to have weighed in on these investments, Combs and Weschler have generally been given liberty to make investments totaling up to $2 billion to $2.5 billion in a single security over time.
Spirits and beer giant Constellation Brands is a tougher one to figure out. On one hand, Buffett has a knack for understanding consumer behaviors, and he's absolutely attracted to market leaders exhibiting price dislocations. Constellation Brands' forward price-to-earnings ratio (P/E) of 14 is currently 25% below its average forward P/E over the trailing-five-year period.
On the other hand, it's fair to wonder if a 94-year-old Buffett, who's winding down his executive tenure at Berkshire by the end of 2025, is focusing on what's currently a $2.35-billion position instead of looking at potentially game-changing acquisition opportunities.
Regardless of the answer, expect Combs and Weschler to take on a bigger role in trading activity.
