BRK.B

Warren Buffett's Latest $2.1 Billion Buy Brings His Total Investment in This Stock to More Than $74 Billion in Under 6 Years

For nearly six decades, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett has been putting on a clinic for Wall Street. Whereas the benchmark S&P 500 has delivered a total return, including dividends, of a little north of 33,000% since the "Oracle of Omaha" took over as CEO in the mid-1960s, Berkshire's Class A shares (BRK.A) have galloped higher by an aggregate of more than 5,000,000% as of the closing bell on Feb. 28, 2024! An outperformance of this magnitude is going to get you noticed by professional and retail investors.

Warren Buffett's phenomenal track record is a big reason why there's a buzz surrounding Berkshire Hathaway every time the company files Form 13F with the Securities and Exchange Commission (SEC). A 13F gives investors an over-the-shoulder look at what Wall Street's greatest money managers have been buying and selling, and is a required quarterly filing for institutions and investors with at least $100 million in assets under management.

A jubilant Warren Buffett at Berkshire Hathaway's annual shareholder meeting.

Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.

Warren Buffett has been adding to a core position and building up his stake in a value stock

Throughout 2023, the Oracle of Omaha and his investment aides, Todd Combs and Ted Weschler, were very selective about their purchases. One core holding that's continued to see somewhat regular additions is energy stock Occidental Petroleum (NYSE: OXY).

Accounting for Berkshire's latest share purchases during the first week of February, Buffett's company has gobbled up more than 248 million shares of Occidental Petroleum since the start of 2022. That's a roughly $15 billion position, with $34 billion, in total, devoted to energy stocks, including Berkshire's position in Chevron.

Having 9% of Berkshire's invested assets tied up in two integrated oil and gas stocks is a pretty clear message that the company's brightest minds anticipate crude oil prices will remain elevated for an extended period. With the global supply of oil remaining tight following years of capital underinvestment tied to the COVID-19 pandemic, there's a real possibility the spot price of crude oil heads even higher.

What makes Occidental Petroleum an intriguing investment in the energy arena is its revenue breakdown. Despite being an integrated operator that generates some of its revenue from downstream chemical plants, Occidental derives the lion's share of its sales from drilling. If the spot price of crude oil climbs, it'll benefit more than virtually any other integrated oil and gas company.

Beyond Occidental, we've also seen Warren Buffett and his team piling back into satellite-radio operator Sirius XM Holdings (NASDAQ: SIRI). Though radio operators are often highly dependent on advertising revenue to keep the lights on, Sirius XM has an assortment of competitive advantages working in its favor that should help it navigate any economic climate better than terrestrial and online radio companies.

To start with the obvious, Sirius XM is the only licensed satellite-radio operator. While this doesn't mean it's free of competition for listeners, it does give the company reasonably strong subscription-pricing power.

What's arguably even more important with Sirius XM is how the company generates revenue. Whereas terrestrial and online radio providers are reliant on advertising revenue, only 20% of Sirius XM's sales came from advertising in 2023. Meanwhile, a whopping 77% of Sirius XM's revenue can be traced to subscriptions. Subscribers are less likely to cancel their service during an economic downturn than businesses are to meaningfully pare back their advertising budgets.

Sirius XM is also historically cheap. Shares are currently trading for a multiple of 13 times forward-year earnings, which is a 32% discount to its average forward-year earnings multiple over the trailing five-year period.

A stopwatch whose second hand has stopped above the phrase, Time to Buy.

Image source: Getty Images.

The Oracle of Omaha has purchased in excess of $74 billion worth of this stock

Although Berkshire's 13Fs have told an interesting story for more than a year -- Buffett and his team have been net sellers of equities for the past five quarters -- it's what's not in Berkshire's 13Fs that's an even bigger deal.

Warren Buffett's favorite stock to buy isn't Apple, Occidental Petroleum, or any of the nearly four dozen securities currently listed in Berkshire's quarterly filed 13F. The only way to find this mystery stock that the Oracle of Omaha can't stop buying is to dig into his company's operating results. That's where you'll find the quarterly share-repurchase activity, because Warren Buffett's favorite stock to buy is none other than shares of his own company! Don't you love a good plot twist?

Prior to July 2018, the rules governing Berkshire's share-buyback program didn't allow its then-dynamic duo of Warren Buffett and Charlie Munger to get off the proverbial bench. Repurchases could only be undertaken if Berkshire's share price fell to or below 120% of book value (i.e., no more than 20% above its listed book value, as of the end of the latest quarter). Because Berkshire's share price never fell to or below this preset threshold, no buybacks were undertaken for years.

On July 17, 2018, everything changed for Buffett, Berkshire, and the company's shareholders. The company's board amended the buyback rules to allow their star players to "get in the game." As long as Berkshire holds at least $30 billion in cash, cash equivalents, and U.S. Treasuries on its balance sheet, and Buffett and Munger agreed that their company's stock was intrinsically cheap, buybacks could commence without a ceiling.

During the December-ended quarter, Berkshire retired 3,623 shares of Class A stock and 660,585 shares of Class B stock (BRK.B) at a total cost of $2,147,823,075! This marked the 22nd consecutive quarter that Buffett's company has repurchased its own stock, and it brought the grand total of buybacks since July 2018 to more than $74 billion. To put this into context, Buffett and the late Charlie Munger spent roughly twice as much buying Berkshire stock compared to how much they spent purchasing shares of Apple.

Since Berkshire Hathaway doesn't pay a dividend, share repurchases are the direct way Warren Buffett and his investment team can reward investors who align with their long-term vision. Steadily buying back stock should increase the ownership stakes of the company's shareholders.

Furthermore, businesses like Berkshire Hathaway that tend to grow their operating income over time should enjoy a hearty boost to their earnings per share as their outstanding share count declines. This is only going to make the stock more attractive to fundamentally focused investors.

Buying back tens of billions in his own company's stock is also a pretty clear indication that Buffett is betting on himself and the business he, Munger, Combs, and Weschler have built to succeed over the long run.

With a record $167.6 billion in cash on hand and few, if any, values piquing the interest of the Oracle of Omaha and his team, look for repurchases of Warren Buffett's favorite stock to continue throughout the first quarter (and likely well beyond).

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Sean Williams has positions in Sirius XM. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Chevron. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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