Unexpected move by Warren Buffett: he invested more in this stock than he put in other leading companies

When the CEO of Berkshire Hathaway, Warren Buffett, speak, professional and beginner investors usually pay close attention. This is because the “Oracle of Omaha”, as it is known, has far outperformed the benchmark index S&P 500 in terms of profitability for almost six decades.

While the S&P 500 generated an impressive total return, including dividends, of around 34,200% since the mid-1960s, Buffett has managed an aggregate return on his company’s Class A shares (BRK.A) approaching 5,000,000%. So it’s no surprise that tens of thousands of investors flock to Omaha, Nebraska, each year to hear Buffett talk about stocks and the American economy.

This also explains why investors anxiously await the quarterly presentation of the Berkshire Hathaway Form 13F. A 13F provides a snapshot of what Wall Street’s brightest and most successful money managers bought and sold in the most recent quarter.

Although historically Berkshire’s 13Fs They have been a gold mine for investorsthey don’t tell the whole story about the favorite action of Warren Buffett to buy.

The fortune Buffett spent on Berkshire shares

Based on Buffett’s statements during his company’s last annual shareholder meeting, He and his top investment advisors (Todd Combs and Ted Weschler) sold about 13% of their leading position in the technology stock Apple for tax reasons in the quarter ending in March. This reduced the market value of Berkshire’s stake in the Manzanita firm to about $144.5 billion at the close of the market. 10th May.

However, Buffett and his team are sitting on a massive unrealized gain. According to the American press, it is estimated that Berkshire Hathaway tIt has a base cost of less than $40 at Apple. This suggests that Buffett and company spent around $31.3 billion to buy the Apple shares they currently own.

Energy sector

The Oracle of Omaha and his team also spent large sums accumulating Berkshire’s stakes in two integrated energy companies, Chevron and Occidental Petroleum. Approximately US$16 billion and US$13 billion, respectively, have been invested in shares of Chevron and Occidentaland this doesn’t count the $8.5 billion in Occidental Petroleum preferred stock that Berkshire also owns.

Spending a total of $29 billion on energy stocks is a pretty concise indicator that the smartest investment minds at Berkshire expect the price of crude oil remains high. After years of underinvestment during the pandemic by major energy players (including Chevron and Occidental), the overall offer crude oil is restricted. With no easy solution in sight, higher prices should be beneficial for both companies’ high-margin drilling segments.

Warren Buffett invested a lot of capital in his company when the beverage company Coca Cola and credit services provider American Express were added to Berkshire’s portfolio in 1988 and 1991, respectively. According to a previous annual letter to shareholders, Buffett notes that his company’s cost basis at Coca-Cola and AmEx is approximately $1.3 billion for each company.

In his latest annual letter to shareholders, Buffett referred to Coca-Cola and American Express as holdings “indefinite“. They are companies with especially strong brands and marketing that benefit from long periods of economic growth.

Buffett spent more than $77 billion on his favorite stock since 2018

Collectively, Warren Buffett has invested around $63 billion in these top five holdings. Although that may seem like a lot of money, It’s actually surpassed by the amount of cash you’ve spent buying shares of your favorite stock over the past six years.

In that sense, the company from which Warren Buffett has spent more money buying stocks than Apple, Chevron, Coca-Cola, American Express and Occidental Petroleum, combined, is Berkshire Hathaway.

Before mid-July 2018, Warren Buffett and the late, great Charlie Munger Their hands were tied when it came to share buybacks. Buybacks were only allowed if Berkshire shares fell to or below 120% of book value (i.e., no more than 20% above reported book value in the most recent quarter). At no point did Berkshire stock reach this threshold during the 2010s.

On July 17, 2018, Berkshire Hathaway’s board of directors adopted new measures that allowed Buffett and Munger get off the proverbial bench and work their magic. Berkshire’s board gave the green light to share buybacks with no limit or end date, as long as: Berkshire Hathaway has at least $30 billion in cash, cash equivalents and US Treasuries on its balance sheet; and

Because Buffett’s company does not pay dividends, a constant program of share buybacks andIt’s an easy way for the Oracle of Omaha to reward its long-term shareholders. Constantly purchasing shares and reducing the number of shares outstanding incrementally increases long-term investors’ holdings.

Additionally, companies with steady or growing net income typically see their earnings per share (EPS) increase as their number of shares outstanding decreases. With Berkshire’s cash pile potentially approaching $200 billion this quarter, Buffett has every incentive to keep buying his favorite stock.