Warren Buffett Has Bought Shares of This Stock for 23 Consecutive Quarters — and It’s Not Chevron or Occidental Petroleum
For nearly 60 years, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRC.B) CEO Warren Buffett An offer has been made to Wall Street. Since he became CEO in 1965, the standard Standard & Poor's 500 By more than 35,000%, including dividends paid. In comparison, the so-called “Oracle of Omaha” has overseen total gains in his company's Class A shares (BRK.A) of over 4,900,000%!
When you decisively crush Wall Street's broader stock index, you'll attract a lot of attention. This is why investors wait patiently once every three months for Berkshire Hathaway to file its application. Form 13F With the Securities and Exchange Commission. Figure 13F shows investors exactly what stocks Buffett and his top investment assistants, Todd Combs and Ted Weschler, have been buying and selling.
Although Berkshire's 13F stock has been a veritable gold mine for decades, it fails to tell the full story of Warren Buffett's favorite stock to buy — a company whose shares have been bought for 23 straight quarters, dating back to July 2018.
Warren Buffett has a new fascination with energy stocks
One of the most interesting aspects of Berkshire's 44-stock, $387 billion investment portfolio is that it is highly concentrated. This means that Buffett and his team strongly believe in investing more of their company's capital in their best investment ideas. As of June 14, approximately 63% of invested assets were tied up in just three stocks.
For decades, financial stocks (Buffett's favorite sector to invest in) and consumer goods made up a large percentage of invested assets. But recently, we've seen Berkshire's brightest minds gravitate to energy stocks.
Oil and gas stocks have mostly been an afterthought to the Oracle of Omaha since the beginning of this century. But as happened last week, Chevron (NYSE: CFX) And Occidental Petroleum (NYSE: OXY) Combined to represent approximately $34 billion in market cap. In fact, the 252.3 million shares Berkshire owns in Occidental have been created from scratch since the first quarter of 2022.
Buffett, Combs and Weschler would not have raised so much capital in Chevron and Occidental Petroleum if they did not strongly believe that the spot price of crude oil would remain high, relative to its historical average. Macro factors certainly support the hypothesis that oil prices can remain high.
For three years during the COVID-19 pandemic, major oil and gas companies were forced to reduce their capital expenditures (capex) due to historical uncertainty in demand. Even as capital expenditures return to normal in the wake of the pandemic, increasing crude oil supplies to meet growing global demand has proven difficult. Drilling tends to be the most profitable and highest-margin sector for integrated energy companies. As long as crude oil supplies remain limited, the price of oil is likely to rise.
Being an “integrated” energy operator also has its advantages. In addition to its drilling segments, Chevron oversees transportation pipelines and refineries, and the two companies also operate chemical plants. These intermediate and downstream operations provide predictable cash flow and help hedge against any potential decline in the spot price of crude oil.
Major oil companies are also known for their generous capital return programs. Chevron's board approved a $75 billion stock buyback program in January 2023 and has increased its annual core dividend for 37 consecutive years. Although Occidental Petroleum has been working to climb out of a significant debt hole since its acquisition of Anadarko, the company has been gradually increasing its quarterly dividend over the past two years.
Find out which stocks Warren Buffett has bought for 23 consecutive quarters
Berkshire Hathaway's quarterly 13Fs report shows that Buffett and his crew are big fans of the oil and gas industry right now. But no stock listed on the company's 13Fs has been purchased by the Oracle of Omaha for close to 23 straight quarters.
To locate Buffett's favorite stock to buy, you'll need to look beyond the 13Fs and dig into his company's quarterly operating results. On the last page of these results, just before the executive certifications, you'll find detailed stock repurchase activity for the quarter. Time Evolution Conspiracy… Warren Buffett's favorite stock to buy is the stock of his own company, Berkshire Hathaway!
Before July 2018, there was a hard line in the sand that determined when stock buybacks could be made. In order for Buffett to greenlight a stock buyback, Berkshire shares had to be valued at 120% or less of book value (i.e., no more than 20% above book value, as of the most recent quarter). At any time for a lot In the years leading up to July 2018, Berkshire stock had fallen to or below that extent. As a result, no shares were repurchased.
On July 17, 2018, Berkshire's board of directors rewrote the criteria governing stock buybacks to ensure that Warren Buffett and his right-hand man, Charlie Munger, could get off the sidelines and into the proverbial game.
Under the new standards, buybacks can be made without a cap or expiration date as long as:
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Berkshire Hathaway has at least $30 billion in cash, cash equivalents, and U.S. Treasury securities on its balance sheet (the company ended March 2024 with $189 billion in cash); And
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Warren Buffett believes that stocks are intrinsically cheap.
Since these new standards were passed in mid-July 2018, Warren Buffett has purchased more than $77 billion worth of his company's stock over 23 consecutive quarters.
Since Warren Buffett's company does not pay a dividend, stock buybacks are the clearest way to reward Berkshire Hathaway shareholders. A steady stream of stock repurchases gradually increases the ownership stakes of the company's investors. In short, it encourages the long-term thinking that Buffett favors from Berkshire shareholders.
Additionally, companies with stable or growing net income, such as Berkshire Hathaway, can benefit from a lower number of shares outstanding. With fewer shares to divide net income into, earnings per share (EPS) tend to rise over time. Boosting earnings per share could make Berkshire stock more attractive to fundamentally focused investors.
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Sean Williams He has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Chevron. The Motley Fool recommends Occidental Petroleum. The Motley Fool has Disclosure policy.
Warren Buffett has bought shares of this stock for 23 straight quarters — and it's not Chevron or Occidental Petroleum Originally published by The Motley Fool
