When Berkshire Hathaway (BRK.A -0.95%)(BRK.B -0.91%) CEO Warren Buffett buys or sells shares of a company, Wall Street and investors tend to pay close attention. That’s because Buffett’s investing track record is tough to top.
Since becoming CEO in 1965, he’s overseen the creation of more than $680 billion in shareholder value and delivered an average annual return of 20.1% for Berkshire’s Class A (BRK.A) shareholders (himself included). In aggregate, this worked out to a return in excess of 3,600,000%, as of Dec. 31, 2021.
Buffett has always been a big fan of “being greedy when others are fearful.” With the technology-dependent Nasdaq Composite plunging nearly 30% from its all-time November high, Buffett has pivoted investor fear into opportunity for Berkshire Hathaway and his company’s shareholders. What follows are five stocks Warren Buffett has bought hand over fist as the Nasdaq fell into a bear market.
Perhaps it’s no surprise that the largest holding in Berkshire Hathaway’s portfolio, Apple (AAPL -0.54%), was one of the Oracle of Omaha’s key buys in recent months.
A little over two weeks ago, when Berkshire was hosting its annual shareholder meeting, Warren Buffett divulged to CNBC’s Becky Quick that his company had purchased $600 million worth of Apple stock following a three-day decline in shares of the company. Not including this purchase, Apple’s $132.7 billion market value accounted for 38.5% of Berkshire’s invested assets, as of May 16.
As I’ve previously pointed out, Apple checks all the right boxes for Buffett and his investing team. It’s a well-known and recognized brand with an extremely loyal customer base. Apple’s iPhone holds a mammoth lead in U.S. share among smartphones since launching with 5G capability, and the company’s subscription services segment continues to outpace products growth. This services segment should help reduce the revenue lumpiness associated with product replacement cycles.
The Oracle of Omaha is no doubt a fan of Apple’s capital return program, too. Since commencing its buyback program in 2013, Apple has repurchased nearly $499 billion worth of its own shares.
Buffett and his investing team also piled into integrated oil and gas company Chevron (CVX -2.08%) during the first quarter. After ending 2021 with a little over 38 million shares of Chevron, Berkshire Hathaway’s first-quarter report noted a fair value of $25.9 billion on the position, as of March 31. The company’s 13F filing showed nearly 121 million shares were purchased last quarter.
Warren Buffett’s love for Chevron likely has to do with rising energy prices and the company’s generous capital return program.
With regard to energy prices, Russia’s invasion of Ukraine is likely to leave crude oil and natural gas prices elevated for the foreseeable future. Even though Chevron is an integrated energy giant, and therefore able to lean on its midstream and downstream assets as a hedge when needed, the company’s upstream drilling assets produce superior margins.
Chevron can also be viewed as a way for Berkshire Hathaway to combat historically high domestic inflation. Collecting a 3.4% yield from Chevron can be viewed as a smart decision, relative to having inflation erode cash that’s sitting on the sidelines.
In early April, a Berkshire Hathaway Securities and Exchange Commission (SEC) filing showed that Buffett had taken a sizable stake in HP (HPQ 0.15%), the personal computer and printer company once known as Hewlett-Packard. In spite of the Nasdaq plunging and tech stocks getting taken to the woodshed, Buffett’s company took an 11.5% stake in HP, equating to nearly 121 million shares.
Why HP? The best answer I can offer is that Buffett loves boring businesses that continue to make money. Although HP’s high-growth days are in the rearview mirror, cost management is allowing the company to generate hearty per-share profits. Even now, HP is valued at less than nine times Wall Street’s forecast earnings for 2022 and 2023. That would seemingly limit HP’s downside, even in a volatile market.
Additionally — and you’ll notice a bit of a theme here — HP is going to bat for its shareholders. The company’s $1 base annual payout works out to a nearly 2.7% yield. Further, HP has repurchased between $1.34 billion and $1.75 billion of its own stock in each of the past six quarters. An easy way to get in Buffett’s good graces is for a company to pay a regular dividend and repurchase its own stock.
Have I mentioned that the Oracle of Omaha is bullish on oil stocks? According to a May 12 SEC filing, Buffett’s company has amassed more than 143 million shares of Occidental Petroleum (OXY -2.19%), which works out to a 15.3% stake in the company.
Keep in mind, this isn’t Buffett’s first waltz with Occidental. Back in 2019, Buffett handed over $10 billion to Occidental to aid with its acquisition of Anadarko Petroleum. In return, Buffett nabbed preferred stock of Occidental that comes with a juicy 8% annual yield. Although this dividend was in precarious shape during the initial stages of the COVID-19 pandemic, multidecade highs for crude have helped Occidental’s operating cash flow immensely.
As with Chevron, Buffett’s fascination with Occidental likely has to do with the globally challenged energy complex. Since oil and gas producer didn’t make domestic and global investments in drilling during the pandemic, ramping up production when energy supply chains are a mess isn’t going to happen overnight. This suggests above-average crude and natural gas prices could persist for years, which would be a boon for Occidental (and Chevron).
Lastly, Warren Buffett has been buying shares of video game company Activision Blizzard (ATVI -0.41%) hand over fist as the Nasdaq plunges.
Although Berkshire Hathaway ended 2021 with approximately 14.7 million shares of Activision Blizzard in its portfolio, the Oracle of Omaha noted during his company’s annual shareholder meeting that this stake had been increased to 9.5% of Activision’s outstanding shares.
While Buffett generally has a long-term view on what he buys for Berkshire’s portfolio, he was clear in speaking with his company’s shareholders that the Activision Blizzard buy is all about the arbitrage opportunity.
In January, Microsoft agreed to acquire Activision Blizzard for $95 a share in an all-cash deal. However, shares of Activision closed at $78 on May 16. There’s clear concern that antitrust regulators may not allow the deal to be completed. But if the deal does come to fruition, Buffett’s shares would enjoy roughly 22% upside, translating into a gain I estimate would be north of $1 billion.