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Warren Buffett’s latest $2.6 billion purchase brings his total investment in the stock to more than $77 billion in less than six years

Last weekend, about 40,000 investors flocked to Omaha Berkshire Hathaway‘S (NYSE: BRK.A)(NYSE: BRK.B) annual shareholders meeting. The appeal was simple: hearing the ‘Oracle of Omaha’, Warren Buffett, speak for hours about stocks, the American economy and his investment philosophy.

Since taking over as CEO of Berkshire Hathaway in the mid-1960s, Buffett has circled Wall Street’s broad stock indexes many times. While the benchmark S&P500 approaching a total return of 34,000%, including dividends paid. Since becoming CEO, the “Oracle” has guided his company’s Class A shares (BRK.A) to returns of nearly 4,900,000%!

With a winning track record dating back more than half a century, it’s no surprise that professional and everyday investors wait for the quarterly filed Form 13Fs to see what Warren Buffett has been buying and selling. But what investors may find surprising is that the buying activity for Buffett’s favorite stocks won’t occur in a 13F.

A jovial Warren Buffett surrounded by people at Berkshire Hathaway's annual shareholder meeting.

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

Buffett’s buying activity was selective

A 13F is a required quarterly filing for institutional investors and money managers with at least $100 million in assets under management. While it can be kept for up to 45 days after the end of a quarter and thus may contain slightly outdated data, it provides a snapshot of what Wall Street’s brightest minds have been buying and selling.

Over the past six quarters, Warren Buffett and his top investment advisors (Ted Weschler and Todd Combs) have certainly sold far more than they bought.

Collectively, Berkshire Hathaway sold $56 billion more worth of stock than it bought between October 1, 2022 and March 31, 2024. Although we don’t have a full picture of what sold in the last quarter since Berkshire’s 13F. The key point is that Buffett and his team have been very selective buyers for more than a year.

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If there’s one Berkshire Hathaway company that has bucked this trend over the past six quarters, it’s energy stocks. Western petroleum (NYSE:OXY). Berkshire’s stake in the integrated oil and gas asset Occidental has increased regularly over the past two years. In fact, the Oracle of Omaha stated in his latest annual letter to shareholders that he expects Occidental to be an “indefinite” holding company.

Part of Buffett’s love for Occidental Petroleum comes from his recognition that oil is a necessity for a growing American and global economy. While he fully understands that recessions are a normal part of the economic cycle, periods of growth for the U.S. economy since the end of World War II have, on average, lasted significantly longer than economic downturns. Long-term economic expansions often mean greater demand for fossil fuels.

Another unique thing about Occidental Petroleum is that despite being an integrated energy company that also owns chemical plants, it gets the lion’s share of its revenue and operating income from its drilling segment. If spot crude oil prices remain above historical norms or rise even further, Occidental will benefit more than any other integrated oil and gas company.

Moreover, macro factors work in the company’s favor. About three years of reduced capital investment by major energy companies due to pandemic-related uncertainty has limited global oil supply. This makes it unlikely that there will be an oversupply of this in-demand commodity anytime soon.

A person writing and circling the word A person writing and circling the word

Image source: Getty Images.

The Oracle of Omaha has bought more than $77 billion worth of his favorite stocks

Despite purchasing more than 248 million shares of Occidental Petroleum since the start of 2022, this doesn’t come close to the amount of capital Warren Buffett is willing to put to work in his favorite stocks.

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As I said, you won’t find a single mention of this mysterious stock in the company’s quarterly earnings report, 13F. However, Berkshire Hathaway’s quarterly report devotes an entire page to this stock. Just before the executive certifications, you’ll find the company’s share repurchase activities. That’s right, folks… Warren Buffett’s absolute favorite stock to buy is shares of his own company!

Less than six years ago, Berkshire Hathaway’s stock buyback program looked different than it does today. Before mid-July 2018, buybacks could only be undertaken if the company’s shares fell to or below 120% of book value. At no point during more than half a decade leading up to July 2018, Berkshire Hathaway stock fell below this threshold. Long story short, not a cent of capital was spent on buybacks for a long time.

On July 17, 2018, Berkshire’s board renewed the covenants governing the company’s share repurchase program. The two new criteria stated that:

  1. Berkshire Hathaway has at least $30 billion in cash, cash equivalents and U.S. Treasuries on its balance sheet; And

  2. Warren Buffett and (the late, great) Charlie Munger believe that the company’s stock is inherently cheap, that buybacks can begin without a ceiling or end date.

During the quarter ending in March, Warren Buffett wasn’t shy about buying shares of his own company. A total of 4,232 Class A shares were repurchased in the first quarter for $2,572,710,359! This marks the 23rd consecutive quarter that Buffett has overseen his company’s share buybacks, increasing the total amount of capital deployed to buy back shares to more than $77 billion in less than six years.

Since Berkshire Hathaway doesn’t pay dividends, constant stock buybacks are Warren Buffett’s way of rewarding his loyal shareholders.

The reason Buffett is such a big fan of stock buyback programs is because they can steadily increase the ownership stake of long-term investors. As the number of shares outstanding in a company decreases, the remaining investors own an increasing share of what remains. This is the kind of mentality and ethos that Buffett wants to promote among his company’s shareholders.

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Additionally, companies with stable or rising net income should see their earnings per share (EPS) rise through buybacks. Undertaking more than $77 billion in total share repurchases since July 2018 has undoubtedly boosted Berkshire’s earnings per share and made it even more attractive to fundamental-minded investors.

With Berkshire ending the March quarter with $189 billion in cash, cash equivalents and U.S. Treasuries on its balance sheet, and Buffett signaling at the annual meeting that his company is on track to reach $200 billion in its war chest by the end of the current period You can be almost certain that the Oracle of Omaha will continue to buy shares of his favorite stocks.

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Sean Williams has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Berkshire Hathaway. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.

Warren Buffett’s latest $2.6 billion purchase brings his total investment in the stock to more than $77 billion in less than six years. Originally published by The Motley Fool

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