Warren Buffett's Latest Bets: Unlocking The Oracle's Recent Investments

Warren Buffett is one of the world's most successful investors, and his recent investment activity offers a fascinating insight into his strategy. In the first quarter of 2024, Buffett's company Berkshire Hathaway made several notable moves, including adding to its stake in Occidental Petroleum and selling shares in Apple and Chevron. The company also revealed a major position in insurance giant Chubb, and increased its investment in satellite radio player Sirius. Overall, Buffett's approach appears to favour long-term, buy-and-hold investing in businesses he understands well, with a focus on finding quality companies at a fair price.

Bank of America (BAC)

Warren Buffett's investment strategy has reached almost mythical proportions, and many investors track changes in his portfolio as a guide for their own investing choices.

Buffett's holding company, Berkshire Hathaway, has been investing in Bank of America since 2011, when Buffett picked up $5 billion worth of preferred stock and warrants as confidence in the bank was declining. As of July 2024, Bank of America was the second-largest holding in Berkshire Hathaway's portfolio, worth $42.3 billion, or 11.18% of their entire equity portfolio.

However, in late July 2024, Berkshire Hathaway reduced its stake in Bank of America by 33.9 million shares over a three-day period, selling the shares at average prices ranging from $43.13 to $44.07. This reduced the company's holdings by about $1.5 billion, although it continues to own approximately 999 million shares of the bank, worth more than $42 billion. This is an almost 13% stake in the firm, which is the second-biggest Berkshire investment in its portfolio after Apple.

Despite Berkshire Hathaway selling Bank of America stock worth $1.5 billion, the bank's shares have been performing well. They hit a more than two-year high last week and are up more than 25% year-to-date, outperforming the S&P 500's total year-to-date return of 16%.

Buffett's Investment Philosophy

Buffett subscribes to the Benjamin Graham school of value investing, which looks for securities with prices that are unjustifiably low based on their intrinsic worth. He focuses on the overall potential of a company rather than the supply-and-demand intricacies of the stock market. Some of the factors he considers include company performance, company debt, and profit margins.

Buffett's Top Holdings

As of July 2024, in addition to Bank of America, some of Buffett's other top holdings included:

• American Express (AXP)
• Occidental Petroleum (OXY)
• Apple
• Coca-Cola
• Chevron
• Kraft Heinz Co. (KHC)
• Moody’s Corporation (MCO)
• Mitsubishi Corp. (MTSUY)
• Mitsui & Co. (MITSY)

Apple (AAPL)

As of Q1 2024, Buffett's Apple stake was worth approximately $135 billion, representing a decline of around 13% from the previous quarter. Despite this, Apple remains Berkshire's biggest holding, with Buffett praising the company's products and business model.

Buffett's investment in Apple is notable as he had previously avoided technology stocks, but Apple's strong performance, coupled with its massive cash hoard and successful stock buyback programs, have made it a lucrative investment for Berkshire Hathaway.

At the 2023 Berkshire Hathaway annual meeting, Buffett expressed his admiration for Apple, stating that it was "a better business than any we own." He also indicated his desire to continue investing in the company, a strategy that has paid off handsomely for Berkshire Hathaway.

As of the end of 2023, Berkshire Hathaway owned 905,560,000 shares of Apple, representing a market value of approximately $156 billion. This massive investment has resulted in significant gains for Buffett and Berkshire Hathaway, reinforcing their reputation as savvy investors.

Coca-Cola (KO)

Coca-Cola is one of the biggest consumer staples stocks in the U.S. It offers products from its iconic namesake cola to snacks and sports drinks. Despite operating in many highly competitive markets, KO has provided solid returns and dependable dividends for decades.

Coca-Cola is Berkshire Hathaway's oldest equity position. The firm first started buying KO in 1988, and Buffett is on record saying that he will never sell any of his shares. Coca-Cola makes up around 7% of Berkshire Hathaway's portfolio today, worth more than $25 billion. It is the company's fourth-largest holding by market value.

Buffett first bought more than $1 billion in shares of the Coca-Cola Company (KO) in 1988, an amount that was then equivalent to 6.2% of the company. The purchase made it the single largest position in Buffett's Berkshire Hathaway Inc. (BRK.A, BRK.B) portfolio at the time.

Coca-Cola stock was hit hard by the 1987 stock market crash, along with many others. Buffett & Co. determined that Coca-Cola was a good company, had great value, could withstand competition, and was poised to recover.

The Coca-Cola stake marked a significant change in Buffett's investing philosophy, from buying "bad companies at great prices" to buying "great companies at good prices". By the end of 2020, Buffett's continuing investments in Coca-Cola had returned 1,550%, not including dividends.

Coca-Cola is one of the most recognizable global brands, and its products are sold in more than 200 countries worldwide. It is the No. 1 producer of non-alcoholic, ready-to-drink beverages. Its market cap has reached $275 billion as of July 11, 2024, up from $16 billion in 1988 when Buffett first started buying shares.

Coca-Cola has also consistently paid out quarterly dividends, with a forward dividend yield of 2.8% as of July 2024. Berkshire's 400 million shares of the company net a whopping $704 million in dividend payments each year.

Kraft Heinz (KHC)

Warren Buffett first invested in H.J. Heinz Co. in 2013, helping 3G Capital acquire the company. He was also involved in orchestrating the merger with Kraft in 2015. Today, Kraft Heinz represents around 3.8% of Berkshire Hathaway's holdings, making it one of the company's ten largest positions.

Berkshire Hathaway owns approximately 325 million shares in Kraft Heinz, giving it a 26.8% ownership stake in the food company. The value of the company's Kraft Heinz shares, based on their price of around $31, is about $10.1 billion. It's important to note that Buffett has yet to sell any shares, but Berkshire has received significant dividend payments from the holding. Each share has generated $10.60 in dividend payments, resulting in lifetime dividend payments of $3.445 billion.

Despite Kraft Heinz's underperformance in recent years, there are several reasons why Buffett has remained patient with this investment:

• Trust in his partner: Buffett values doing business with people he trusts, and he has a long-standing friendship with 3G Capital founder, Jorge Paulo Lemann.
• Strong brands: While some Kraft brands have lost their competitive edge, others like H.J. Heinz, Kraft Mac & Cheese, Lunchables, and Philadelphia cream cheese remain strong and immune to the pull of private labels.
• Improving sales and business performance: Under the leadership of new CEO Miguel Patricio, Kraft Heinz has made operational improvements, paid down debt, and demonstrated excellent pricing power in an inflationary environment.

In summary, while Kraft Heinz may not be one of Buffett's finest investment choices, it remains a significant holding for Berkshire Hathaway, and the recent improvements in the company's business performance suggest that Buffett is unlikely to sell his stake anytime soon.

Occidental Petroleum (OXY)

Warren Buffett's recent investment in Occidental Petroleum (OXY) has sparked interest from investors, given his history of successful value investing. Here is an overview of Buffett's involvement with Occidental Petroleum:

Background

Occidental Petroleum is one of the largest oil and gas exploration and production companies in the US, with a significant presence in the chemical business. In 2019, Buffett's company, Berkshire Hathaway, facilitated Occidental Petroleum's acquisition of Anadarko Petroleum by providing $10 billion in financing. This move gave Berkshire Hathaway exposure to the oil sector, where prices were rising.

Recent Activity

In 2022, Buffett's interest in Occidental Petroleum intensified. After receiving approval from the Federal Energy Regulatory Commission, Berkshire Hathaway was permitted to acquire up to a 50% ownership stake in Occidental. This led to a buying spree, with Berkshire accumulating an investment worth about $7.7 billion and becoming the biggest shareholder in the company. As of March 2024, Berkshire Hathaway's holdings in Occidental Petroleum were valued at $15.6 billion, representing 3.8% of its portfolio.

Impact

Buffett's aggressive purchases of Occidental Petroleum stock have potentially impacted the company's share price and valuation. The oil giant has benefited from increased fuel prices due to inflation and geopolitical events, resulting in soaring shares and strong revenue growth. Occidental Petroleum's business exposure is primarily in oil, natural gas liquids, and natural gas, with a profitable chemical business segment.

Risks and Opportunities

The volatility of commodity prices is a risk factor for Occidental Petroleum, as highlighted by analysts from Goldman Sachs and JPMorgan. However, the company's emphasis on carbon capture projects and net-zero emissions targets presents a potential growth opportunity. Additionally, the Inflation Reduction Act signed by President Joe Biden includes provisions beneficial to carbon capture-focused companies, further enhancing the outlook for Occidental Petroleum's carbon reduction efforts.

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