Warren Buffett's Current Investment Strategy

As of Q1 2024, Warren Buffett's Berkshire Hathaway has been focusing on investing in and adding to stakes in several companies. These include Liberty SiriusXM Group Series A and C, Occidental Petroleum, and Chubb. At the same time, Berkshire Hathaway has been reducing its positions in or exiting stocks such as Apple, Chevron, Paramount Global, and HP. Apple remains Berkshire Hathaway's largest holding, and Buffett has praised it as probably the best business I know in the world. Bank of America, the company's second-largest position, is also notable as Buffett has been reducing positions in other bank stocks.

Bank of America

Warren Buffett's investment in Bank of America (BoFA) dates back to 2011, when the bank was still reeling from the fallout of the 2008 financial crisis. Buffett's company, Berkshire Hathaway, offered the bank $5 billion in the form of preferred stock, which came with warrants to purchase 700,000 shares of BoFA stock at a fixed price over the following 10 years. This initial investment gave Berkshire a significant stake in the bank, and they have continued to add to it over the years. As of 2024, Berkshire Hathaway owns over 1 billion shares of BoFA, worth about $32 billion, which translates to a stake of just under 12%.

Buffett has expressed his admiration for BoFA's management, particularly CEO Brian Moynihan. Since the financial crisis, BoFA has transformed itself into a top-notch financial institution, becoming more efficient, more responsible in its lending operations, and more diversified. The bank has four business segments: consumer banking, global wealth and investment management, global banking, and global markets, allowing it to participate in all areas of the banking industry. It also has a strong financial position and has been growing its deposit and loan portfolios faster than most of its big-bank peers.

Another reason for Buffett's investment in BoFA is the bank's business model. As a longtime fan of bank stocks, Buffett knows that people and businesses will always need safe places to park their cash and access additional capital. BoFA's diversified business and strong financial position make it a stable and attractive investment. Additionally, BoFA has been increasing its dividend steadily over the last 10 years, offering an attractive yield of over 3.5%.

In terms of valuation, BoFA is a relatively cheap bank stock compared to its profitability. It trades at just 1.09 times book value, offering greater profitability for the price compared to other banks. BoFA's shares have also been beaten down in 2023 due to the banking crisis and rising interest rates, making it an even more attractive buy for value investors like Buffett.

Overall, Bank of America's strong management, diversified business, attractive dividend yield, and favourable valuation make it a compelling investment for Warren Buffett and Berkshire Hathaway.

Apple

Buffett's holding company, Berkshire Hathaway, first bought shares in Apple in 2016. Since then, Berkshire Hathaway has become Apple's largest shareholder outside of exchange-traded fund providers. As of March 2024, Berkshire Hathaway's stake in Apple was worth $135.4 billion, and it owned about 6% of the company, making it the No. 2 Apple shareholder, behind only Vanguard. This makes Apple Berkshire Hathaway's biggest public stock holding.

However, in the first quarter of 2024, Berkshire Hathaway cut its stake in Apple by about 13%, marking the second quarter in a row that it had trimmed its stake in the company. Buffett hinted that the sale was for tax reasons, saying he wanted to avoid a higher tax bill in the future if rates increase to fund a ballooning U.S. fiscal deficit. Despite this, he has stressed that his belief in Apple has not wavered, and it will remain Berkshire's largest investment "unless something dramatic happens".

Buffett has long said that buying Apple wasn't a bet on technology, but on a company that is beloved by its customers. He has seen how devoted Apple users are to their devices and has viewed the iPhone as an extraordinary product. He has also praised Apple's ability to return billions of dollars to shareholders annually through share buybacks and dividends.

Chevron

Warren Buffett has been investing in Chevron, with Berkshire Hathaway adding significantly to its Chevron bet during the first quarter of 2022. This move made the energy company the conglomerate's fourth-biggest equity holding. Chevron is now one of the top stocks in Berkshire's portfolio by number of shares.

Berkshire's investment in Chevron has grown to be worth billions. By the end of March 2022, the Chevron investment was valued at $25.9 billion, a substantial increase from $4.5 billion at the end of 2021. Chevron shares have rallied more than 30% in 2022, and Berkshire's position has increased fivefold, reflecting Buffett's buying.

Buffett's interest in Chevron may be due to several factors. Firstly, energy has been a standout winner in 2022, with the S&P 500 energy sector up 35% compared to the broader benchmark's 13% loss year-to-date. Oil and gas companies also offer attractive dividends, with the energy sector yielding 4.7% compared to the S&P 500's 1.5%. Chevron, in particular, pays a 3.6% dividend.

Secondly, Buffett's move into Chevron could be part of a broader strategy to increase Berkshire's energy exposure. In addition to Chevron, Buffett has also been buying shares in Occidental Petroleum. Together, Berkshire's bet on the oil sector is now over $40 billion.

Thirdly, Buffett may view Chevron as a stable and reliable investment with growth potential. Chevron is known for its capital discipline, quality of assets, and ability to increase dividends consistently. The company has increased its dividend for 35 consecutive years and has a growing dividend and a low P/E.

Finally, Chevron could serve as a hedge against inflation. Energy stocks tend to perform well during inflationary periods, and Buffett is likely aware that owning energy stocks can be a simple way to take advantage during times of high inflation.

In summary, Warren Buffett's significant investment in Chevron appears to be driven by a combination of factors, including the attractive valuation of energy stocks, the potential for dividends, Chevron's strong fundamentals, and the hedge against inflation that energy stocks can provide.

Occidental Petroleum

Warren Buffett is currently investing in Occidental Petroleum (OXY), an oil company based in Houston, Texas. As of June 2023, Berkshire Hathaway, Buffett's investment firm, holds more than 25% of the company's shares, making it the largest shareholder in Occidental Petroleum.

Berkshire Hathaway has been steadily increasing its stake in Occidental Petroleum over the past year and a half. In June 2023, the firm bought an additional 2.1 million shares worth approximately $123 million, bringing its total holdings to over 224 million shares valued at nearly $13 billion. This purchase was made shortly after Occidental Petroleum reported better-than-expected third-quarter earnings and revenue, despite a 52% drop in quarterly profits.

In addition to its investments in Occidental Petroleum, Berkshire Hathaway also has significant stakes in other companies, including Apple, Bank of America, and Coca-Cola. The firm is known for its long-term investment strategy and has a diversified portfolio spanning various sectors, including insurance, utilities, energy, manufacturing, and retail.

Kraft Heinz

Warren Buffett is the CEO of Berkshire Hathaway, one of the largest shareholders of Kraft Heinz, owning 26.5%-26.7% of the company.

In 2015, Berkshire Hathaway merged Kraft Foods with H.J. Heinz, which they had bought in 2013, to create Kraft Heinz Co. However, in 2019, Buffett admitted that he had overpaid for Kraft. Despite this, he stated that he had absolutely no intention of changing Berkshire's stake in the company, and that he would be happy to own the stock in a decade.

However, under the leadership of new CEO Miguel Patricio, appointed in 2019, Kraft Heinz has seen a turnaround. Patricio has focused on stabilising the company, selling off underperforming brands, improving packaging, marketing, and operating efficiency, and paying down debt. As a result, adjusted sales and pricing power have improved, and the company has seen promising financial results, with net sales rising 7.3% and adjusted operating profits improving by 10.3% year over year.

Overall, despite past challenges, Kraft Heinz appears to be on a positive trajectory under Patricio's leadership, and Buffett's investment in the company remains steady.

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