Buffett's Current Investment Strategy

Warren Buffett is one of the most successful investors in history, and his investment strategy is closely watched and emulated by many. As the CEO of Berkshire Hathaway, a holding company with subsidiaries in various industries, Buffett has achieved strong returns and built a diverse portfolio of businesses and stocks. While he is known for his buy-and-hold strategy, there have been some notable changes to his investments recently. In the first quarter of 2024, Buffett's Berkshire cut its Apple and Paramount Global stakes, while adding to its positions in Occidental Petroleum, Liberty Media, and Chubb. Despite these changes, Apple remains Berkshire's largest holding, followed by Bank of America, American Express, and Coca-Cola. Buffett's success and longevity make him a highly influential figure in the investing world, and his moves are sure to continue to be closely followed.

Apple stock

Apple Inc. (NASDAQ: AAPL) has been one of Warren Buffett's favourite companies for a long time. Berkshire Hathaway, the investment giant founded and led by Buffett, first bought Apple shares in 2016. Since then, Buffett has bought Apple shares 13 more times and sold them on seven occasions. As of 2024, Berkshire Hathaway owns about 6% of Apple, making it the company's No. 2 shareholder, behind only Vanguard. Apple is also Berkshire Hathaway's biggest public stock holding, accounting for 46.95% of their stock portfolio.

Despite being a self-described "Luddite", Buffett has long had a coherent non-techie thesis for loving Apple. He has witnessed how devoted Apple users are to their devices and has viewed the iPhone as an extraordinary product that could keep its customers spending within the Apple ecosystem. He calls it a "moat", one of his favourite words for describing his preferred businesses.

Buffett's bet on Apple has paid off handsomely. Berkshire's initial investment in Apple was worth $31 billion, and by the end of 2023, it was valued at $174 billion, a gain of 459%. However, in the first quarter of 2024, Berkshire Hathaway cut its stake in Apple by about 13%, selling more than 100 million shares, worth an estimated $21 billion. This move sparked concerns among investors about the future of Apple's stock price.

Buffett hinted that the sale was for tax reasons, as the current corporate tax rate of 21% is historically low, and the Biden administration has proposed increasing it to 28%. However, Buffett has stressed that his empire will remain a key investor in Apple, stating that it will remain Berkshire's largest investment "unless something dramatic happens".

Bank of America

Warren Buffett's investment strategy is well-known: he is a buy-and-hold investor, hanging on to stocks for years and even decades. However, he has been known to make rapid turnover on occasion. For example, in 2023, he sold his stakes in several banks, including US Bancorp and the Bank of New York Mellon, but he continues to back his favourite bank stock, Bank of America.

Buffett's company, Berkshire Hathaway, has a 13% stake in Bank of America, which equates to 1.03 billion shares. This is a long-term investment, dating back to 2011 when Buffett injected $5 billion into the bank. This was a bet on Bank of America's leadership position and the steady hand of CEO Brian Moynihan, who remains at the helm today. Since then, Bank of America's shares have surged about 185%.

Buffett's commitment to Bank of America is notable because he has sold tens of billions of dollars worth of bank stocks in recent years. In fact, he has eliminated a number of bank investments altogether. However, he continues to express confidence in Bank of America, even amidst considerable turmoil in the sector. At the Berkshire Hathaway annual meeting in 2023, he said:

> "We're very cautious… about ownership of banks and we do remain with one bank… I like Bank of America and I like the management."

Buffett's investment strategy is focused on finding and buying quality stocks at a fair price and holding them for the long term. He has owned Coca-Cola since 1988, American Express since 2001, and Apple since 2016. Apple is now the No. 1 stock in the Berkshire Hathaway portfolio by market value, with a position worth a whopping $135.4 billion as of April 2024.

American Express

Warren Buffett is widely regarded as one of the greatest investors of all time. One of the ways in which people try to emulate his success is by investing in his firm, Berkshire Hathaway. However, Berkshire Hathaway's portfolio is always changing, and it can be difficult to keep up with Buffett's investment strategy.

One of the stocks that Berkshire Hathaway has held onto for a long time is American Express (AXP). Buffett has owned American Express since 2001, and it currently makes up around 7% of Berkshire's large equities portfolio. Here are some reasons why American Express is one of Buffett's favourite stocks:

Superior Credit Quality

Buffett knows the banking business well, and anyone who knows this industry understands that bad loans can sink a bank very quickly. In the credit card business, loan losses can occur very suddenly during times of financial difficulty. However, American Express has lower loss rates than its peers because it caters to a more affluent customer base that is more resilient during recessions and economic downturns. American Express also benefits from its extensive experience in underwriting.

Powerful Brand

Diverse Revenue Sources

Many credit card businesses rely solely on the net interest income they earn from credit card loans. However, American Express also runs an end-to-end payments network, which is its largest revenue generator. It also collects substantial revenue from subscription fees on its card programs, such as the Platinum and AmEx Gold cards. By having a majority of its revenue derived from fees, American Express has a more stable business model than its competitors.

Chevron

Warren Buffett's investment firm, Berkshire Hathaway, has been buying more shares in Chevron, an integrated oil giant. As of June 2024, Berkshire's stake in Chevron is worth over $19 billion, making it the fifth-largest public equity holding in its portfolio. This move indicates that Berkshire is bullish on the energy sector, particularly oil and gas companies, and approves of Chevron's recent merger and acquisition activity.

Another factor in Buffett's favouring of Chevron is its reasonable valuation. At the time of his increased investment, Chevron was priced at 11.8x forward earnings and 0.8x earnings growth, offering modest pricing considering its potential future earnings. This is especially attractive when compared to its competitor, Exxon Mobil, which trades at a similar forward P/E ratio but a much higher price-to-earnings-growth ratio.

Additionally, Chevron's ability to perform well even during periods of lower oil prices is a key consideration for Buffett. The company has demonstrated its resilience by covering capital expenditures and dividends when Brent crude oil prices dropped to the low $50 range. This ability to navigate volatile oil markets is crucial for long-term investment success in the energy sector.

In summary, Warren Buffett's recent investment activity in Chevron underscores his confidence in the energy sector and his belief in Chevron's ability to deliver long-term returns. Chevron's strong financial position, consistent dividends, reasonable valuation, and resilience in a volatile market make it an attractive opportunity for investors seeking stable, long-term returns.

Occidental Petroleum

Warren Buffett's company, Berkshire Hathaway, has been consistently buying shares in Occidental Petroleum (OXY) when they dip below $60. In the most recent quarter, the firm added a further 19 million shares of OXY, bringing its total ownership to just over 248 million shares. This is worth nearly $13 billion and Berkshire Hathaway now controls more than 25% of the oil producer.

Occidental's earnings have averaged a decline of over 39% in the last three quarters. In the second quarter of 2023, the company reported earnings per share of 68 cents, a 78% decrease compared to 2022, and sales fell 37% to $6.7 billion. In the third quarter, earnings per share were $1.18, a 52% drop, and revenue declined 24% to $7.16 billion. Despite these declines, OXY shares have been performing well, gaining 1.6% to $61.16 on the day of the Q3 earnings release.

Berkshire Hathaway received regulatory approval to purchase up to 50% of the oil giant, but Buffett has said that they are not going to buy control of Occidental. Instead, he praised the company's management and business at the annual shareholder meeting in May 2023.

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