Berkshire Hathaway CEO Warren Buffett, renowned for his impressive investment track record, has been actively buying shares of his favorite stock, pouring an astounding $78 billion into the company since mid-2018. This continuous investment strategy underscores Buffett’s strong belief in the value of Berkshire Hathaway itself, alongside a significant trend in corporate share repurchases.
For almost six decades, Buffett has been at the helm of Berkshire, achieving a jaw-dropping cumulative gain exceeding 5,500,000% for Class A shares (BRK.A). This stands in stark contrast to the S&P 500, which, while respectable, has produced a total return of less than 38,000% within the same timeframe. Despite facing some setbacks—like the notable losses from Paramount Global—investors remain eager to decipher the quarterly Form 13F filings from Berkshire Hathaway. These documents are crucial as they detail the buying and selling activities of institutional investors overseeing at least $100 million in assets.
It’s important to grasp that these 13F filings often provide only a partial picture of Buffett’s strategic maneuvers in the stock market. For example, while they reveal that Buffett has been a net seller recently, offloading a total of approximately $132 billion, they also highlight his selective purchasing strategies. A key player in his portfolio is Occidental Petroleum, from which he has recently acquired over 255 million shares.
Berkshire Hathaway’s share repurchases have become a vital element of Buffett’s investment philosophy, particularly following a significant change in the company’s buyback policy in July 2018. Before this adjustment, buybacks were largely restricted to when the stock price dipped below a set threshold. After the rule change, which allowed for unlimited buybacks contingent on maintaining a cash reserve of at least $30 billion and Buffett’s assessment of intrinsic value, the company embarked on a robust share repurchase program. This has resulted in Buffett utilizing nearly $78 billion to buy back shares over the past six years, aiming to bolster long-term shareholder value and enhance earnings per share (EPS) as the total share count diminishes.
Interestingly, while Berkshire remains his favorite investment, Buffett has recently turned his attention toward a different company: Chubb Limited (NYSE: CB). Over the last year, Buffett has allocated approximately $6.5 billion to Chubb, surpassing his recent investments in Berkshire. The decision to invest significantly in Chubb, particularly after keeping its ownership confidential until mid-2024, reflects Buffett’s strategic approach to accumulating stakes discreetly.
Chubb’s appeal lies in the insurance industry’s stable nature, characterized by consistent profitability and effective premium pricing power. Insurers like Chubb benefit from rising interest rates and the ability to adjust premiums in the face of loss events, ensuring that they remain a lucrative investment. Furthermore, Chubb’s focus on high-value properties positions it well in a niche market that is less sensitive to economic downturns.
However, potential investors should assess whether Chubb is currently a good value, especially considering its 92% premium to book value as of late September 2024—a rate not typically experienced in over two decades. While Buffett tends to gravitate towards companies with solid fundamentals and logical growth potential, this steep valuation might signal that his investment in Chubb has matured.
For those contemplating investing in Berkshire Hathaway or exploring Buffett’s recent picks, it’s essential to conduct thorough research and consider alternative opportunities that may also yield substantial returns. There are numerous stocks that may not have the same level of prominence but could produce impressive results in the future.
In summary, Buffett’s steadfast investment in Berkshire Hathaway illustrates his long-term vision for the company, while his increasing stake in Chubb demonstrates a tactical diversification strategy. As market conditions shift, astute investors should stay informed, remaining open to new opportunities that may lead to significant gains in their portfolios.