In the world of investing, few figures stand out as prominently as Warren Buffett, the ceaselessly inquisitive CEO of Berkshire Hathaway. Known as the “Oracle of Omaha,” Buffett’s investment acumen has consistently eclipsed Wall Street’s benchmark, the S&P 500, often by astonishing margins. Over decades, since he assumed control of Berkshire in the mid-1960s, the Class A shares have achieved an incredible return exceeding 5,400,000%. For comparison, the S&P 500, including dividends, has seen a mere 37,000% increase during the same period.
Buffett’s investment philosophy revolves around acquiring stakes in robust companies with significant competitive advantages and sound leadership. A hallmark of his strategy is long-term thinking; he prefers to maintain investments in his portfolio for years—sometimes decades—allowing them to flourish.
In recent times, however, Buffett has adopted a notably selective approach towards acquisitions. Analysis of Berkshire Hathaway’s filings, particularly Form 13F, reveals a striking trend: rather than pursuing multiple new investments, Buffett and his trusted investment managers, Ted Weschler and Todd Combs, have been net sellers of stocks, totaling nearly $132 billion over the past several quarters. For instance, about $7.2 billion worth of Bank of America stock has been sold since mid-July, which marks the potential for an eighth consecutive quarter of net stock sales.
Yet, within this trend of sales lies significant activity that should capture the attention of investors. A focal point of Buffett’s buying strategy has been Occidental Petroleum (NYSE: OXY). Since the beginning of 2022, Berkshire Hathaway has scooped up an impressive 255.2 million shares of the integrated energy company, showcasing Buffett’s bullish stance on the oil sector. The energy landscape, influenced significantly by fluctuating prices, provides a compelling narrative for Occidental, particularly as it remains heavily tied to the performance of its upstream drilling operations.
Buffett’s strategy does not stop at energy. He has also invested in Chubb (NYSE: CB), a property and casualty insurance giant. Despite the perceived dullness of the insurance industry, it offers solid profitability and has proven resilient, allowing firms like Chubb to maintain premium pricing power even during adverse conditions.
However, the narrative surrounding Buffett’s preferred stock reveals an even more compelling aspect of his investment philosophy: in fact, the bulk of his investing prowess is directed into his own company, Berkshire Hathaway. Over the last six years, Buffett has invested close to $78 billion into repurchasing shares of Berkshire—a significant investment that exceeds the market capitalizations of 379 other S&P 500 companies.
The buyback activity has become a central strategy for Buffett, especially since changes to the buyback policy in July 2018. Under the amended rules, Buffett can repurchase shares whenever he deems them undervalued, as long as Berkshire maintains a cash reserve of at least $30 billion. Given Berkshire’s substantial cash reserves, which reached a historic high of $276.9 billion by the end of June 2024, the pathway for buybacks is wide open, allowing the Oracle of Omaha to strategically boost shareholder value over time.
Buffett’s notable preference for buybacks is grounded in his belief that this strategy enhances future returns for long-term investors. As the total shares of Berkshire decrease via buybacks, the ownership stake of every remaining share increases, potentially leading to improved earnings per share (EPS) over time—a win-win for patient investors.
While Buffett remains optimistic about Occidental Petroleum and Chubb, no other investment rivals his profound commitment to Berkshire Hathaway itself. This strategy not only reflects his unwavering confidence in the company but also demonstrates his commitment to fostering sustained growth and shareholder value.
For any investor contemplating a stake in Berkshire Hathaway, bear in mind the insights provided by the Motley Fool’s Stock Advisor. Although Berkshire Hathaway isn’t featured among their top ten recommended investments at this time, it stands as a testament to Buffett’s unparalleled investment legacy. With a history that speaks louder than mere figures, Berkshire continues to serve as a compelling example of diligent investment philosophy and substantial long-term payoffs.
As you navigate the investment landscape, remember that while market trends frequently ebb and flow, the core principles of sound investing endure, championed by the likes of Buffett. Whether you’re contemplating a foray into stocks or refining your current portfolio strategy, the insights from seasoned investors like the Oracle of Omaha can serve as invaluable guiding lights.