It’s been a trying year for Wall Street professionals and everyday investors. Since the year began, the broad-based S&P 500 declined as much as 24% from its all-time closing high. Meanwhile, the tech-heavy Nasdaq Composite has fared even worse, with a peak-to-trough plunge since its record-closing high in November of 34%.
While bear market declines are known for sending nervous investors scurrying to the sidelines, they’re just the opportunity successful money managers use to pounce. Just ask Berkshire Hathaway (BRK.A 0.03%) (BRK.B 0.00%) CEO Warren Buffett.
Warren Buffett has been a busy bee during the first half of 2022
Despite an incredible amount of volatility in the first half of the year, the Oracle of Omaha has put tens of billions of dollars in Berkshire’s capital to work in over a dozen stocks since 2022 began. We know this because Berkshire Hathaway is required to file Form 13F with the Securities and Exchange Commission (SEC) on a quarterly basis. A 13F is a filing that allows investors an under-the-hood look at what the brightest money managers with at least $100 million in assets under management were buying, selling, and holding during the previous quarter.
With two 13F filings under his belt through June, here are all 16 stocks Warren Buffett has bought in 2022, as well as the aggregate shares purchased this year.
- Occidental Petroleum (OXY 3.03%): 188,366,460 shares purchased (through Aug. 8, 2022)
- Chevron (CVX 1.75%): 123,195,113
- HP (HPQ 2.68%): 104,476,035
- Paramount Global (PARA -1.25%): 78,421,645
- Citigroup (C -0.39%): 55,155,797
- Activision Blizzard (ATVI -0.11%): 53,743,029
- Ally Financial (ALLY 0.97%): 30,000,000
- Celanese (CE 1.91%): 9,156,714
- Apple (AAPL -0.23%): 7,666,765
- Formula One Group (FWON.K -0.96%): 5,603,705
- Floor & Décor (FND -0.08%): 3,936,291
- McKesson (MCK 0.32%): 3,198,344
- Markel (MKL 0.70%): 467,611
- RH (RH -0.50%): 353,453
- General Motors (GM 0.83%): 7,122,641 net shares sold (2,045,847 purchased in Q1, 9,168,488 sold in Q2)
- Berkshire Hathaway: 4,402 BRK.A shares and 6,850,133 BRK.B shares
What’s plain as day from the Oracle of Omaha’s buying activity in 2022 is that he’s confident about four sizable bets.
Tech is king (sort of)
Although Wall Street has been leery of tech stocks in recent months, Warren Buffett has continued to plow money into the sector.
During the first six months of the year, Buffett and his investing team purchased more than 7.6 million shares of the largest publicly traded company in the United States. Berkshire Hathaway’s stake in Apple accounted for a whopping 42.6% of its nearly $372 billion of invested assets, as of the closing bell on Aug. 16, 2022. While tech is king within Buffett’s portfolio, it’s a statement that comes with an asterisk, because it’s really all about Apple.
As I’ve previously pointed out, Apple has pivoted its exceptional branding and customer loyalty into a launchpad for its high-margin subscription services push. Services has consistently grown by a double-digit percentage for Apple, and should allow the company to better manage the revenue peaks and troughs associated with product replacement cycles.
Buffett and his team also took the time to add to their stake in gaming company Activision Blizzard as well during the second quarter. Activision is a rare investment for the Oracle of Omaha and his investing team in that it’s purely an arbitrage play. Microsoft made an all-cash offer of $95 per share to acquire Activision in January, yet shares of the company have been mostly stuck between $74 and $81 as regulators ponder whether to allow the deal to go through.
Financials are still a favorite long-term bet
There’s no sector of the market the Oracle of Omaha is more comfortable putting his company’s money to work in than financial stocks. Specifically, Buffett has been investing in a handful of new bank-stock holdings in 2022: Citigroup and Ally Financial.
Why bank stocks? The simple answer is they’re boring moneymakers over the long run, and that’s just the type of investment Warren Buffett loves. Even though recessions are an inevitable part of the economic cycle, periods of expansion last significantly longer than contractions and recessions. Long-winded expansions are what allow banks to grow their loans and deposits, which in turn lets them return capital to shareholders via dividends and/or share buybacks.
What makes bank stocks like Citigroup and Ally Financial especially intriguing at the moment is the Federal Reserve’s monetary policy shift. With the U.S. inflation rate hitting a four-decade high of 9.1% in June 2022, the nation’s central bank has no choice but to get extremely aggressive with rate hikes to tame skyrocketing prices. The end result for banks is a sizable increase in the yields they’ll net on their outstanding variable-rate loans. Even if delinquencies rise, the consumers and businesses paying higher yields on these outstanding variable-rate loans should allow earnings to grow for banks.
As one added bonus, Citigroup and Ally Financial are both trading below their respective book values, which makes both intriguing value plays.
Energy stocks have never been more popular with Buffett
At no point since the start of the century have energy stocks comprised such a large percentage of Berkshire Hathaway’s investment portfolio. Since the year began, more than 188 million shares of Occidental Petroleum and north of 123 million shares of Chevron have been purchased by Buffett’s company.
For Warren Buffett to be making such a massive bet on the oil and gas sector, he would have to be of the opinion that energy commodity prices will remain elevated for years to come. This certainly isn’t a far-fetched idea with major energy companies substantially reducing their capital investments during the COVID-19 pandemic and Russia’s invasion of Ukraine complicating an already challenged global supply chain. With no immediate fix to global supply issues, elevated oil and gas prices could very easily benefit upstream providers for years to come.
It just so happens that Chevron and Occidental are also integrated oil and gas companies. “Integrated” companies operate midstream and/or downstream assets, in addition to drilling and exploration. Midstream companies oversee transmission pipelines and storage, which often run on transparent and predictable fixed-fee or volume-based contracts. Meanwhile, downstream assets, such as refineries and chemical plants, benefit when crude oil prices fall. With lower input costs, downstream assets can generate better margins and somewhat hedge upstream drilling weakness.
With Big Oil often delivering big dividends, the sector looks like a solid bet in a high-inflation environment.
Buffett’s own company remains his top bet
However, Warren Buffett’s favorite stock to buy over the past four years isn’t going to show up on the company’s 13F filing. Rather, investors have to sift through the company’s quarterly report to find its share buyback activity.
Through the first half of 2022, Warren Buffett and right-hand man Charlie Munger have overseen the purchases of 4,402 shares of the company’s Class A shares (BRK.A) and 6,850,133 Class B shares (BRK.B). All told, more than $62 billion has been deployed since July 2018 to repurchase Berkshire Hathaway’s common stock.
The “Why?” here is simple: Buffett and Munger believe their company is undervalued and are more than willing to bet on themselves to outperform over long periods of time. Warren Buffett loves cyclical companies and dividend stocks — two categories that tend to grow in value and create wealth for long-term shareholders.
Something else to note is that buying back stock usually has a positive effect on perceived value for businesses with steady or growing net income. If a company’s share count decreases over time, steady or growing profit should lead to rising earnings per share. This can make a publicly traded stock more fundamentally attractive to the investing community.
Ally and Citigroup are advertising partners of The Ascent, a Motley Fool company. Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Activision Blizzard, Apple, Berkshire Hathaway (B shares), HP, Markel, Microsoft, and RH. The Motley Fool recommends McKesson and recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.