Through Berkshire Hathaway, he has bought large stakes in different companies, spending a total of over US$ 40 bn in the first quarter of 2022.
In comparison, the conglomerate spent a total of US$ 8.4 bn on stocks over the course of 2021, and less than US$ 8 bn in three of the four quarters of 2020.
While most of the deals struck are in existing holdings like the oil and gas giants Chevron and Occidental Petroleum, some are fresh, such as the investment in the gaming company Activision Blizzard Inc.
But how does Mr Buffett’s stock purchases in the US help us here?
Sir Isaac Newton once said, “If I have seen further, it is by standing on the shoulders of giants.”
Now Newton was not literally standing on a giant’s shoulder. He was simply illustrating that he, like many others, also relied on the ideas of those who came before him. The people who were giants in the scientific community.
Akin to this, we, as investors can also learn a lot from the giants in our financial community. And who better than the legendary investor, Mr. Warren Buffett. In the age of digitisation, we can uncover his moves and mimic them to the best of our ability.
So with this in mind, we outline four investment ideas from Buffett’s recent buying spree.
Buffett believes the world’s transition towards cleaner sources of fuel will be slow.
Therefore, he has increased his stake in his existing holdings of Chevron and Occidental Petroleum.
Buffett first invested in the US oil major Chevron in 2020 and in Occidental Petroleum in 2019. But a lot has happened since his investment in these oil majors.
The global energy crisis combined with Russia’s invasion of Ukraine has sent crude oil prices soaring to 13-year highs. This shift in the energy market appears to have pushed Buffett to increase his stake in these oil giants.
Well-poised to benefit from the current soaring oil price and India’s dependence on fossil fuels, especially crude oil, Oil India is an Indian equivalent to Chevron and Occidental Petroleum.
Much like its American counterparts, Oil India is also engaged in the exploration of hydrocarbons.
The second-largest player, in terms of proven and probable oil and natural gas reserves and production, Oil India, together with ONGC, accounts for around three-fourths of the total domestic oil production.
For the nine months ending December 2021, the company’s revenue and profit has grown handsomely 40% YoY and 39% YoY respectively.
With a slew of benefits like a well-diversified revenue stream and strong financials, Oil India is well-placed to grow briskly.
Buffett has always been wary of investing in IPOs and advocated against them. However, his second investment is in the newly listed Brazilian digital bank, Nubank.
Nubank completed its initial public offering in December 2021. But apart from partaking in this IPO, Buffett had already invested privately in the company, via an exclusive fundraising round in June 2021.
Currently, Berkshire Hathaway owns around 107.1 m shares worth about US$ 1 bn.
India doesn’t have a digital bank yet. But the closest counterpart can be Paytm i.e. One97 Communications.
Much like its American counterpart, Paytm too was listed in December 2021. Since then, its shares are down in the dumps, tumbling to half their value from the listing price.
This erosion comes on the back of various events like the Reserve Bank of India barring the onboarding of new customers due to suspicious activities. The central bank has asked for a comprehensive audit from an independent audit firm.
The sequence of events has credible brokerages downgrading the stock to a solid sell, and rightly so. Weak fundamentals combined with spurious activities are a sure shot recipe for disaster.
Buffett seems to be transitioning into investing in new-age companies. After Nubank, his third investment is in a gaming company, Activision Blizzard.
Owning and operating some of the world’s most-renowned games like Candy Crush, Call of Duty, and World of Warcraft, Activision Blizzard is not a new investment.
Buffett boosted his stake in this company from 2.5% to 9.5%, valued at a whopping US$5.6 bn, in the quarter ending March 2022.
India’s answer to Activision Blizzard is Nazara Technologies. It runs a well-diversified gaming and sports media platform. Along with a wide reach in India, the company is present across emerging and developed markets across the globe.
The company is backed by ace investor Rakesh Jhunjhunwala, who holds 3.3 m shares amounting to a nearly 10% stake in the company.
The company has actively been acquiring and forging new partnerships. Recently the company tied up telecom major Vodafone Idea, to launch ‘Vi Games’.
Nazara can be a big beneficiary from India’s leading mobile entertainment platform, with over 100 m monthly active users.
With zero debt, the company has grown over four-folds reporting a total profit after tax of ₹430 m for the nine months ended December 2021, from ₹94 m in the same period a year ago.
After acquiring Precision Castparts for US$ 32 bn in 2016, Alleghany Corp is Berkshire’s largest acquisition in six years.
Buffett and Munger, in their 2022 annual letter to shareholders did say, they found ‘little that excites them in terms of large deals’.
Alleghany, a non-life (like casualty) insurance company, adds to Berkshire’s existing large insurance portfolio, including GEICO auto insurance and General Re reinsurance.
Buffett has always been very fond of the insurance business. He counts it as a part of the ‘list of stocks that can be passed on for generations’.
The public sector in India enjoys a 40% market share in the general (non-life) insurance business.
But most of the profits in the general insurance business are in the hands of a few private players like ICICI Lombard, Bajaj Allianz, and HDFC Ergo. Together they account for nearly two-thirds of the sector’s profits.
The money insurance providers receive stays with them for an extended period. They invest it, generating a handsome profits.
Along with a balanced portfolio, increased focus on profitable segments and strong backing from its parent company, ICICI Lombard is a formidable general insurance player in the country.
With a solid track record of growing investor wealth, the company has grown consistently but also boasts a sound balance sheet.
Learning by standing on this investing giant’s shoulder is not difficult. One of the most-respected investors ever, Warren Buffett follows a simple recipe for investing success.
Advocating thinking like a business owner, he always looks for companies with an edge (economic moat, as he calls it).
He also strongly believes that no matter how good a business or its prospects are, it all boils down to how much you are willing to pay for it.
Be safe. Be smart.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com