For most of the last six decades, Berkshire Hathaway (BRK.A -1.09%) (BRK.B -1.08%) CEO Warren Buffett is making the rounds on Wall Street. The Oracle of Omaha, as he is affably called, has overseen an annualized return of nearly 20% for his company’s Class A shares (BRK.A) since taking over as CEO in the middle From the 1960s. On an overall basis, we are talking about a gain of 4,355,584%, as of the December 8 close.
When you double the annualized total return of the benchmark S&P500 for almost 60 years, you will get noticed. This is why professional and ordinary investors closely monitor Berkshire Hathaway’s quarterly reports. 13F filings to find out which stocks the Oracle of Omaha and his team of investors have been buying and selling.
As we prepare to close the curtain on 2023 in about two weeks, it’s clear that a highly valued stock is a virtual lock that will be purchased by Warren Buffett throughout 2024.
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Buffett and his team accumulate household names
A quick look at Berkshire Hathaway’s 13Fs over the past two years reveals some popular names that Buffett and his investor lieutenants, Todd Combs and Ted Weschler, have piled into.
Technology stock Apple (AAPL 0.08%) is an ideal example of a large company in which Buffett and his collaborators have the greatest confidence. Apple accounts for nearly half of Berkshire’s $365.5 billion investment portfolio.
Since opening a position in Apple in the first quarter of 2016, Buffett and his team have increased their stake numerous times. In fact, Buffett said at Berkshire’s annual shareholder meeting in May that Apple is “a better company than any we own“That’s an incredibly strong statement, given that Berkshire owns well-known insurer GEICO and the highly successful BNSF railroad, among about five dozen other companies.
Buffett’s belief that Apple is the best company in Berkshire likely relates to the company’s innovation-driven operating model. It is consistently #1 in smartphone market share in the United States and has a loyal consumer base attracted to its physical products (iPhone, Mac and iPad). To boot, CEO Tim Cook is overseeing a natural evolution of the company’s operating model that will allow Apple focused on higher margin subscription services.
The Oracle of Omaha is also, without a doubt, a big fan of Apple’s capital return program. The largest publicly traded company in the United States by market capitalization pays $15 billion a year to its shareholders through dividends, and it has repurchased more than $600 billion of its common stock since the start of 2013 These buybacks increase Berkshire’s stake in Apple without Buffett or his “lieutenants” having to lift a finger.
Another household name that Warren Buffett and his team have stuck to is energy stock Western oil (OXY 2.69%). Since the start of 2022, Berkshire Hathaway has added more than 228 million shares of Occidental common stock. This is in addition to the $10 billion in Occidental preferred stock (8% yield) that Buffett’s company received in 2019.
Having nearly $13 billion invested in Western common stocks is a pretty clear indication that Buffett and his closest confidants believe the spot price of oil will remain high, or even rise further. The ongoing war between Russia and Ukraine, along with several years of reduced capital investment by major energy companies due to the COVID-19 pandemic, has led to a tightening of oil supplies around the world entire. Whenever the supply of an important product is limited, it is likely that the price of that product will increase.
What is remarkable about Occidental Petroleum, compared to other integrated oil and gas operators, is that it generates most of its revenue from its drilling operations. This means that its operating performance is considerably more sensitive to changes in the spot price of crude oil than that of other integrated energy companies. If the spot price of crude oil remains high, Occidental will benefit disproportionately.
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Find out which stock Warren Buffett is almost guaranteed to buy in 2024
Over the past two years, Apple and Occidental Petroleum were regularly purchased stocks for Buffett and his team. But if I had to bet on which stock is most likely to be bought by Warren Buffett in 2024, neither company would be at the top of the list.
Interestingly, the stocks Warren Buffett is all but guaranteed to buy in 2024 won’t appear on Berkshire Hathaway’s quarterly F13s. Instead, you’ll find evidence of these purchases toward the end of the company’s quarterly operating results. That’s right: the company with a practical lock for Buffett to buy in 2024 is… Berkshire Hathaway.
Prior to July 17, 2018, Berkshire Hathaway had a stock repurchase policy in place that allowed repurchases only if Berkshire’s shares fell to 120% or less of their value. book value (i.e. not more than 20% above the declared book value). At no time for more than half a decade before that date did Berkshire Hathaway shares reach that threshold. As a result, Buffett was never able to pull the trigger on any takeover.
On July 17, 2018, Berkshire’s board of directors adopted new measures allowing its dynamic duo, Warren Buffett and the late, great Charlie Munger — to get off the proverbial bench and repurchase their company’s stock more frequently. For redemptions to take place:
- Berkshire Hathaway was required to have at least $30 billion in cash, cash equivalents and U.S. Treasury bills on its balance sheet; And
- Warren Buffett and Charlie Munger had to admit that Berkshire stock was inherently cheap.
Admittedly, I’m not entirely sure who, if anyone, will step in and play the role of Warren Buffett’s sidekick when it comes to stock buybacks in the future. What I TO DO know is that the Oracle of Omaha has oversaw the buyout of more than $72 billion value of Berkshire Hathaway shares since July 2018. Additionally, Buffett has repurchased his own company’s stock for 21 consecutive quartersuntil September 2023.
At the end of the most recent quarter, Berkshire’s cash flow hit a record high of $157.2 billion. With little value tickling the imagination of Buffett, Weschler or Combs, it’s a virtual guarantee that at least some of that cash will be deployed to buy back Berkshire’s common stock in 2024.
To add, Berkshire Hathaway does not pay a dividend. Buffett regularly rewards his long-term shareholders through buybacks. Reducing the number of shares outstanding over time should increase Berkshire’s shareholder ownership, similar to how Apple’s buyback program increased Berkshire’s stake in the company.
Additionally, reducing the number of outstanding shares of a company with stable or growing net income may increase earnings per share (EPS) over time. This helps Berkshire Hathaway become fundamentally even more attractive to value-seeking investors.
