Warren Buffett Just Sunk $40B into the Stock Market

Well guys, welcome to Omaha! I have made the pilgrimage over to the States with my friends Hamish and Tom, who you no doubt know from the Hamish Hotter YouTube channel and the Investing with Tom channel. We were really lucky to actually attend the 2022 Berkshire Hathaway annual shareholder meeting in person the other day, and it was an awesome experience. I also just wanted to say quickly at the top of the video a huge thank you to everybody that came up and said hello to us, that you know follows all of our channels. I'm very sorry if I wasn't able to talk to you; at the end of the day, I completely lost my voice. By the end of the day, as you can probably hear, my voice is absolutely shot, but it was still awesome to meet all of you guys, so thanks very much if you came up and said hello. It was fantastic to make sure.

But anyway, news! Big news! Warren Buffett! Wow, he has been sinking a lot of Berkshire's excess cash into the market in Q1. Literally, the cash pile of Berkshire Hathaway dropped by about 40 billion dollars across Q1. It started at about 144 billion and dropped to just 103 billion by the end of Q1. From the meeting and also from Berkshire's Q1 filing, we know that there's at least six positions that Buffett has either bought or added to in the quarter. So, let's start running through them.

Probably the one that's been catching the most headlines, which is actually quite an interesting case, is that Buffett was buying in Q1. He was buying into Activision Blizzard. So, he bought about 4.7 billion dollars' worth of Activision stock, and that's to add to either Ted or Todd's pre-existing one billion dollar position. No, Buffett hasn't gone crazy here; he's not all of a sudden having a thing for video game companies. There's, in fact, a completely different reason as to why Buffett has decided to increase Berkshire's stake to 9.7% of the company.

But then on January, I don't know, 17th or 18th, Microsoft announced that they're going to buy Activision for 95 a share. Now, when they announced that, at that point Activision becomes a different kind of security. It becomes what Charlie and I used to call, we call them workouts or something like that. They become known as arbitrage. Well, they're not really arbitrage, but they're securities of those kinds of common stock whose value depends not on what the market price does but whether a given corporate event occurs, an announced corporate event occurs.

So, Buffett is not buying Activision Blizzard for the business itself; he's simply buying the stock in the hopes that the Microsoft acquisition does actually go through. Because if that does happen, if it goes through at 95 per share, then Buffett will profit the difference between that 95 per share figure and whatever the stock price was that he bought it at. Microsoft wants to buy Activision, we'll say, well, they said at 95 a share, and they've got the money. You know, in January, whatever it was, 17th, 18th, or 19th, Microsoft announces that the stock, which had been in the 60s, went up to the 80, 81, or 82, and that looked like not a big enough spread to me for a few days, then it settled back a little.

So anyway, we now own nine and a half percent of Activision, and if we went over 10 percent, we would file a report. It is my purchases, not the manager who bought it some months ago. If the deal goes through, we make some money, and if the deal doesn't go through, who knows what happens? So that's the story of Warren Buffett's roughly 4.7 billion investment in Activision Blizzard stock; it's just, you know, betting on the fact that the acquisition will go through—just a simple bet really.

But from there, if we get on to the second buy of the quarter—which was a really sneaky one which did go a little bit under the radar—and that is that he bought more Apple shares. Now, Buffett didn't spend any great length of time talking about this at the meeting itself, but he did mention it. So, this is what he had to say: "We actually bought a little more Apple in the first quarter. So, we decided we wanted on a greater interest, and on top of that, we knew that we would own an even greater interest if they’re buying in their shares."

So, nothing really groundbreaking there, but two things we can probably take away from this: that Buffett is currently okay with Apple's current valuation, and no doubt he likes the buybacks too. But overall, I don't think there's anything to get too carried away with. For example, Berkshire's Apple stake was worth 161.2 billion at the end of Q4, and it finished at 159.1 billion at the end of Q1. Across Q1, Apple stock actually fell 1.67%, which would have taken the 161.2 billion dollar stake down to 158.5 billion dollars anyway, which only leaves about a 600 million dollar gap there to what the position was worth at the end of Q1.

So in the grand scheme of things, nothing really big there, just an interesting tidbit. But with that said, let's talk about the biggest investment that Warren Buffett made in Q1 of 2022, and that was in Chevron. This was interesting because it was a massive buy for Buffett, but it wasn't discussed even once during the shareholder meeting. But it's very interesting. So, at the end of Q4 last year, Berkshire's position was worth 4.5 billion dollars, but three months later, the position has now grown to a massive 25.9 billion dollars.

And have a look at this: during the Berkshire meeting, Buffett put up this really interesting slide, which showed us exactly how much money he sank into the market during different time periods within Q1. As you can see, the lion's share of that money went into the market between February 21st and March 15th. So, it's likely that a lot of that Chevron buying—because it's such a big position—a lot of that money went into Chevron during that very specific time period.

And what's funny is that if you look at Chevron's stock price chart over that period of time, it looks pretty impressive. The stock rose about 20%. Wow! Buffett, amazing market timing! Congratulations, that's epic! But there's a little bit more to it than that because, for example, if you say that Buffett maybe put 15 billion of the roughly 20 billion Chevron investment over that time period, at the then market cap of Chevron, it would have bought him about 6% of the entire company.

Now that works out to about 117 million shares. But if you look at the time period between February 21st and March 15th, that includes 17 trading days, which on average might mean Buffett would have bought an average of 6.9 million shares per day. Well, interestingly, before this time period, the average daily volume for Chevron was about 10 to 12 million shares. So, when Buffett comes in with an extra 6.9 million shares per day, that's going to raise the daily volume of Chevron quite substantially, which definitely would have helped the stock price come up a little bit.

Now, it's not all Berkshire because, of course, Chevron did also put out their annual report during this time as well, which definitely would have seen an increase in the trading volume. But it's interesting that definitely Berkshire would have had a hand in making the Chevron stock price rise over that specific period of time. But anyway, no doubt Buffett is certainly liking the U.S. oil and gas companies at the present time because, beyond everyone, another stock that he bought in Q1 was actually Occidental Petroleum.

What I found really interesting about Buffett's discussion of the Occidental Petroleum buyer during the Berkshire meeting is that he was essentially able to buy 14% of the company in just two weeks. But that's on top of about 40% of the company's shares being held off limits. The reason for this, as we're about to hear, is the stock market's recent trend towards increasing amounts of speculation and essentially gambling in the short term, which increases the daily trading volumes.

And it shows how we bought 14% of Occidental Petroleum. And you'll say, well, how can you buy 14% of a company in two weeks? It's more extreme than that because if you look at the Occidental proxy, you'll see the standard names index funds they own 40% of the company, roughly, and they didn’t do anything during this period. So now you're down to 60% of the Occidental Petroleum Company that's even available as well.

And I go in and tell Mark Millard, just follow, that is 30 feet away from Mirasol, and I say in the morning to them, “Buy 20,” and take blocks or whatever it may be, and in two weeks he buys 14 out of 460%. That's not investment. People were buying and selling like three-day calls or two-day calls. The more times people pull the handle on the machine, the more money the machine makes. I mean, it's very clear and overwhelmingly—I mean, where did people go? The investors just were sitting around, and there weren't very many, and the money was being made essentially by a bunch of people gambling on things.

It defies anything that Charlie and I have seen, and we've seen a lot, but I've never seen that percentage of the American public that sounds essentially—it was a gambling part of it. So, in a weird way, Berkshire actually has to thank the traders and the speculators that have swarmed the market over the past couple of years, which increased the daily trading volumes, which enabled a big business like Berkshire to still make a sizable investment in a company like Occidental Petroleum in the space of like two weeks. It's pretty insane.

So that's the update for Warren Buffett's Occidental Petroleum position. And now, if we move on to the next stock that he bought during the quarter, it was HP. So, Buffett bought about 4.2 billion dollars’ worth of HP shares during the quarter, but unfortunately, he just didn't discuss this one at all during the Berkshire meeting. However, if you look at HP, it might be a very simple investment by Warren Buffett because HP, not—it’s a large established company.

But at the moment, it's very cheap. It's trading at a P/E of about six and a half, but at the same time as being very cheap, the management is very focused at the moment on buying back a lot of their shares, which, of course, we know Warren Buffett loves. So, I think over the past four quarters, HP has brought back about 1.5 billion dollars’ worth of stock in every single quarter. So, it's probably not the most in-depth or crazy, in-detail complicated investment that Buffett has ever made; it probably just makes pretty good sense on paper. So, that's why he decided to pull the trigger, but still nothing huge—4.2 billion.

I know that's crazy saying 4.2 billion is nothing huge, but in Berkshire's case, it is nothing huge. But anyway, that leads us on to the last stock that we know that Buffett was buying in Q1, and that was Allegheny, an insurance company—so right up Warren Buffett's alley. Now this one we already knew about; Berkshire announced that they were going to acquire Allegheny for 11.6 billion a little while back. But I wanted to still include it in this video because Warren Buffett really opened up on how that acquisition came about at the Berkshire shareholder meeting.

So, let's have a listen: "February 25th, I got an email just a few lines long from a fellow that is a friend of mine that worked for Berkshire then many years ago, and he said he now becomes CEO of Allegheny Corp. I'd been following Allegheny Corp for 60 years, but their annual reports—I had four big file drawers full of it because it was an interesting company. And so Joe said, you know, this is my first annual report as CEO, and I just wanted to send it along to you, and I sent a note back to Joe, and I said, you know, I'm going to read it. I look forward to reading it, and I said, by the way, I'm going to be in New York on March 7th, and then we get together. I'd like to see you."

So, that's the orderly and decision-making process. I didn't call up investment backers and say, you know, will you prepare me a report on this? And you know, what's your advice? You know, what's up? I knew we'd buy Allegheny at the price we offered, and if it was of interest, I'll be any fine; if it wasn't, but otherwise, if that email hadn't been sent, we would not have made an offer for Allegheny. So that is the story of how Buffett ended up acquiring, or is set to acquire, Allegheny; it hasn't actually happened yet.

But with that said, guys, they are the six stocks that we definitely know Warren Buffett was buying in Q1 of 2022. Now, of course, yes, we do have to wait until the 13F filing, which is a couple weeks away, to actually get the full picture, you know, perfectly presented, laid out in front of us. But I still think that it was pretty interesting that from all the different tidbits, we can still compile a pretty complete list of all the moves that Warren Buffett was making in Q1.

So anyway, guys, thanks very much for watching. Leave a like on the video if you did enjoy it; subscribe to the channel if you'd like to see more. You can check out additional links to all the other stuff that I do down in the description of this video. But guys, that will just about do us for today. Thank you very much for watching, and I'll see you guys in the next video.

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