8 Stocks Warren Buffett is BUYING

So I'm going to let you in on a well-kept secret in the world of investing. If you want to know what stocks you should be buying, look at what stocks the greatest investors in the world are buying. The number one investor you should be watching is none other than the king of investing himself, Warren Buffett.

So in this video, we're going to look at the eight stocks Warren Buffett has been buying recently, and wow, there are definitely some names on this list you're going to be surprised by. So make sure to stick around to the end of this video because, who knows, you may just find your next great investment.

Every three months, large investors are legally required to show the world what stocks they're buying and selling. Now this is huge for everyday investors because it provides a sneak peek into the inner workings of the greatest investment minds in the world.

So let's take a look at what stocks Buffett has been spending billions buying. There are three new positions in the portfolio entirely and five stocks Buffett already owns that he added to. Let's start with the three new positions, going from smallest to largest.

So the largest new position was a complete shocker to me and probably will be to you too. But before we jump into the list, if you want to learn more about investing, make sure to subscribe to the channel because it's my goal to make you a better, smarter investor. Our community is approaching 200,000 people strong, and it would be even better with you as a part of it.

Now let's jump into the list. The first stock on our list is Jeffrey's Financial Group, ticker symbol JEF. Now Buffett bought 434,000 shares in the company, worth 12.8 million dollars. The company has a current market cap of 8.75 billion dollars and trades at a P/E ratio of 10 times.

Jeffries is best known for its investment banking services, which accounts for roughly 85 percent of the company's revenue. Now when most people think of the word banking, they think of their local bank branch. They think of services like checking accounts, saving accounts, and loans to buy a house or car. However, investment banking is completely different from what most people think of when they hear the word banking.

Investment banks help companies get access to large amounts of money by other companies or even sell themselves to a bigger company. Think of an investment bank sort of like a real estate agent. When someone wants to buy or sell a house, for example, they hire a real estate agent to help them through that process.

Well, when a company wants to buy another company, they hire an investment bank to sort of act like a real estate agent. An investment bank will provide the company with guidance on what companies it should consider buying, how much it should pay for that company, and anything else that could come up. In exchange, investment banks will charge a pretty hefty fee for that guidance—in some cases, tens of millions of dollars just for one deal.

Now these fees are how investment banks make their money. Additionally, investment banks help companies get access to large amounts of money when a company is wanting to get access to investors. One option is to become publicly traded on an exchange like the New York Stock Exchange or NASDAQ. This process is referred to as an initial public offering, or IPO for short. Investment banks help companies go through this IPO process.

The investment banking industry is highly dependent on the health of the economy and the confidence level among investors. If companies and investors are worried about the future of the economy, they won't as frequently buy other companies or want to invest. As a result, the amount of fees investment banks will earn decreases because not as many deals are being done. This is what is happening right now—investment banks have seen their revenue plunge as there aren't a ton of deals being done due to concerns about the economy.

It looks like Buffett used this weakness as an opportunity to invest in a prominent investment bank like Jeffries. Next up on our list is Louisiana Pacific Corp, ticker symbol LPX. Buffett bought 5.8 million shares of the company worth 297 million dollars. The company has a current market cap of 4.6 billion dollars and trades at a P/E ratio of five times. Yes, you did hear that right—a P/E ratio of only five times.

Louisiana Pacific manufactures building materials and engineered wood products. The building material company makes specialized wood products such as a lower-cost version of plywood, siding, and laminated lumber. The company's products are used in new home construction, repair and remodeling, and in building outdoor structures.

Last year, the stock was trading at over 80 dollars per share but has since been trading as low as 50 a share during the time Buffett started to purchase them. The reason for the sell-off in the stock is concerns about the housing market. The health of Louisiana Pacific's business is directly tied to new home construction, and when there's a lot of new homes being built, business is booming.

On the other hand, when fewer new homes are being built, that weighs heavily on the business. Many investors are worried that new home construction is going to slow down. Interest rates have skyrocketed this year, making it more expensive to purchase a house using a loan. As a result, there is a concern that people are going to hold off on buying newly constructed houses, and the new home construction market is going to slow down dramatically.

And there might be some merit to this argument. Louisiana Pacific saw its revenue grow 63 percent last year, from 2.8 billion dollars in 2020 to 4.6 billion in 2021, and this is a direct result of the housing boom the past couple of years. There is also the risk that the company is not going to be able to maintain current profitability levels. Earnings per share were 4.44 in 2020, though it more than tripled to 13.97 in 2021.

The reason the stock is trading at such a low P/E ratio is that investors are thinking that there is no way the company is going to be able to continue to be this profitable. Only time will tell. Buffett is living proof that there's always opportunity out there. Even in 2022, the average 60/40 portfolio of stocks and bonds is having its worst performance in a hundred years—down 34%.

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Now let's get back to the list. Number three on our list is a real surprise: Buffett bought shares in Taiwan Semiconductor or TSMC for short, ticker symbol TSM. Buffett bought 60 million shares worth nearly 5 billion dollars. The company has a 407 billion dollar market cap and trades at a 13.9 times P/E ratio. Berkshire Hathaway is now the largest shareholder in TSMC, and for those of you who may not be familiar, TSMC is a semiconductor contract manufacturer.

This means TSMC has provided the designs for semiconductors from its customers. TSMC then goes about manufacturing the semiconductors based on those designs. Semiconductors, also called "semis" and "chips," can be found in thousands of products such as computers, smartphones, appliances, gaming hardware, and medical equipment. Apple is TSMC's largest customer. Apple provides TSMC with the details of how they want their semiconductor manufactured and then TSMC makes that happen.

So this raises the natural question of why does a company like TSMC even exist? Why don't TSMC's customers just cut TSMC out of the equation and make the semiconductors themselves? Well, there are two big reasons for this. The first is that manufacturing semiconductors takes a huge amount of money. Every year TSMC spends literally tens of billions of dollars to buy the equipment needed to have the necessary manufacturing capacity to be able to produce the semiconductors.

And while Apple may have the cash to do it themselves, most of TSMC's customers don't. Even Apple would rather spend those billions of dollars developing future products instead. The other big reason is that manufacturing is extremely difficult and requires a lot of specialized knowledge that takes years to develop.

Let's say I wanted to get into the furniture business. I designed a chair and want to find a company to manufacture it for me. In just a matter of weeks or months, I could find a company with the knowledge and skills to effectively manufacture this chair. This is because something like a chair is not overly difficult to manufacture.

On the other hand, semiconductors are extremely difficult to manufacture. If I was to come up with a design for a new type of semiconductor, I would have no choice but to use TSMC because there aren't many companies that have the ability to manufacture cutting-edge semiconductors. These two factors—the large amounts of money and the expertise required to manufacture semiconductors—leave TSMC's customers with no choice but to use them to manufacture their semiconductors.

Don't feel bad if you aren't familiar with TSMC or its business model. I would describe TSMC as the biggest company that the average person has probably never heard of. Believe it or not, TSMC is the 12th largest company in the entire world by market cap. It's bigger than well-known companies like Walmart, JPMorgan Chase, Facebook, Toyota, and Coca-Cola. This valuation is earned considering TSMC did 57 billion dollars in revenue and 21 billion dollars in profit last year, and obviously Buffett sees something worthwhile in the company considering he's now the largest shareholder of the stock.

The next five stocks on the list are stocks that Buffett has been adding to. Get ready and pay attention because we are going to cover these names quickly. Number four on our list is Occidental Petroleum, ticker symbol OXY. Buffett bought an additional 36 million shares in the company, bringing the total ownership stake to 194 million shares worth 12 billion dollars. Occidental Petroleum has a market cap of 67 billion dollars and currently trades at a P/E ratio of six times. Berkshire owns around 21% of the company. There has even been talk about how Buffett is looking to potentially acquire the entire company, and this isn't necessarily crazy to imagine by any means.

Berkshire recently got approval to buy up to 50% of the entire company, and this got people thinking that if Buffett and Berkshire control 50% of the company, they will eventually look to buy out the remainder of the shares. Occidental Petroleum is an oil and gas company. This means that the overall profitability of the company is directly tied to the price of oil. As an oil producer that profits by selling oil and gas, Occidental makes more money the higher the price of oil goes, and boy, have oil prices skyrocketed recently.

Take a look at this chart of oil prices: the price of a barrel of oil was as low as 25 dollars back in May of 2020. Since then, the price of oil has soared, hitting a high of over 125 dollars. This ascent shares an Occidental skyrocketing this year. By investing in an oil company, Buffett is making the bet that oil demand will remain strong and prices will remain high for years to come.

Next up, we have Paramount Global, ticker symbol PARA. 12.8 million shares were added to the portfolio, bringing the total shares Berkshire owns up to 91.2 million. This stake is worth 1.7 billion dollars, and Berkshire owns nearly 13% of the entire company. Paramount has a current market cap of 12 billion dollars and trades at a P/E ratio of 3.9 times. Paramount Global is a media company that was formed by the combination of two smaller media companies: CBS and Viacom.

Paramount Global owns a ton of different media properties. These include the film and television studio Paramount Pictures, the CBS television network, and cable networks that are familiar to those of us living within the U.S., including MTV, Nickelodeon, and BET, just to name a few. They are also in the process of growing their own streaming business called Paramount+. Buffett has decades of experience investing in media companies. He was an investor in the newspapers The Washington Post and the Buffalo News.

Additionally, he was instrumental in the merger of Capital Cities, which owned local TV and radio stations as well as newspapers, with the media company ABC back in 1985. This deal was one of Buffett's best investments ever at the time, and the combined company was later acquired by Disney. Buffett made billions. All this to say that media companies are well within Buffett's so-called circle of competence. He must be seeing value in the brands Paramount Global owns.

Number six on our list is RH, ticker symbol—you guessed it—RH. 190,000 more shares were bought this past quarter, bringing the total stake in the company to 2.36 million shares. This stake is worth 580 million dollars, bringing Berkshire's ownership stake in the company up to nine percent. RH has a market cap of 7.7 billion dollars and currently trades at a P/E ratio of 13 times. RH, formerly known as Restoration Hardware, is an upscale American home furnishings company.

Buffett has frequently talked about how he likes businesses with what is referred to as pricing power. This is where businesses can charge high prices, and customers will happily pay it. RH for sure falls into that category. Gross margins, which is the difference between what it costs a company to make a product and what they can sell it for, is a good measure of a company's pricing power. The higher the gross margin, the better—all else being equal.

Now, RH has gross margins of over 50 percent, and for reference, Wayfair, which is an online furniture store, has gross margins of only 29. This shows that RH has a ton of pricing power over its competition, and it's also a sign that RH has a moat—a key element in Buffett's investment strategy. Next up, we have Celanese, ticker symbol CE. Half a million shares were added to the portfolio, bringing the total shares owned by Berkshire up to 9.7 million.

Now this stake is worth 877 million dollars, bringing Berkshire's ownership in the company up to eight percent. Celanese has a market cap of 10.9 billion dollars and currently trades at a P/E ratio of 6.6 times. Celanese is a global chemical and specialty materials company that engineers and manufactures a wide range of products used in most major industries and consumer products. Buffett knows the chemical industry well. Back in 2011, Berkshire purchased chemical company Lubrizol for 11 billion dollars. Lubrizol produces a market's oil additives throughout the world.

Celanese is also a powerful example of something Warren Buffett has talked about: share repurchases. Take a look at Celanese's shares outstanding by year: 138 million in 2017, 135 million in 2018, 125 million in 2019, 118 million in 2020, 112 million in 2021, and as of September 30th of this year, 109 million shares outstanding. When companies are repurchasing shares, each share that someone owns represents a larger portion of the company. Assuming Celanese continues repurchasing shares at the same rate moving forward, Berkshire's ownership percentage of the company will continue to climb without Berkshire having to buy a single share.

Buffett has talked about this concept frequently. Large share repurchases are part of the reason his investments in Apple and Coca-Cola have performed so well. Only time will tell if Celanese will have a similar outcome. Last up on the list, we have Chevron, ticker symbol CVX. Buffett bought 4 million shares, bringing the entire stake to 165 million shares. This stake is worth 23.8 billion dollars, bringing Berkshire's ownership in the company to 8.25 percent. Chevron has a market cap of 364 billion dollars and currently trades at a P/E ratio of 10.5 times.

Chevron is one of the largest oil and gas companies in the world. In oil and gas lingo, Chevron is what is referred to as a supermajor. The oil and gas industry is frequently divided into three segments: upstream, which is where the exploration and production occurs—think of the pumps that are common in some places in the United States. Then we have midstream—this is where transport and storage occurs; think of oil pipelines that transport oil long distances. The third segment is called downstream—this is where oil is prepared for end use and where it is ultimately delivered to the end customer. An example of this segment would be gas stations where people fill up their vehicles.

The supermajors are integrated, meaning they are involved in all three of these phases instead of just one. Between Occidental and Chevron, Buffett is betting big on the oil and gas industry. Given how much Buffett likes cash flow-producing businesses, it's not surprising Berkshire has taken large stakes in these companies.

Look at the free cash flow yields of these stocks. Free cash flow yield is a measure of how much cash a business generates relative to its stock price. The higher the free cash flow yield, the better—all else being equal. The higher the free cash flow yield, the more cash that is being generated for you as the owner for every dollar you invest. Occidental trades at a free cash flow yield of 20.6 percent, Chevron 10.6 percent, and for reference, Coca-Cola—another popular Buffett investment—currently trades at a free cash flow yield of 3.8 percent.

So there you have it. Let's recap what names Berkshire has been buying. The three new positions were Jeffrey's Financial Group, Louisiana Pacific, and the biggest surprise of all, Taiwan Semiconductor, better known as TSMC. Buffett also added to five of his existing positions: Occidental Petroleum, Paramount Global, RH, Celanese, and Chevron.

Thanks for watching the video! Make sure to like this video and subscribe to the channel because it's my goal to make you a better investor by studying the world's greatest investors. If you enjoyed this video, make sure to check out this other video on the channel here. This one will be a really good one for you. Talk to you again soon.