Warren Buffett Keeps Buying These 3 Stocks...

Well, as of the time of recording, we've now ticked 45 days past the end of Q2, and that means the 13F filings are out. These are regulatory filings that portfolio managers with at least 100 million in assets under management must submit to the SEC every quarter. What it does is it discloses their equity portfolios, so, aka, their stock picks become public knowledge.

Obviously, this is an incredible bonus for us everyday investors because we get to see what the smart money is buying and selling. So today, starting off 13F season, we're going to look at the smartest of the smart money: Mr. Warren Buffett, the Oracle of Omaha—literally the best investor the world has ever seen. Let's discuss everything Warren Buffett has been buying and selling in Q2 of 2022, and thus, what he's thinking about the markets right now. [Music]

So, for those that don't know, Warren Buffett makes investments not through his own name but through his company, which is Berkshire Hathaway. So technically, we're looking at Berkshire in this video. That's an important distinction, which we'll discuss in a second. But let's firstly start with their cash pile.

Warren Buffett has been criticized quite a lot in recent years for not deploying his cash into the market as it just powered forward. But, of course, that has all changed this year. At the end of last year, Berkshire's cash pile was a whopping 143.85 billion. However, at the end of Q1, that was down to 102.69 billion. So that was obviously the big news of last quarter: that he sunk about 40 billion into the market.

But now, at the close of Q2 2022, we can see his buying spree did not really continue into April, May, and June. He now holds 101.34 billion on the sidelines, so he sits in roughly one-third cash with two-thirds invested. So still a lot of dough that Buffett could potentially invest into the market, even considering that we know about 30 billion, if that, is reserved as an emergency fund for the insurance business.

So that's the cash position. And now, with that out of the way, let's move on to the stock portfolio. What has Berkshire been buying and selling? Before we do the big reveal, it is worth noting that for the rest of this video, we will be focusing in on the top 10 holdings, and there's a good reason for that.

The reason is because Warren Buffett is not the only person who makes investments under the Berkshire name; there's also Todd Combs and Ted Weschler. In Buffett's most recent letter to Berkshire shareholders, he did note that combined, they managed 34 billion as at the end of 2021. What does this mean? Well, it means that a lot of the smaller positions in the 47-stock Berkshire portfolio aren't actually Buffett's. Thus, for this video, we'll focus on the bigger holdings.

With that said, here is the portfolio in its entirety: starting at the top, this quarter, Berkshire added to Apple, Chevron, and Occidental. They reduced in U.S. Bancorp, added to Activision Blizzard, reduced Kroger, added to Paramount Global, reduced GM, added to Selenius, McKesson, Ally Financial, and Markel, and they reduced in Store Capital.

So, interestingly, no new buyers this quarter; however, a lot of positions increased in size, a few decreased, and Berkshire sold out of both Royalty Pharma and Verizon in Q2. So that's everything. But now, if we zoom in to just the top ten holdings, we can see two key movements this quarter.

First, Buffett added 6.35% to Activision Blizzard. Now, this was a very interesting talking point last quarter as Buffett actually admitted that he was not buying Activision Blizzard for the long term; rather, he was making a short-term bet that Microsoft’s acquisition deal would go through. Of course, in January this year, Microsoft announced it would acquire the video game developer for 69 billion, or ninety-five dollars per share.

Normally, that would cause the share price to rise to close to ninety-five dollars as if the deal goes through, all those shareholders will be bought out at ninety-five dollars. But the thing is, since the announcement, the share price has actually not jumped up to ninety-five dollars; it’s in fact lingered around 80. Now, it’s normal for there to be a bit of a gap there while an acquisition is pending and there’s still some uncertainty, but right now that gap is about 20.

So clearly, Buffett thinks that gap is worth the potential risk of the acquisition maybe falling through. So that’s Buffett’s first notable movement in Q2: buying a little bit more of Activision Blizzard stock and eyeing off a quick 20% return if the deal closes.

But the next major talking point in this 13F is the 16.26% addition to Occidental Petroleum and the 1.42% increase in Chevron. So, Buffett has been eyeing the oil companies. We've seen a lot of shorter-term investors get into the oil space over the last year or so. There's obviously been a major disruption to the flow of oil around the world.

But normally, Buffett isn't the type of guy to make short-term commodity plays, so there must be something more to the story. So let’s start with Occidental Petroleum. For those that have kept a close eye on Buffett's moves, you actually won't be at all surprised to see Berkshire’s added 16% to the stake.

And that's because in Q2, Buffett fittingly filed a total of four Form 4s with the SEC saying that he was buying more Occidental. For those that don't know, this is a filing you have to submit with the SEC every time you own more than 10% of a company and then you make a change to your ownership.

So, as you can see on Buffett's last Form 4 for Q2, he was buying Occidental Petroleum on the 23rd of June between 55 and 56 per share. It's also a good little peak into the price that Buffett is willing to pay for Occidental. But here’s the crazy thing: sitting here now in Q3 2022, we can already see that he's been buying even more Occidental right now.

So at the end of Q2, Berkshire held 158 million shares, but if we look at the most recent Form 4 filed on the 8th of August, it actually shows that Buffett now owns 188 million shares—so more than 20% of the company. Plus, he also has 10 billion dollars of Occidental preferred shares and 83.9 million warrants.

So yes, Buffett bought quite a bit in Q2, but he’s actually sinking more money into it right now in Q3 as well. So that's Occidental. But, of course, he also added 1.42% to his Chevron position. So at quarter-end, Berkshire owned a total of 161.4 million Chevron shares.

And the reason that this is interesting—and I have to say shout out to Tom for bringing this to my attention—is because year over year, this position has gone from 0.8% of the portfolio to 7.8% and now represents roughly the same amount of money that Buffett originally sunk into Apple. So make no mistake, this is a really big bet from Buffett.

And at least the question: why is Buffett investing in oil? Well, he hasn't come out and specifically stated his reasoning, but again, I have to give a huge shout out to Tom, who found a great article detailing all of Buffett's quotes on oil over time. So I want to read a few and make a bit of an educated guess as to what Buffett thinks on his investments in oil.

So, firstly, he said in 2020: "When you buy into a huge oil production company, how it works out is going to depend on the price of oil to a great extent. It’s not going to be your geological home runs, or super mistakes or anything like that; it is an investment that depends on the price of oil."

So, obviously, oil companies' profitability is determined on the price of oil, but Buffett really doesn't make commodity bets. He said himself in 2015: "We have not distinguished ourselves at all in the oil and gas field. Although we've made a little money, we will not be buying very often oil and gas stocks, but we probably haven't bought the last one." Well, he was certainly right about that last bit.

So, okay then, why is Buffett now interested in oil stocks? It sounds like he's not particularly interested from those first couple of quotes. Well, listen to this quote from back in 2007: "If we're in an oil stock, it's because we think it offers a lot of value at this price, but does not mean that we think the price of oil is going up. If we thought the price of oil was going up, we could just buy oil futures, which we actually did once."

So, Buffett admits he's not in the game of making commodity predictions, but he can spot a deal when it comes across his desk. And while I don't believe Buffett sees enormous organic growth from these oil names in the future, I think what he does see is juicy shareholder returns. For example, regarding the transcript of the Occidental Petroleum Q1 earnings call, Buffett said, "I read every word and said this is exactly what I would be doing. She’s running the company the right way," referring to the CEO Vicki Hollub.

And what do you know? When you open Occidental’s Q1 earnings release, the first line says in Q1 they announced a new shareholder return framework and additional debt reduction targets. So, buybacks and dividends, both occurring at both of these companies. Plus, if we turn over to Simply Wall Street, we can see that both of these oil companies trade at very low P/E ratios and are both undervalued based on Simply Wall Street’s discounted cash flow analysis.

And by the way, this is a very handy tool to get a quick snapshot of valuation. So, I definitely encourage you guys to check out Simply Wall Street if you're interested in using this. I'm obviously super happy they decided to join up as a channel sponsor; I really like their platform. So if you did want to check out the platform, the link is in the description, and if you wanted to get the full access to the whole platform, you'll get a 30% discount if you use that link.

So anyway, that is the big story of Berkshire's 13F filing this time around: buying up the oil companies. They also slightly added to their Apple position, which is their biggest holding after it dipped in Q2, which is interesting, as it kind of shows what Buffett thinks fair value is, you know, somewhere around the 130 to 150 range.

And then the last thing to note in the top 10 is a 5% reduction in U.S. Bancorp; however, I really don’t think there’s anything to talk about there. But anyway, guys, that is it for Buffett's big moves in Q2. Are you surprised to see Buffett buying up the oil companies? Do you think it's a smart move? Let me know your thoughts and opinions down in the comment section below.

But apart from that, guys, please leave a like in the video if you did enjoy it, subscribe if you'd like to see more, but that'll do us for today. I'll see you guys in the next video.