6 NEW Stocks Warren Buffett is Buying!

Warren Buffett runs the most closely followed portfolio in all of investing. Put simply, when Buffett's company, Berkshire Hathaway, starts buying up stock in a certain company, people pay attention. I frequently say that probably the best way to learn about investing is to study the investment decisions of great investors. By trying to understand why investors like Buffett make certain investment decisions, we, in turn, improve our own investing skills and knowledge. Thankfully for us, Buffett has given us a lot of content to work with because he has been on quite the buying spree as of late, having spent tens of billions of dollars buying a variety of stocks. In this video, we are going to look at Berkshire Hathaway's recent purchases to better understand just why exactly these stocks are getting bought. Make sure to stick around till the end of the video because I guarantee you will learn a thing or two, and who knows, you may just find your next great investment idea. Now, let's jump into the video.

Once every three months, Warren Buffett's firm, Berkshire Hathaway, is required to release what is referred to as a 13F filing. This document provides details on every stock in Berkshire's portfolio, what new stocks are being added to the portfolio, what positions are getting added to, and even what stocks are being sold. During the first three months of 2022, Buffett bought eight new stocks. Two of these stocks, Occidental Petroleum and HP, were covered in a previous video that you can check out here. So, I'm going to spend the remainder of this video talking about the other six new stocks that we haven't gotten a chance to talk about yet.

Let's get into the list. The first stock on the list is Citigroup, ticker symbol C. As a quick side note, you know a company has been around for a while when its ticker symbol is a single letter. Buffett bought 55.2 million shares of the company, worth nearly 3 billion. Citigroup is a bank. One of the most important lessons I have learned from studying Warren Buffett is the concept of circle of competence. This means that as an investor, you only invest in companies you have a deep understanding of. Imagine a circle; only companies that fall within the boundaries of your circle of competence are companies you would consider investing in. Any stocks that fall outside of your circle of competence are too risky as investments because you simply don't know enough about the company or the industry that it operates in.

Bank stocks, including Citigroup, are definitely within Warren Buffett's circle of competence. He has been investing in bank stocks for decades. Bank of America is a 38 billion dollar position within Buffett's portfolio, and represents the second largest position in the portfolio. Additionally, one of Buffett's most successful investments of all time was Wells Fargo when he first bought shares all the way back in 1989. That position grew to be worth tens of billions of dollars and turned out to be one of his largest returning investments. When the position in Wells Fargo was exited recently, Buffett knew the banking industry. As a result, the investment in Citigroup should come as no surprise.

Citigroup stock currently trades at around 53 a share and has a price-to-earnings ratio of around six. However, while the price-to-earnings ratio is helpful in understanding whether a company is undervalued, a more frequently used valuation metric for banks is what is referred to as price-to-book. This is calculated by taking a bank stock price and dividing it by its book value per share. Book value is the net value of a firm's assets found on its balance sheet and is roughly equal to the total amount all shareholders would get if they liquidated the company. As a general rule of thumb, the lower the price-to-book ratio, the more undervalued a company is.

Citigroup's price-to-book is 0.57, meaning that its current stock price is 53 and its current book value per share is 92. Citigroup's price-to-book is extremely low compared to Bank of America at 1.24 and JPMorgan Chase at 1.51. The next company on the list is Markel, and this company has a very interesting nickname: that nickname is "Baby Berkshire" because in the eyes of many, it is a smaller version of Warren Buffett's company, Berkshire Hathaway. Buffett bought 421,000 shares of Markel, worth around 620 million dollars. The similarities between Markel and Berkshire Hathaway are striking. Markel is, at its core, in the insurance business.

However, the profits and float, as it is referred to in the insurance industry, are then invested in a portfolio of stocks and wholly owned businesses. Take a listen to Markel's investment strategy when purchasing equity securities. The company seeks to invest in profitable companies with honest and talented management that exhibit reinvestment opportunities and capital discipline at reasonable prices. If that sounds familiar, it is because that is essentially the same approach Warren Buffett takes at Berkshire Hathaway. The similarities between the companies even go farther; of the 8 billion stock portfolio at Markel, around 15 percent of the entire portfolio is invested in Berkshire Hathaway shares.

In addition to a portfolio of stocks, Markel also owns a variety of operating companies. These include companies ranging from home builders, a luxury handbag company, a construction equipment manufacturer, a commercial real estate firm, and even the largest producer of house plants in the world. This collection of non-insurance businesses generated nearly 3.7 billion dollars in revenue in 2021. Much like bank stocks, insurance companies are also valued on a price-to-book basis. Also, just like Berkshire Hathaway, Markel does not pay a dividend. Instead of paying out a portion of the profits to shareholders through a dividend, the money is reinvested into growing the business as well as acquiring new businesses and stocks to add to the portfolio.

Now, Markel has a very similar business model to Berkshire Hathaway, but there is one huge difference you have to keep in mind. Berkshire Hathaway has a market cap of over 700 billion dollars; Markel's is around 19 billion dollars. This means that Berkshire Hathaway is nearly 37 times larger than that of Markel. Believe it or not, Markel's smaller size is actually a good thing for Markel shareholders. This is because as a company gets bigger, it becomes more difficult to grow at the same rate. Let me explain what I mean. Let's say there is an amazing company that is for sale with strong investment returns. Imagine that the price for this company is two billion dollars. At a market cap of nineteen billion dollars, that two billion dollar price for the business they want to buy represents over ten percent of Markel's market cap. However, at Berkshire's market cap of 700 billion dollars, that two billion dollar business accounts for less than 0.3 percent of Berkshire's market cap.

So, while that 2 billion business purchase would greatly impact Markel, it would barely move the needle given Berkshire's enormous size. Just for this reason alone, it is extremely reasonable to think that Markel will be able to grow faster than Berkshire in future years. One of Markel's wholly owned portfolio companies is a real estate investment firm. However, you actually don't need to be a professional real estate investor in order to get real estate in your portfolio. That brings us to the sponsor of today's video, Fundrise. As you may or may not know, I am extremely bullish on real estate. Real estate has traditionally been one of the most sought-after asset classes for professional investors, and now it's available to normal investors like you and me, thanks to Fundrise.

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Okay, now back to the video. Next up on the list is Paramount Global, ticker symbol P-A-R-A. Nearly 69 million shares of the company were added to the Berkshire Hathaway portfolio for a total stake worth 2.6 billion dollars. Paramount Global is a media company. The company distributes content through studios, networks, streaming services, live events, and merchandise. Paramount operates through three segments: cable networks, TV entertainment, and film entertainment. The cable network segment accounts for nearly half of the company's revenue. The company owns networks such as Showtime, B-E-T, Nickelodeon, MTV, and Comedy Central. As I'm sure you can probably imagine, the trend of consumers ditching cable for digital streaming has not been a good thing for Paramount given how reliant the company is on cable to make money.

At around 33 dollars per share, Paramount's stock price is trading significantly below what it did 22 years ago in the year 2000. The company has a market cap of 22 billion and trades at a P/E ratio of around 13. The next new stock that got added to the portfolio was McKesson, ticker symbol MCK. McKesson stock currently trades at around 333 dollars per share and has a P/E ratio of 14. Buffett bought nearly 3 million shares of the company, making the stake worth around 900 million dollars. McKesson is a top global pharmaceuticals distributor. The company delivers prescription and generic drugs as well as health and beauty care products to retail and institutional pharmacies around the world.

The company is also a major medical supplies wholesaler, providing medical and surgical equipment to alternate healthcare sites such as doctor offices, surgery centers, and long-term care facilities. In addition to distribution, McKesson offers management consulting and technology services that help customers navigate supply chain, clinical, administrative, and financial operations. The company's 2021 revenue was a whopping 264 billion dollars, with 80 percent of that coming from the U.S. pharmaceutical segment. When it comes to revenue, McKesson is probably one of, if not the largest company that the average person has never heard of. While many other stocks have seen their stock prices decline substantially so far this year, McKesson stock has been the exception to that trend; McKesson's stock is up 35 percent so far this year, while the S&P 500 is down around 15 percent.

Next up on the list is Ally Financial, ticker symbol A-L-L-Y. Citigroup wasn't the only banking stock added to the portfolio. Buffett bought nearly 9 million shares of Ally Financial, making the position worth around 400 million dollars. Ally Financial is one of the leading online banks in the U.S. Ally operates its digital direct bank, Ally Bank, which offers deposit, mortgage, auto, and investing products. Ally also provides auto financing for auto dealerships and their customers; this is where auto dealerships take out loans in order to purchase vehicles before those vehicles are resold to customers. Despite being known more for its digital banking offering, the automotive financing business is by far Ally's biggest earner at over 65 percent of sales. Ally Financial stock trades for around 43 dollars per share, with a market cap of 14 billion dollars, and it has a P/E ratio of five.

The final stock we have on the list is Celanese, ticker symbol CE. Celanese stock currently trades at around 160 dollars per share and has a P/E ratio of eight. Buffett bought nearly 8 million shares of the company, making his stake worth around 1.1 billion dollars. Celanese is a global chemical and specialty materials company. It produces chemicals and specialty materials that are used in a diverse set of end-use applications, including automotive, construction, consumer and industrial adhesives, medical, energy storage, and paper and packaging. Despite being a U.S.-based company, the company only gets around 25 percent of its sales from the United States.

Investing in chemical companies takes a lot of specialized knowledge of the industry. Honestly, it wouldn't surprise me if Buffett wasn't the person behind making this investment. Buffett has two people at Berkshire that also manage significant amounts of money: his so-called investment lieutenants, Todd Combs and Ted Weschler. Interesting fact: Ted Weschler actually spent his first six years out of college working at a chemical company. Given his firsthand knowledge of the industry, it wouldn't surprise me if Ted was the one behind the investment in Celanese.

So there we have it! Thank you so much for watching the video. Let me know what you think of these stocks getting added to the Berkshire Hathaway portfolio. Make sure to like this video and subscribe to the Investor Center if you aren't already because it is my goal to make you a better investor by studying the world's greatest investors. Talk to you soon!