Look Inside Warren Buffett’s Latest Stock Moves!

Well, in the last video, we covered Michael Burry's 13F filing. Now, next on the list is, of course, you guessed it, Mr. Warren Buffett. Without a doubt, you know Warren Buffett is the super investor that I follow personally the closest. I mean, for me, everything about his strategy just makes logical sense in my brain.

With that strategy, Buffett has certainly achieved some impressive long-term performance results. Since 1965, he's generated returns of 20% annually through his company, Berkshire Hathaway; about double the annual return of the S&P 500. So without question, he is the world's best investor. However, he has been criticized in recent times for keeping a lot of his money on the sidelines, despite the market posting amazing returns.

With Buffett's 13F filing release just the other day, let's have a look at whether he has been putting any of that cash to use in the past few months. What is he buying? What is he selling? Let's find out.

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So, Berkshire Hathaway currently has a cash pile of about 140 billion dollars. They have 39 billion in cash and cash equivalents, then about 102 billion in short-term U.S. Treasuries. No doubt, that is a lot of cash, and if we jump down a few lines on the balance sheet, we can see investments in equity securities. This is Berkshire Hathaway's stock portfolio, and the value is currently 308 billion.

Now, that is a big portfolio, but this also shows that Buffett's cash pile is about 30% of his total portfolio. That is crazy! You know, for a small investor like us, 30% in cash is still pretty decent, but for a big investor like him, it's almost unheard of. This means he's certainly not finding many good opportunities in the market at the moment, and it's not from a lack of trying.

Remember back a few years ago in his letter to shareholders. He said, literally, "In the years ahead, we hope to move much of our excess liquidity into businesses that Berkshire will permanently own." The immediate prospects for that, however, are not good; prices are sky-high for businesses possessing decent long-term prospects. So, the unfortunate reality is that Buffett is really struggling to find investments that would be value-adding to Berkshire at current market prices.

For Buffett, the pool of stocks he can buy from is really quite limited. He's only interested in making a position that will shift the needle for Berkshire Hathaway. He's looking to deploy literally tens of billions of dollars. Imagine an insurance company, you know, posting 30% year-on-year growth, great management—you know that’ll be right in Buffett's hitting zone. If that company had a market cap of, say, 1 billion, Buffett would not even touch it. It's just not going to shift the needle, so he's limited by his size to a select group of very large businesses.

Then, from there, he has to try and find value, and that's something that he's finding particularly challenging right now when the market is artificially inflated by obviously ultra-low interest rates. But with that said, what did Buffett do this quarter?

Well, yes, there were still some moves, but to be honest, nothing really eye-catching like what we were seeing over the past few quarters. Berkshire Hathaway overall added to four stocks; they bought one new stock, they reduced in 11, and they sold out of two. Interestingly, when you look at the percentage impact to the portfolio, Buffett sold much more than he bought. So, Buffett was a net seller of stocks in Q2, which honestly doesn't surprise me because the market has just kept going up, going from bad to worse.

Alrighty, so let's now focus in on these stock moves. In terms of his new buy, this stock is Organon, which is a pharmaceutical company in the U.S. that specializes in reproductive medicine, contraception, psychiatry, hormone replacement therapy, and anesthesia. Now, I'm certainly not going to pretend that I know everything about this company, but they do make a big long list of medications—even the hay fever nasal spray that I bought yesterday! Who would have thought?

But back on topic, this was only a very small buy; it was 0.02% of Berkshire's portfolio. Actually, what I learned about Organon is that they actually just spun off of Merck, and Merck shareholders received one-tenth of an Organon share for every Merck share that they owned. So, this is actually likely just Buffett's portion of Organon stock he received from the spin-off, as he does have a decent position in Merck already.

Alright then, moving on, Berkshire also added to Kroger, Aeon, and RH. Kroger now sits at position 15 in the Berkshire portfolio, occupying 0.81%. RH is number 23 with 0.42%, and Aeon sits at number 24 with 0.36%. But again, nothing crazy here. These additions were small, the biggest being a 21% increase to Kroger, which makes sense. I mean, they've been adding quite heavily to that position since Q2 2020, as the stock has been in the 30s.

So clearly, Buffett sees it being undervalued in that range, but it will be interesting to see if he's keen to add to it during this current quarter, as now the stock has shot up to the mid-40s. But anyway, those were the buyers—really not too much to sink our teeth into right there.

So let's turn our attention to the cells. Berkshire reduced in eight stocks during Q2, with the most notable being in the pharmaceutical companies. Buffett reduced 50% in Merck, then just 15% in Bristol Myers Squibb, and 10% in AbbVie. Buffett initially bought all these stocks together in Q3 of 2020, along with Pfizer. Now, surprisingly, he ditched Pfizer in Q4 but did hold on to these other stocks.

It was that reason that I thought this probably wasn't a vaccine play. I genuinely think Buffett just wanted his conglomerate, Berkshire, to have broad exposure to pharmaceuticals. I guess they all seemed fairly priced at the time, so it all made sense. Maybe initially he just went a little bit too gung-ho, so maybe he wanted to trim 10% to 15%, but, you know, the Merck reduction of 50% does seem strange.

Maybe he's decided, like Pfizer, that he doesn't really want to hold it as much as the others, so it will be interesting to see if he continues to sell in this current quarter. But anyway, that's the story with the pharmaceuticals: trimming two and then halving the position in Merck.

Then, Buffett also reduced 10% in General Motors. Now, this is one of Buffett's long-term stocks; this is number 12 in his portfolio, and he's held it since 2012. However, over the past few quarters, he has been trimming this one down. He sold 10% in Q4 last year, then 8% in Q1 2021, and now 10% in Q2.

And you know, honestly, I'm not surprised that he's less bullish on this one. I mean, to be perfectly frank, I think GM is one of Buffett's worst stocks. I mean, their revenue has just been sinking over the past five years, as has their net income—everything about their business is declining. They're essentially being dragged kicking and screaming into building electric vehicles. They don't seem to really want to do it. But you know, clearly Buffett still sees something in their future and has that as his 12th largest position, occupying only 1.2% of Berkshire's portfolio.

So, overall, there were the notable reductions, and then lastly, the cells: Axalta Coating Systems, Biogen, and Liberty Global. But nothing to really talk about here either; unfortunately, these cells had basically no impact on the portfolio. The biggest sell was Axalta, which makes a variety of paint and coating products. The sell there reduced the portfolio by 0.15%.

But honestly, like, that's about it—a pretty boring quarter for Warren Buffett. Certainly doesn't help us value investing YouTubers, that's for damn sure. But you know, I do think that this quarter still shows a few things. Buffett's quarter still shows us a couple of things. There are a few takeaways.

Firstly, it shows us that I think Buffett is pretty happy with his core holdings. Because remember, Berkshire is very top-heavy; the top 10 account for 87.5% of their portfolio, and the only change in the top 10 this quarter was GM, which slipped from 10th to 12th.

So that tells me Buffett is pretty happy holding his big positions: you know, Apple, Bank of America, American Express, Coca-Cola, Kraft Heinz, Moody's, Verizon, U.S. Bancorp, Davida Healthcare. I think he's sitting pretty with that portfolio, so that's really my first takeaway.

Then my second takeaway is, obviously, what we're talking about at the start of the video—that Buffett just really isn't finding anything good to sink money into right now. He isn't, you know, able to deploy any of that cash into new investments because the prices are too high. He doesn't even want to put more cash into his pre-existing large equity investments because the prices are too high.

Honestly, most Buffett-style investors have also been finding the exact same problem, and if I'm being perfectly frank, perfectly honest, I think we're probably going to have to see a pretty decent sell-off or recession before a lot of these businesses get to a reasonable valuation that justifies investment. It doesn't even have to be cheap, just a reasonable valuation.

But overall, that's what I took out of Buffett's latest 13F filing. I'd love to hear what you guys thought of it and you know whether you agree or disagree that finding value is difficult in today's market. So leave that stuff down in the comments section below.

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If you want to check out how I go about my investing, the Warren Buffett-style strategy, you can check out Introduction to Stock Analysis, Passive Investing; you can check out Stock Market Investing for Beginners. There are two courses hosted over on Profitful, which is the business that I started, so if you want to check that out, feel free to do so.

But guys, that will just about do us for today. I hope you enjoyed the video, and I'll see you guys in the next one. Thanks again to Sharesight for sponsoring this video.

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