The "Oracle of Omaha," as he's been affably dubbed by the investing community, has overseen an average annual return in his company's Class A shares (BRK.A) that nearly doubles up the annualized total return of the benchmark S&P 500, including dividends, since the mid-1960s. More recently, he witnessed Berkshire reaching a trillion-dollar valuation, which is a mark only eight U.S.-listed companies have ever achieved.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Even though Warren Buffett is fallible -- Berkshire took a sizable loss on its now-disposed stake in media stock Paramount Global earlier this year -- his notable outperformance of the broad-market indexes has earned him quite the following from new and tenured investors alike.
But despite being a big proponent of the U.S. economy and long-term investing, Buffett's buying activity over the last seven quarters has been exceptionally selective.
The Oracle of Omaha has been a big-time net-seller of stocks for seven consecutive quarters
Investors typically wait on the edge of their seats for Berkshire Hathaway's quarterly Form 13F filing, which provides a detailed picture of which stocks Buffett and his most trusted investment aides, Todd Combs and Ted Weschler, have been buying and selling.
However, Berkshire's cash flow statements, which can be found in its quarterly operating results, paint the clearest picture of how he and his team feel about stocks.
Beginning in the fourth quarter of 2022 (Oct. 1, 2022) and continuing through June 30, 2024 -- a span of seven quarters -- Berkshire's brightest investment minds have been net sellers of stocks:
Q4 2022: $14.64 billion in net-equity sales
Q1 2023: $10.41 billion
Q2 2023: $7.981 billion
Q3 2023: $5.253 billion
Q4 2023: $0.525 billion
Q1 2024: $17.281 billion
Q2 2024: $75.536 billion
Cumulatively, Buffett has overseen the sale of almost $132 billion more in stocks than he and his team have purchased since October 2022.
The bulk of this selling activity can be traced to the No. 1 holding in Berkshire's 45-stock, $308 billion investment portfolio, Apple(NASDAQ: AAPL). Buffett has been a seller of Apple stock in each of the past three quarters, with well over 500 million shares being shown the door.
Although the Oracle of Omaha continues to proclaim Apple is a wonderful company with a solid management team and market-leading share repurchase program, during Berkshire's annual shareholder meeting, he opined that corporate tax rates were liable to climb from where they stand now. In other words, Buffett sees value in taking profits now and paying a lower tax rate.
We've also witnessed sizable selling activity in Berkshire's former No. 2 holding, Bank of America(NYSE: BAC). Since mid-July, Buffett has disposed of more than 168 million shares of BofA, worth just shy of $7 billion. While this selling may also be tax-related, there's a possibility it may be in response to the Federal Reserve kicking off a rate-easing cycle. No money-center bank is more interest-sensitive than Bank of America.
But in spite of this persistent selling in two core holdings, there are two stocks Warren Buffett simply can't stop buying.
Image source: Getty Images.
Occidental Petroleum
The first stock the Oracle of Omaha has been buying with consistency since the beginning of 2022 is oil and gas goliath Occidental Petroleum(NYSE: OXY). This "indefinite holding" has grown into an almost 255.3-million-share stake worth $13.3 billion in market value, as of the closing bell on Sept. 9.
The most logical reason for Buffett to pile into Occidental's stock is the belief that the spot price for crude oil will remain elevated, or perhaps head even higher than it is now. Following three years of reduced capital spending by global energy companies during the COVID-19 pandemic's height, crude oil supply remains largely constrained. When in-demand energy commodities are in short supply, it usually has a positive effect on price.
Though a higher spot price for crude oil is good news for all drilling companies, it's particularly important for Occidental Petroleum. Occidental generates the lion's share of its revenue from its high-margin drilling segment, which suggests that a higher spot price for oil can disproportionately benefit its operating cash flow, compared to its peers.
Buffett likely also appreciates the integrated nature of Occidental's operating model. While it does bring in most of its revenue from drilling, its downstream chemical operations serve as a partial hedge in the event that the spot price of crude oil declines. When the price of oil falls, it lowers input costs for petrochemical operations, and generally increases demand for downstream-related products.
Occidental has meaningfully improved its balance sheet, too. Since acquiring Anadarko for $55 billion in 2019, it's nearly halved its net debt to $18.39 billion, as of June 30. While there's still work to be done to improve Occidental's financial flexibility, a higher spot price for crude oil has certainly loosened the belt a bit.
Berkshire Hathaway
The other stock Warren Buffett can't stop buying, despite being exceptionally selective with his purchasing activity of late, is (drum roll) shares of his own company!
Prior to mid-July 2018, the Oracle of Omaha and his right-hand man Charlie Munger (Munger passed away in November 2023 at the age of 99) were only allowed to repurchase Berkshire Hathaway's stock if it fell to or below 120% of book value -- no more than a 20% premium to book value, as of the most recent quarter. Unfortunately, shares never fell to or below this threshold, leading to no buybacks.
On July 17, 2018, Berkshire's board amended the criteria governing share repurchases to allow Buffett and Munger more freedom to buy back their company's stock. As long as Berkshire has at least $30 billion in cash, cash equivalents, and U.S. Treasuries on its balance sheet, and Buffett believes shares are intrinsically cheap, repurchases can be made with no ceiling or end date.
Over the last six years, Buffett has overseen 24 consecutive quarters of buyback activity totaling almost $78 billion.
Since Berkshire Hathaway doesn't pay a dividend, buybacks are the direct way Buffett rewards his shareholders. Reducing Berkshire's outstanding share count is incrementally increasing the ownership stakes of the company's investors, as well as encouraging the long-term ethos that Charlie Munger instilled in his four-plus decades at the company.
The other benefit of share repurchases is that, for businesses like Berkshire that have steady or growing net income (sans unrealized investment gains/losses), they often increase earnings per share (EPS). With almost $277 billion in available cash, Warren Buffett is strongly incented to continue buying shares of his own company.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Sean Williams has positions in Bank of America. The Motley Fool has positions in and recommends Apple, Bank of America, and Berkshire Hathaway. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.