Warren Buffett’s Latest $2.9 Billion Buy Brings His Total Investment in This Stock to $66 Billion in 4 Years

If Berkshire Hathaway (BRK.A 0.94%) (BRK. B 1.03%) CEO Warren Buffett speaks, Wall Street listens intently. That’s because the Oracle of Omaha shattered the standard S&P500 since he took over as Berkshire’s CEO in 1965. Total returns of 3,787,464% for Berkshire Hathaway’s Class A shares (BRK.A) through the end of 2022 is 153 times the total return, including dividends paid, of the benchmark index S&P 500 over the same period.

Mirroring Warren Buffett’s trading activity has been a profitable endeavor for nearly six decades — and it’s easier than ever, thanks to Form 13F filings with the Securities and Exchange Commission.

Berkshire Hathaway’s 13Fs are a gold mine for investors

Simply put, a 13F provides investors with a snapshot of what money managers with at least $100 million in assets under management were holding at the end of the most recent quarter (ending December 31, 2022 in this case). This snapshot allows investors to see what the smartest and most successful fund managers have bought, sold and decided to hold over the last quarter.

Over the past seven years, 13F filings have shown that Warren Buffett and his investing lieutenants (Todd Combs and Ted Weschler) have invested heavily in a select few companies.

For example shares of technology stocks Apple (AAPL 0.41%) were first purchased in the first quarter of 2016. Excluding stocks from Warren Buffett’s secret portfolio, the Oracle of Omaha and his team have poured more than $33 billion into Apple stock in seven years.

This was a hugely successful investment for Berkshire Hathaway, with an estimated unrealized gain of $98 billion (excluding dividends). Apple has exceptional brand strength, a loyal customer base, and a dominant product lineup, led by the iPhone. It also benefits from the rapid growth in subscription services. Buffett’s favorite aspect of Apple, however, might be that it’s repurchased more than $550 billion worth of common stock over the past 10 years.

Warren Buffett and his team have also invested a boatload of the company’s cash in energy stocks. In all, almost $30 billion was spent buying shares rafters (CVX 0.32%) And Western Petroleum (OXY 0.94%). Chevron became a continuous holding in the fourth quarter of 2020, with Occidental’s common stock added to Berkshire’s portfolio in the first quarter of 2022.

This sudden fascination with energy stocks likely stems from a belief that crude oil prices will remain elevated for years to come. Years of underinvestment related to the COVID-19 pandemic coupled with Russia’s invasion of Ukraine make it unlikely that global crude oil supply can be significantly boosted anytime soon. This supply cap should help dampen crude oil prices and increase the upside potential of Chevron’s and Occidental Petroleum’s upstream drilling segments.

Warren Buffett Spent $66 Billion Buying This Stock (And It’s Not Listed in Berkshire’s 13Fs)

However, investors might be surprised to learn that Berkshire Hathaway’s quarterly 13F reports don’t tell the whole story about where Buffett is putting his company’s money. For that full story, you’ll need to delve into Berkshire Hathaway’s quarterly operating results.

Though the Oracle of Omaha has piled into companies like Apple, Chevron, and Occidental Petroleum, there’s one other stock he’s spent $66 billion to buy since mid-July 2018. Interestingly, that stock is Berkshire Hathaway.

The key date for investors is July 17, 2018. Before that date, Warren Buffett and Executive Vice Chairman Charlie Munger could only buy back shares of Berkshire Hathaway if it was valued at or below 120% of book value. In more than half a decade prior to that date, Berkshire Hathaway stock never fell at or below 120% of book value, leading to no stock repurchases.

On July 17, 2018, the company’s board of directors passed new measures that gave Buffett and Munger more freedom to repurchase Berkshire Hathaway stock. As long as the company has a total of $30 billion in cash, cash equivalents, and U.S. Treasury inventory, and Buffett and Munger agree that the company’s stock is trading below its intrinsic value, buybacks can be made with no specific cap.

During the fourth quarter of 2022, Buffett and Munger agreed to repurchase 4,280 Class A shares and 3,046,794 Class B shares. In total, this represented $2.86 billion worth of buyback activity. In the more than four years since buyback activity resumed, the dynamic Berkshire Hathaway duo have repurchased just over $66 billion worth of stock in their company.

Aggressively buying back Berkshire Hathaway stock has three specific benefits. First of all, it can make companies with constant or increasing net earnings inherently more attractive. If a company’s outstanding share count decreases over time due to repurchases, constant or growing net income will result in higher earnings per share.

Second, reducing the company’s outstanding shares allows existing shareholders to increase their stake in the company without lifting a finger. For example, Apple’s extensive buyback program helped boost Berkshire Hathaway’s stake in the company to 5.8%. Over long periods of time, Berkshire’s buyback program has the same effect on its shareholders.

And third, buying back $66 billion worth of Berkshire Hathaway stock in just over four years is Buffett’s way of showing Wall Street that he’s willing to invest in himself, his investment team, and the one he’s built set long-term ethos. Whether it’s the five dozen mostly cyclical companies Buffett has acquired or its $328 billion investment portfolio, Berkshire Hathaway is perfectly positioned to grow in tandem with the U.S. and global economy over the long term.

Don’t expect these share buybacks to slow down any time soon.