Warren Buffett Latest Moves: The release of Berkshire Hathaway’s most recent 13F disclosure report provides investors with a unique opportunity to see how Buffett and his team manage the conglomerate’s equity portfolio.
Indeed, the filing shows which stocks the company has been buying and which ones it has sold. This information is particularly valuable because Buffett is widely regarded as one of the most successful investors of all time, and his choices are often considered to be a bellwether for the economy as a whole. Many investors view Buffett’s stock picks as a sign of confidence in a particular company or industry, and his decisions are followed by others in the market.
Moreover, in addition to any changes made to Berkshire’s holdings during the quarter, the filing also reveals the size and value of the company’s investments. This allows those interested in imitating Buffett’s approach to do so in an exact and precise manner.
In fact, Berkshire’s sunmission offers a valuable window into the present state of the market, highlighting trends and shifts that are significant enough to have influenced the company’s investment decisions. Insights like these can help investors understand the catalysts and broader secular developments that may impact their investment portfolios.
So, let’s see which businesses Buffett has been adding in the fourth quarter – and which he’s been chipping away at.
What Buffett Bought?
Unusually for Berkshire Hathaway, the fourth quarter saw no new businesses added to the firm’s list of current investments. However, the company bought more shares in three positions it already owns, albeit only by small amounts.
For instance, Buffett chose to increase his interest in the Louisiana-Pacific Corporation by a whopping 22%, bringing his total stake in the building materials manufacturer to $417 million.
While LPX might not be the glamour play some investors expect, the enterprise is right up Buffett’s street when it comes to business fundamentals. The company boasts a massive 54% return on total assets, and trades at a very cheap forward GAAP price-to-earnings multiple of 4.5. What’s more, because of its low dividend payout ratio of just 6.4%, Louisiana-Pacific has been able to announce a 9% increase in its quarterly cash distribution.
The second firm that BRK increased its stake in was Tim Cook’s Apple, with Buffett famously being a longtime proponent of the multinational technology company.
Indeed, Apple enjoys a variety of business moats – i.e., competitive advantages over its peers – including its superior brand recognition, economies of scale, and the stickiness of its highly integrated product ecosystem. Couple this with a solid financial base, and it should be obvious why Berkshire bought another 333,856 shares in the iPhone and MacBook maker.
Finally, the fourth quarter also witnessed Buffett grow his Paramount Global bet by 2.7%, possibly due to the fact its price-to-book ratio of 0.67 is heavily discounted compared to the Communications Services sector median of 1.92. Paramount is an international mass media and entertainment conglomerate, and such is Berkshire’s faith in the business that it’s now PARA’s largest outside investor.
What Buffett Sold?
If the period ending December 31, 2022, didn’t see much buying action, it certainly saw some significant pruning of Berkshire’s most valuable investments.
For example, Buffett’s stake in Taiwan Semiconductor Manufacturing Company Limited was the largest of these reductions, which fell 86% from 60.1 million shares to a relatively paltry 8.29 million.
In fact, the decision to enact such drastic cuts to Berkshire’s TSM position surprised many commentators, not least because Buffett only purchased the chip manufacturer during the third quarter of 2022. Furthermore, that position was huge, making TSM his tenth-largest holding.
However, fears over an escalation in US-China trade tensions may have spurred Berkshire into downsizing its exposure to Taiwan Semiconductor, prompting Buffett to take a profit on the trade while he still could.
Another somewhat idiosyncratic sale also occurred with Buffett’s Chevron Corporation divestment. The share price for the oil and gas super-major has snowballed since he first bought the stock in 2020, and it’s easily conceivable that Berkshire simply realized its gains on this bet too. On top of that, it’s likely the hydrocarbon boom of the last twelve months is about to level off, and Buffett is merely realigning his position in light of that fact.
Interestingly, of the other six companies that BRK pared down, three of them were in the finance business. This industry makes up around a quarter of the ventures in the conglomerate’s portfolio, and Buffett is known to favor the sector too. Therefore, to clip investments in U.S. Bancorp, Ally Financial Inc., and The Bank of New York Mellon Corporation seems a little atypical, given his fondness for the space.
Lastly, Buffett made marginal cuts to Activision Blizzard, Kroger, and the healthcare outfit McKesson Corporation.
Warren Buffett Latest Moves: Wrap-up
While Buffett was busy slicing away at Berkshire’s prevailing investments, the Oracle of Omaha still decided against liquidating any of its holdings in full. This suggests he and the investment vehicle are content with their past stock picks, which should also please shareholders all the same.
Indeed, Berkshire’s portfolio grew during the period from $296 billion to $299 billion. While this might seem modest, it came at a time when many stocks were getting battered by inflation and rising rates.
All in all, it was a good quarter for Buffett – who once again proves his investment acumen can stand up even in the face of severe macroeconomic challenges.
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