After rallying during the summer months, US stocks slipped in August following Federal Reserve chair Jerome Powell’s speech at the Jackson Hole economic symposium.
But the pullback this year hasn’t dampened billionaire investor Warren Buffett’s appetite for quality US stocks. In the last quarter, Buffett scooped up US$3.8 billion worth of shares even as the S&P 500 fell more than 16% over that period. Clearly, he walks the talk when it comes to being “greedy when others are fearful”.
If you want to invest like Warren Buffett, here’s what he’s been adding to Berkshire Hathaway’s equity portfolio.
Buffett’s notable stock buys
For years, Buffett has been sitting on a large cash pile, wary of sky-high valuations. But as the US market retreated in recent months, attractive entry points have opened up. In the last quarter, he’s been putting cash to work with his favourite investments.
Buffett added another 4 million Apple shares in Q2 2022. Apple is Berkshire’s single largest stock holding, making up 42% of the entire portfolio. Recently, the company signalled plans to significantly expand its advertising business. Advertising currently generates only 1% of Apple’s total revenue, but Apple wants to crank that up to the double digits.
Occidental Petroleum and Chevron
Warren Buffett has been absolutely bullish on energy stocks this year. Berkshire is now oil producer Occidental Petroleum’s largest shareholder with a 20% stake, after Buffett bought up more than $11 billion worth of shares this year. Occidental is one of the biggest producers in the Permian Basin, the largest oilfield in the US.
Buffett also added more shares of oil giant Chevron, Berkshire’s fourth-largest holding. Chevron reported $11.4 billion in earnings during Q2 2022, up from $3.1 billion in the same quarter last year.
Buffett added to his recently opened position in Paramount Global, which operates film and TV studios, as well as Netflix competitor Paramount+.
Paramount recently reported second-quarter earnings that surpassed analyst expectations; Top Gun: Maverick was one of the highest-grossing movies in history. The company also announced a new partnership with Walmart to offer Paramount+ streaming services to Walmart+ subscribers.
Berkshire now holds 68.4 million shares in the video-game maker, up from 64.3 million in Q1 2022. Buffett has invested in the company as an arbitrage play as Microsoft prepares to acquire Activision for $95 a share. The stock currently trades at $78.
Buffett is a fan of energy and dividend stocks
Oil prices have been on a rise this year, more so following Russia’s invasion of Ukraine. In tandem, inflation has skyrocketed, reaching a 40-year high in the US. Oil has historically worked as a hedge against inflation. Based on his stock buys, Warren Buffett likely believes there’s more upside for oil prices.
In the year to date, Occidental’s stock price has soared 120% while Chevron has jumped 30%. This is in sharp contrast to the S&P 500’s 17% slump.
Buffett also likes well-managed companies with low debt, strong cash flows, growing dividends, and share buybacks. Many of his stock picks check those boxes.
For instance, Occidental raised its annual dividend payout by 1,200% in February. Chevron’s dividend yield in 2021 was an attractive 4.5%. Apple paid out $14.4 billion in dividends last year and has authorised $90 billion in share buybacks.
Lessons from Warren Buffett
Over the course of his illustrious investing career, Buffett has given us regular investors many words of wisdom. If you want to take a page from Buffett, here’s what he’s said about his key investing principles.
- Think long-term. “You’ve got to be prepared when you buy a stock to have it go down 50% or more and be comfortable with it, as long as you’re comfortable with the holding.”
- Buy what you know. “Never invest in a business you cannot understand.”
- Focus on long-term intrinsic value. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
- Don’t time the market. “We haven’t the faintest idea what the stock market is gonna do when it opens on Monday — we never have.”
The last point comes from his most recent Berkshire Hathaway annual shareholders meeting. He pointed out that there’s never a perfect time to buy a stock. Rather, he prefers to do his research, invest in the stock, then observe the stock market over time to determine if he should buy more shares or sell the stock.
In times of volatility, his investing principles can help you navigate the market’s ups and downs. Ultimately, to invest like Warren Buffett, patience is key. As he wisely noted, “If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.”
How to invest like Warren Buffett
Warren Buffett likes to add to his favourite stocks when the opportunity arises. Want to take a leaf out of his book?
You can do so easily through Syfe Trade’s recurring buy feature! This new feature enables you to automatically invest in a particular stock or ETF every week or month. Just buy the stock as usual and click on the “Recurring” button to enable the feature.
This strategy is also know as dollar cost averaging. You’re buying into the market regularly at different prices. Over time, your purchase price averages out. This is a long-term investing strategy that can also help smooth out the impact of market volatility.