Recently, Berkshire Hathaway, led by Warren Buffett, has implemented some significant adjustments to its stock holdings.
“If Buffett’s not buying his own stock, then why should we?” https://t.co/jfECtk6zEy
— Jesse Felder (@jessefelder) September 13, 2024
In the second quarter, the firm offloaded a considerable amount of its shares in Apple, cutting its investment by nearly 50%. This investment was valued at approximately $80 billion based on the current market price of Apple shares.
Berkshire Hathaway currently maintains around $300 billion in cash and cash equivalents on its financial statement, a number that has been steadily increasing. A significant portion from the Apple sale proceeds has been allocated to cash and U.S. Treasury securities.
Berkshire Hathaway (+23.8%) surpasses the S&P 500 (+18.0%) as well as 4 of the top 6 companies by market value this year: Alphabet (+12.7%), Microsoft (+14.5%), Apple (+15.6%), and Amazon (+22.7%). #Buffett $BRK.A $BRK.B
— David Kass (@DrDavidKass) September 14, 2024
It seems Buffett is on the lookout for the next major investment opportunity. Nevertheless, during the second quarter, Berkshire Hathaway did acquire several new stocks. One of Buffett’s preferred investments that he often revisits is Occidental Petroleum.
Warren Buffett’s Berkshire Hathaway has recently entered an elite group of companies valued at $1 trillion. Not everyone is celebrating. https://t.co/S8D7bw9KAj via @WSJ
— David Kass (@DrDavidKass) September 13, 2024
Earlier this week, Berkshire Hathaway’s vice chairman Ajit Jain sold 200 shares of $BRK.A, netting $139 million.
In tonight’s update: Warren Buffett gifted 20 Class B shares to one or two unidentified individuals yesterday.
Buffett’s current holdings include 207,963 A shares and 1,333 B shares. pic.twitter.com/4QemTM2Czx
— Kevin Carpenter (@kejca) September 13, 2024
As one of the major players in the U.S. oil and natural gas sector, Occidental achieved its highest production levels in four years in the last quarter, generating $1.3 billion in free cash flow. Recently, the firm purchased CrownRock for $12 billion.
This acquisition expanded its operational footprint in the Midland basin, aimed at enhancing free cash flow and consolidating Occidental’s stance within the U.S. sector. Buffett now reportedly holds around 27% of Occidental Petroleum’s shares.
This indicates a firm belief in the sustained demand for natural gas in the U.S. market.
Buffett’s significant investment strategy
The rising demand for electricity linked to artificial intelligence (AI) and cloud computing could create opportunities for natural gas.
Although natural gas prices are currently low, this situation might present a favorable buying chance for long-term stakeholders. Occidental Petroleum’s present trading P/E ratio stands at 13.4.
Additionally, Berkshire Hathaway has incorporated Ulta Beauty into its portfolio. The stock was bought in the second quarter after experiencing a price drop exceeding 40% from its peak.
Ulta Beauty faces hurdles following a surge in beauty product sales during the COVID-19 pandemic. The company reported a 1.2% decline in comparable sales for the second quarter, contrasting with the 8% growth seen in the previous year. Spending by customers on beauty goods and in-store visits has diminished.
This raises concerns over potential market saturation considering Ulta’s 1,500 locations. However, Ulta Beauty has demonstrated robust long-term earnings growth, with operating income soaring by 295% over the past decade.
The company has also been actively buying back shares, reducing its total shares by 26.8%. Buffett’s team probably sees Ulta Beauty as a high-quality retailer currently facing temporary setbacks. With a low P/E ratio of 14.4 and ongoing stock repurchases, it could be a compelling investment for those confident in the brand’s resilience. As Warren Buffett reallocates his portfolio, he is making significant investments in Occidental Petroleum and Ulta Beauty, showcasing his long-term confidence in these companies despite their immediate challenges.
