Warren Buffett’s Recent Investments Reflect Strategic Market Moves
Warren Buffett, the billionaire CEO of Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), has been in the spotlight following a busy two weeks. During Berkshire’s annual meeting on May 3, held in Omaha with 40,000 attendees, Buffett revealed the company’s first-quarter operating results. Notably, this marked the 10th consecutive quarter of net-selling activity by his team. He also announced that he plans to step down as CEO by the end of the year, passing leadership to his chosen successor, Greg Abel.
This significant event will be followed by Berkshire’s Form 13F filing, which investors can expect after the market closes on May 15. These filings offer a clear snapshot of which stocks major money managers have bought or sold in the last quarter, as mandated for those managing at least $100 million.
However, investors can gain insights into Buffett’s recent activities sooner. Other regulatory filings reveal that he purchased shares in eight companies—two of which are considered legal monopolies—during the first quarter.
Investments Overview
1. Sirius XM Holdings
The first company Buffett invested in during the March quarter is Sirius XM Holdings (NASDAQ: SIRI). When Berkshire holds at least 10% of a public company’s shares, it must file Form 4 with the SEC to report any trading activity. Between January 30 and February 3, Buffett oversaw the acquisition of 2,308,119 shares of Sirius XM.
Investors are drawn to Sirius XM due to its unique monopoly status in satellite radio. Although it competes with terrestrial and online radio, it remains the only licensed satellite radio provider, granting it solid pricing power with subscribers. Notably, only 19% of its first-quarter sales came from advertising. Over 77% was generated through subscriptions, providing consistent cash flow regardless of economic conditions.
Buffett, a steadfast value investor, finds Sirius XM appealing, particularly given its forward price-to-earnings (P/E) ratio of 7, near an all-time low.
2. Occidental Petroleum
Besides purchasing shares of Berkshire, Buffett has consistently invested in Occidental Petroleum (NYSE: OXY). According to a Form 4 filing, he added 763,017 shares valued at approximately $35.7 million on February 7.
As of May 9, Buffett’s total investment in both Chevron and Occidental Petroleum reached $27.6 billion, reflecting his belief that crude oil prices will rise. Underinvestment in the energy sector during the COVID-19 pandemic, coupled with geopolitical tensions, poses constraints on global oil supply, which may drive prices up.
Occidental, benefiting substantially from higher oil prices, generates a significant portion of its sales from its upstream drilling operations. The company’s shares are currently trading at about 13 times forward-year earnings, presenting a promising investment opportunity considering the overall expensive market backdrop.
3. VeriSign
Another legal monopoly Buffett invested in is VeriSign (NASDAQ: VRSN), a provider of domain-name registry services. Recent filings show Buffett acquired 18,423 shares in the first two trading days of January.
VeriSign holds the registration rights for .com and .net domains, a position granted by ICANN. Although the rush to register domain names has subsided since the early internet days, its status allows it substantial pricing power. The company maintains a low-cost operating model, with an operating cash flow that’s predictably high, often around 60% or more.
Buffett favors businesses like VeriSign that produce recurring revenue with minimal management. This aligns with his investment philosophy of seeking stable and profitable enterprises.
Berkshire Hathaway Increases Stakes in Japanese Trading Houses
Key Investments in Japan’s “Sogo Shosha”
In March, regulatory filings revealed that Berkshire Hathaway boosted its stakes by approximately 1% in five major Japanese trading companies, known as the “sogo shosha”: Mitsubishi (OTC: MSBHF), Itochu (OTC: ITOCY), Mitsui (OTC: MITSY), Marubeni (OTC: MARUY), and Sumitomo (OTC: SSUM.Y).
These trading companies hold significant influence across various sectors in Japan, including food, energy, mining, industrial, and healthcare industries. Warren Buffett and Charlie Munger’s consistent support for these stocks—Buffett labeled them as “indefinite” holdings in his 2023 letter to shareholders—indicates a positive outlook for Japan’s economic landscape.
Shareholder-Friendly Strategies
Buffett likely appreciates the shareholder-centric approach of these sogo shosha. Each trading company currently offers a market-leading dividend, with executive pay remaining within reasonable limits. This strategy aligns well with Berkshire’s investment philosophy.
Moreover, the attractive valuations of these companies stand out, particularly given the “Buffett Indicator” peaked at an all-time high in February. With trailing twelve-month price-to-earnings (P/E) ratios ranging between 7 to 12, these firms present an appealing investment opportunity for value-focused investors.
Investment Considerations
As Berkshire Hathaway reinforces its position in Japan, market participants might consider similar investments. The robust dividends and strong fundamentals of these trading houses provide a solid foundation for potential future gains.
The financial landscape may find further transformations influenced by these developments, making Japan’s trading houses a sector to watch closely moving forward.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
