But guess what Buffett doesn't seem to like doing very much these days? Buying stocks. However, Buffett isn't buying many stocks right now. And there's one simple reason why. That reason definitely isn't that Buffett doesn't have enough cash at his disposal. However, in the second quarter of this year, Berkshire didn't use much of its cash buying stocks. Sure, Berkshire also reported a brand-new position in Organon. However, that new stock in the conglomerate's portfolio was the result of Merck 's spin-off of its women's health business.
Buffett's mentor was Benjamin Graham, the father of value investing. Over the years, Buffett has drifted away from a purist focus on stock valuations. However, it's probably fair to say that he's still a value investor at heart. With that in mind, take a look at the following chart. The only time the CAPE for the index was higher was during the period leading up to and shortly after Of course, we all know what happened after the market valuation reached such a lofty level.
Stocks plunged. And then it nose-dived again with the financial crisis of and I don't know for sure if Buffett is looking at a chart like the one shown above. However, you can bet your bottom dollar that he's closely watching the overall market valuation. And he knows that buying stocks when they're really expensive usually doesn't work out all that well. Some investors might dismiss the idea of following a similar strategy as Buffett.
And CAPE levels were higher during much of that period than they had been in a long time. However, my view is that Buffett's cautious approach makes sense right now. Stocks truly are trading at a premium that hasn't been seen in more than two decades. The Oracle of Omaha is doing two things that other investors should seriously consider.
The outperformance was even worse before Q1, with the market outpacing SYF The exit is no small loss for Synchrony; Buffett was the firm's seventh-largest shareholder as of the end of Q4 The ideal holding period for a Buffett stock might be forever, but the two stakes he exited in Q1 had been around for shorter than five years each.
Suncor — an integrated energy giant whose operations span oil sands developments, offshore oil production, biofuels and even wind energy — also sells its refined fuel via a network of more than 1, Petro-Canada stations.
And for a few months, it was the lone position in the Berkshire Hathaway portfolio. Buffett quickly finished the job during the first quarter, ditching his remaining position of nearly 14 million shares. It's hard to blame Buffett too much. Funnily enough, this was the second time Buffett quickly dabbled with Suncor. Berkshire Hathaway originally invested in the energy giant during , then sold the entirety of the position three years later.
Indeed, shares have more than quadrupled since this time last year, when many Americans started to realize that working from home was going to last more than just a few weeks, and thus began making plans to improve their new workplace environs. Berkshire boasts Nebraska Furniture Mart among its subsidiaries, but added to its home furnishings exposure in Q3 when it brought RH into the fold. RH operates retail and outlet stores across the U. While brick-and-mortar retailers have struggled mightily over the past few years thanks in part to the rise of e-commerce, RH has found success catering to the upper crust.
That success has since been amplified by the COVID pandemic and a shift in where Americans have been putting their money to work.
It's hard to tell whether this was an Oracle of Omaha buy, or a project of one of his lieutenants, Ted Weschler or Todd Combs. Buffett has been mostly mum on RH. Still, the stake fits broadly with Buffett's worldview. Buffett stocks tend to be bets on America's growth, which is exactly what a bet on housing and housing-related industries is. Verizon already looked at home in the Berkshire Hathaway portfolio. While BRK. B famously doesn't pay out a dividend, Buffett is happy to collect them.
Indeed, its ability to pay a healthy distribution puts it among the top dividend stocks for retirement investors. When Berkshire initiated its stake in Verizon in Q4 , it bought with both hands, picking up That was good for a 3. Berkshire also remains the fourth-largest owner of VZ shares at 3. Bulls like Verizon for both its growth prospects in the era of 5G networking, its defensive characteristics and the reliable income stream it delivers to investors.
And in this case, Berkshire was much more aggressive about its second bite. But up until recently, they've never been a major factor in its equity portfolio. But that wind has changed direction over the past couple quarters, via both his MMC addition and Berkshire's lone new stake in Q1 , which we'll get to momentarily. As for Marsh McLennan: Berkshire initiated a 4.
It wasn't a major position, at just 0. Shares in MMC, which provides various risk, strategy and consulting services, are longtime market laggards. The company also pays a modest dividend yielding 1. Kroger operates roughly 2, retail food stores operating under such banners as Dillons, Ralphs, Harris Teeter and its namesake brand, as well as 1, gas stations and even jewelry stores under banners including Fred Meyer Jewelers and Littman Jewelers.
Berkshire Hathaway turned a few heads during the fourth quarter of , when it initiated its But given what was to come, it now looks like a savvy pick. Of course, as investors' focus started to shift away from essential retailers to opening plays, Kroger has underperformed. Buffett added 8. And he has followed that up with another Berkshire Hathaway is now the third-largest owner of Kroger shares, with its 6.
It's only a middle-of-the-pack position at just 0. But it certainly belongs. Unlike other recent new positions such as Amazon. As we mentioned previously, Buffett loves the insurance business — he just hasn't been too keen on owning mere equity stakes in them.
But in Q1, the industry accounted for two of his five buys, and his lone new position. Like most insurance firms, you won't necessarily expect profits to grow in a perfectly straight line year after year. But revenues have improved without interruption over the past four years, and net income is up in three of the past five years. That operational strength has led to superior returns against both the market and its peers. Berkshire hasn't exactly bet the farm on Aon. Skip to header Skip to main content Skip to footer.
Home investing stocks. The 21 Best Stocks to Buy for the Rest of Bancorp Getty Images. Get Dividends Every Month. Warren Buffett stocks. Stock Market Today. What has changed for them? He asked good questions and told educational stories. On that first day, he introduced me to an intriguing analytic exercise that he does.
His enthusiasm for the exercise was contagious. I stayed the whole day, and before he drove off with his friends, I even agreed to fly out to Nebraska to watch a football game with him. Understanding intrinsic value is as important for managers as it is for investors. This principle may seem obvious, but we constantly see it violated. And, when misallocations occur, shareholders are hurt.
For example, in contemplating business mergers and acquisitions, many managers tend to focus on whether the transaction is immediately dilutive or antidilutive to earnings per share or, at financial institutions, to per-share book value. An emphasis of this sort carries great dangers… Imagine that a year-old first-year M. The M. But what could be sillier for the student than a deal of this kind? At Berkshire, we have rejected many merger and purchase opportunities that would have boosted current and near-term earnings but reduced per-share intrinsic value.
That happens because the acquirer typically gives up more intrinsic value than it receives. Almost by definition, a really good business generates far more money at least after its early years than it can use internally. The company could, of course, distribute the money to shareholders by way of dividends or share repurchases.
But often the CEO asks a strategic planning staff, consultants, or investment bankers whether an acquisition or two might make sense. The acquisition problem is often compounded by a biological bias: Many CEOs attain their positions in part because they possess an abundance of animal spirits and ego.
When such a CEO is encouraged by his advisers to make deals, he responds much as would a teenage boy who is encouraged by his father to have a normal sex life. Some years back, a CEO friend of mine—in jest, it must be said—unintentionally described the pathology of many big deals. This friend, who ran a property-casualty insurer, was explaining to his directors why he wanted to acquire a certain life insurance company.
After droning rather unpersuasively through the economics and strategic rationale for the acquisition, he abruptly abandoned the script. When you are with Warren, you can tell how much he loves his work. It comes across in many ways. We are quite candid and not at all adversarial. Warren stays away from technology companies because he likes investments in which he can predict winners a decade in advance—an almost impossible feat when it comes to technology. Unfortunately for Warren, the world of technology knows no boundaries.
One area in which we do joust now and then is mathematics. Once Warren presented me with four unusual dice, each with a unique combination of numbers from 0 to 12 on its sides. He proposed that we each choose one of the dice, discard the third and fourth, and wager on who would roll the highest number most often.
He graciously offered to let me choose my die first. You choose first. Once he chose a die, it took me a couple of minutes to figure out which of the three remaining dice to choose in response.
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