Warren Buffett Has Invested $2.9 Billion in Only 1 Stock This Year. Is It a No-Brainer Buy?

Source The Motley Fool

Warren Buffett doesn't like stocks as much as he used to. That's evident from the fact that he's been a net seller of stocks for eight consecutive quarters.

But Buffett hasn't lost his enamor with all stocks. The "Oracle of Omaha" has even invested $2.9 billion in one stock this year. What is it -- and is it a no-brainer buy now?

Buffett's biggest bet of the year

If you think that $2.9 billion is chump change for Buffett, think again. Most of the positions in Berkshire Hathaway's (NYSE: BRK.A) (NYSE: BRK.B) portfolio are valued at less than that amount. Of the 15 holdings worth more, Buffett reduced Berkshire's stake in three this year and didn't buy any shares of nine others.

Buffett has steadily added shares this year to Berkshire's position in oil and gas producer Occidental Petroleum. He bought more shares of property and casualty insurer Chubb Limited. The legendary investor also loaded up on Sirius XM Holdings. (We'll get an update on this and more when Berkshire releases its quarterly portfolio update after today's market close.)

However, none of these purchases totaled $2.9 billion this year. There's only one stock Buffett has invested that much money in so far in 2024: Berkshire Hathaway itself, via stock buybacks.

Why Buffett has invested so heavily in Berkshire

Berkshire Hathaway delivered an overall gain of 4,384,748% between 1964 (when Buffett took control of the company) and 2023, more than 140 times greater than the gain for the S&P 500 during the same period. The stock is outperforming the S&P so far in 2024 as well. Is this track record of beating the market the reason why Buffett has invested so heavily in Berkshire? Nope.

The real reason behind the continued stock buybacks is revealed in Berkshire Hathaway's quarterly and annual filings to the U.S. Securities and Exchange Commission (SEC). In its latest quarterly filing, the conglomerate repeated the consistent message, "Berkshire's common stock repurchase program permits Berkshire to repurchase its shares any time that Warren Buffett, Berkshire's Chairman of the Board and Chief Executive Officer, believes that the repurchase price is below Berkshire's intrinsic value, conservatively determined."

Buffett has invested so heavily in Berkshire this year because he thought the price was right. No one on the planet is more qualified to determine if Berkshire's share price is below its intrinsic value than Buffett. He knows the company inside and out. If there's any business for which Buffett can reasonably predict future earnings (a necessary prerequisite to valuing the business), it's Berkshire Hathaway.

Is Berkshire Hathaway a no-brainer buy now?

So does this make Berkshire Hathaway a no-brainer buy right now for other investors? Not necessarily.

For one thing, all of the stock buybacks occurred in the first half of 2024. Berkshire didn't repurchase any of its shares in the third quarter. Furthermore, $2.6 billion of the $2.9 billion in stock buybacks this year occurred in the first quarter. Since then, Berkshire's share price has risen by more than 10%.

It appears that Buffett no longer feels confident that Berkshire's share price is below its intrinsic value. And if Buffett isn't confident, why should anyone else be?

That said, Berkshire Hathaway is positioned well for the long run. Its insurance businesses generate steady cash flow. Its energy businesses have solid prospects. Berkshire's manufacturing subsidiaries produce products that will continue to be needed.

The conglomerate's investment portfolio is more diversified than it's been in quite a while thanks to Buffett's reduction of Berkshire's stakes in Apple and Bank of America. Berkshire also has cash, cash equivalents, and short-term investments in U.S. Treasury bills totaling $325 billion. That's the biggest cash stockpile in the company's history. Buffett has a lot of dry powder to deploy when stock prices are more attractive.

I don't think Berkshire Hathaway stock is a no-brainer buy right now, primarily because Buffett himself doesn't seem to think it is. However, I nonetheless believe the stock will deliver solid gains for investors over the long run. Buffett would probably agree.

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Bank of America is an advertising partner of Motley Fool Money. Keith Speights has positions in Apple, Berkshire Hathaway, and Chubb. The Motley Fool has positions in and recommends Apple, Bank of America, and Berkshire Hathaway. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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