Warren Buffett likes to talk about buying more S&P 500 stocks when they’re cheaper. But it turns out he’s human, too, and can’t resist buying more of his winners.
Buffett’s Berkshire Hathaway (BRKB) last quarter added to his positions in four of his best U.S.-listed stocks this year, including energy firm Occidental Petroleum (OXY), Activision Blizzard (AVTI) and McKesson (MCK), says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. It’s a noteworthy move from the famous value investor who has long extolled the virtues of boosting stock positions when they’re cheaper.
All told, Buffett added to nearly half the 11 stocks in the Berkshire Hathaway portfolio that are up this year. In contrast, he only added to two of his 11 worst performers and, instead, finally threw in the towel on many of them.
Buffett’s latest moves highlight the latest shifts in his strategy. He’s starting to act more like a growth investor, than a value one.
Buffett: More Misses Than Hits
It’s understandable Buffett would like to boost positions on some of his biggest winners. Like most S&P 500 investors, even Buffett has had more misses than hits this year.
So far this year, only 11 out of Berkshire Hathaway’s 49 U.S.-listed stocks are up. That’s less than a quarter of his public portfolio of U.S.-listed stocks. Some of Buffett largest positions are losers, like Apple (AAPL). The smartphone maker is Berkshire Hathaway’s largest position, by far. But shares are off roughly 3% this year. Bank of America (BAC), Berkshire Hathaway’s No. 2 largest position is also down 20%.
So, which winners is Buffett buying?
Buffett Wants More Occidental Petroleum, Others
For a self-professed value investor, it’s interesting to watch Buffett chase after skyrocketing shares of Occidental Petroleum.
Occidental is already a big position for Buffett. Following a more than 145% rally in the shares, it’s now seventh largest position in Berkshire Hathaway’s portfolio. And Berkshire Hathaway already boosted its position in the energy company by nearly 19% in the second quarter. Buffett’s holding company now owns more than 20% of Occidental. But its appetite for the company seems endless. Berkshire Hathaway has filed plans with regulators to own up to half of the company.
Cole Smead of Smead Capital Management says the moves by Buffett with Occidental shows the famed investors thinks, “the green transition was way overplayed. Buffett’s solar and wind projects aren’t stopping at Berkshire Energy. He’s just buying a lot more oil and gas stocks.”
Another big winner Berkshire Hathaway is adding to further shows the desire to double-down on energy. Chevron shares are already up more than 30% this year. And its already the fourth largest position in Berkshire Hathaway portfolio. Even so, Buffett added another 1.4% to his position in the second quarter. It’s a small change, but a meaningful one as it’s made on such a massive position that’s up so much.
Additionally, energy is now 10% of the Berkshire Hathaway portfolio, ranking it fourth among the 11 S&P 500 sectors.
Other Big Buffett Bets On Winners
Buffett isn’t just loading up on winning energy stocks.
For instance, Berkshire Hathaway is also adding to his position in McKesson, a health care firm. Shares of the medical supplies company aren’t up anywhere near as much as Occidental this year: Just 48%. But Buffett seems intent on owning more. He upped Berkshire Hathaway’s stake by more than 9% in the second quarter. Berkshire Hathaway now owns more than 2% of the company.
And here’s an intriguing one: Buffett added 6% to his position in Activision Blizzard (ATVI). No, it’s doubtful Buffett is a big “Call of Duty” fan. But the video game stock, up nearly 20% this year on the pending buyout by Microsoft (MSFT), offers someone of a “free money” situation. If regulators approve the deal, it’s an easy nearly 30% pop if shares rally from their 80.27 price now to the 101.74 a share Microsoft’s $79.6 billion buyout price is worth.
Buffett Isn’t Adding To All Winners
The fact Buffett is adding to some S&P 500 winners is noteworthy. He’s being selective, so tipping his hand a bit. Simply state, Buffett not buying across the board.
Buffett didn’t add to Berkshire Hathaway’s third biggest holding, Coca-Cola (KO), even though it’s up more than 10% this year. And Berkshire Hathaway didn’t add to its sixth largest position, either: Kraft Heinz (KHC).
So, when Buffett buys rising stocks, take note. It shows he’s determined to make a bigger bet, even if it’s going to cost him more per-share to do it.
Buffett’s Buying More Of These Winners
Berkshire Hathaway increased positions in the second-quarter of these stocks up on the year
|Company||Symbol||Stock YTD % ch.||% increase in Berkshire Hathaway position in the second quarter||Sector|
|Activision Blizzard||(ATVI)||19.9||6.4||Communication Services|
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
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