Warren Buffett doubles down on his big money energy bet

Hans Lee

Livewire Markets

One of the best things about working at Livewire is the chance to revisit ideas, themes, and stories that have captured our readers' imaginations. A few months ago, we ran a series on the 13F statement filings. The filings are a mandatory requirement for all US-based hedge funds and give investors a detailed insight into the kinds of trades big investors are making. 

If you haven't caught up on that series, you can read our wrap which we published here:

Investment Theme
What the top gun investors are backing

But the best part of this series is that updates are made quarterly. And with the new listings out, we thought it was high time we took another look at the people we profiled in our last iteration. In particular, we want to find out how these big money managers have either reiterated their thesis or bailed out.  

Before we dive into the first in this new series, we want to let you know that we've made a couple of shuffles. Bill Ackman's profile won't be looked at again, as his portfolio holdings have not moved one iota since the Netflix saga. 

In his place, we are adding two new famous investors: Howard Marks of Oaktree Capital and Michael Burry of The Big Short fame. ARK's Cathie Wood and Carl Icahn of Icahn Enterprises will be returning from our previous series - as will the subject of this first feature, the biggest name of them all...

Warren's 13F changes at a glance

Berkshire Hathaway's additions (note Amazon is distorted, for reasons which we will discuss.) (Source: 13F.info)
Berkshire Hathaway's deductions (Source: 13F.info)

Big oil, big money

If you've ever seen the show Wheel of Fortune, chances are you've heard the phrase "big money!" shouted a few times. In Warren Buffett's case, he believes the big money will be made in big oil. How do we know this?

He made his big oil bet even bigger last quarter.

In 2019, Buffett initially invested $10 billion in oil and gas explorer Occidental Petroleum (OXY: NYSE). The most recent 13F filing shows that he added an extra 22 million shares to his arsenal last quarter. 

The move is so large that Berkshire Hathaway now owns about 17% of Occidental's outstanding share register - more than fellow whale investors Vanguard and Blackrock. The moves have also - naturally - fuelled speculation of an eventual buyout. Not least because reporting from Bloomberg suggests Berkshire is proposing to buy out as much as 50% of the company!

But this is the part that will really vindicate Buffett, Berkshire Hathaway, and their loyal followers. Since those large purchases were made, the share price of Occidental continues to climb. Whether it's a Buffett effect or not is one matter, but I suspect they would be willing to argue that the long-term thesis is intact:

(Source: CNN Money) - The green dots show when Buffett made his initial purchases. The green on the bottom is the share price performance seen ever since.

Berkshire Hathaway also increased its stake in Chevron (NYSE: C) - just to hammer home the point that old-world energy continues to remain an attractive investment idea. 

Old world, new world

Buffett might be 91 years old, with offsider Charlie Munger clocking in at 98 years old, but that doesn't stop the two thought leaders from thinking new world as well as the old world. Berkshire Hathaway added an extra four million shares in Activision Blizzard (NAS: ATVI) - the video game maker behind such titles as Call of Duty, Candy Crush, and the World of Warcraft franchises. 

The bet is being seen by observers as an arbitrage bet, given Activision is still the subject of a near-$70 billion takeover offer from Microsoft (NAS: MSFT). 

Berkshire also tripled its stake in Ally Financial (NYSE: ALLY), an online-centric bank. Ally is primarily an auto and home loan lender - and adds to the team's long-held love of big American financial institutions (Citi, Bank of America, and American Express are all core holdings). 

So what didn't he like?

For all the additional moves he's made into companies that they were already buying, there is an equally big story in what he didn't want to hold onto anymore. Berkshire Hathaway shed more than $2 billion in total holding values last quarter - and for two stocks, it was a complete goodbye:

  • Verizon (NYSE: VZ)
  • Royalty Pharma (NAS: RPRX)
Verizon (blue) vs Royalty Pharma (orange). Source: Trading View

It's worth noting that neither were major holdings but the moves are still very interesting given they could be seen as a centralisation tactic. For instance, the shedding of Verizon shares may end up creating a shift towards stakes in other media companies like Paramount Global. The shedding of Royalty Pharma shares, likewise, could be seen as a shift towards a bigger stake in fellow biopharma Celanese. 

Who's coming up

And that's the news! (On Warren)

Tomorrow, we'll analyse the moves made by Carl Icahn of Icahn Enterprises. The renegade investor made four new purchases in the second quarter. But Icahn also has a history of making power moves at the board level. Popcorn, anyone?

Never miss an insight

If you're not an existing Livewire subscriber you can sign up to get free access to investment ideas and strategies from Australia's leading investors.

Livewire gives readers access to information and educational content provided by financial services professionals and companies (“Livewire Contributors”). Livewire does not operate under an Australian financial services licence and relies on the exemption available under section 911A(2)(eb) of the Corporations Act 2001 (Cth) in respect of any advice given. Any advice on this site is general in nature and does not take into consideration your objectives, financial situation or needs. Before making a decision please consider these and any relevant Product Disclosure Statement. Livewire has commercial relationships with some Livewire Contributors.

2 topics

Hans Lee
Content Editor
Livewire Markets

Hans is one of Livewire's content editors. He is the moderator and creator of Signal or Noise. He also helps write the LW-MI Morning Wrap. Previously, he was the market open producer at ausbiz TV and wrote for Bloomberg, Reuters, and The Australian.

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.